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Uncertainty over gas demand in India-V: IGL's prospects remain bright, for now
Jul 05: Even as we ponder the long term future of city gas distribution companies, in the immediate perspective, the outlook for Indraprastra Gas Ltd -- continues to remain bright.
8Aggressive plans of DIMTS (Delhi Integrated Multi-Modal Transit) to add buses and the Delhi government’s move to introduce new blue-line buses (last mile connectivity for Delhi
Metro) will aid CNG volume growth.
8The CNG business, which contributed 75% to the company's sales volumes in FY17, involves distribution of CNG to automobiles through gas stations. Through its PNG business, the company supplies natural gas to homes and commercial and industrial establishments.
8Acquisition of 50% stake in Maharashtra Natural Gas (MNGL) will grant IGL entry into Pune which has a good growth potential.
8The gradual commissioning of Rewari (5-6 CNG stations; 1,000 residential PNG by end FY18) will drive volumes in 5 years (0.5mmscmd potential)
8The fact that the company has a monopoly gives it strong pricing power capability.
8However the key risk as of now is a cut back in domestic city gas allocation or allocation of the more expensive domestic gas can massively impact profitability.
8As new government sponsored fertilizer plants come into play in two-to-three years from now, they will require allocation from what will be a declining pool of cheap domestic gas to stay competitive with falling urea prices.
8This is when the crunch might come to CGD companies when the government will have to decide on whether to allocate cheaper gas to fertilizer companies or to CGD outfits.
8It will be a tough call to make
Click on Reports for for a detailed analysis as well as an interview with the IGL CEO


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