Indraprastha Gas(IGL) is a leading City Gas distributor which operates in Delhi.
The stock has taken a massive beating in the last 1 month.
Stock price sees a 30% fall in the last one month!
Reasons for the fall?
- Delhi Government draft policy
- Allegations against former IGL boss
- Massive rise in gas prices
Delhi Government draft EV policy:-
Delhi govt in a draft notification said:-
At least 10% of their new 2Ws and 5% of 4Ws in the next 3 months must be electric.
This would be scaled up to 50% of all new two-wheelers and 25% of new four-wheelers by March 2023,
However, the above is just a draft. But the markets have not taken the proposal lightly.
Even if these policies are implemented given the lack of charging infrastructure,it is highly unlikely aggregators will jump to EVs.
Near term impact will be negligible for IGL
However, in the long term EVs are a threat to IGL.
In order to mitigate the risk of EVs….IGL is already investing 200cr in the charging infrastructure.
IGL will start to create charging infrastructure across all its stations.
Arrest of former IGL MD in bribery case:-
The CBI has registered a case against E S Ranganathan Director (Marketing) GAIL and former IGL MD and others including private persons, private companies & unknown others. The agency has arrested Ranganathan and five private individuals
The relentless rise of Gas prices:-
Over the last 1 year Gas prices have risen by nearly 100%.
However, being a CGD IGL has been successfully able to pass on the price increases to the end customers with the price hike
Record conversions of cars to CNG in Delhi.
During Q1 and Q2 of FY22 record number of cars converted to CNG.
The company has guided for strong Volume growth in the coming quarters as well
New areas should also start to contribute to the Volume in the coming year.
Strong Balance Sheet:-
The company remains debt free with a strong dividend-paying history
Valuation:-
IGL is now available at less than 20x P/E trailing earnings.
Given the strong Gas outlook and strong balance sheet
The valuations seem reasonable.
My Investment Notes 