INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: Improving volume visibility beyond its traditional markets and strong pricing power should continue to draw investors
It is trading at 23 times its next twelve-month earnings, a premium of 31 per cent over its five-year average.
But the volumes increased 13
per cent to 5.9 mmscmd in the September quarter, the highest pace of growth in the last four quarters, as demand from industrial and
commercial clients rose by a fourth
Industrial and commercial supplies account for about 11 per cent of the total volumes, followed by 25 per cent for piped natural gas (PNG),
and the remaining from compressed natural gas (CNG) sales to vehicles.
The Street was expecting volume growth of around 10 per cent in the
IGL took out-of-turn price increases in September by 4 per cent to offset the increased cost of gas brought about by a falling local
Gas prices increased 10 per cent due to the increase in domestic natural gas prices and the rupee depreciation.
Average gas prices increased
to Rs 15.5 per standard cubic metre (scm) in the September quarter, up 26 per cent year-onyear
The company was able to pass on higher prices to consumers as alternative fuels are 45-60 per cent more expensive than CNG
The significant price difference with alternative liquid fuels has allowed the company to maintain its pricing power and take out-of-turn
price increases.
By acquiring Haryana City gas, Indraprastha should be able to expand the catchment size in the National Capital Region
The size of the Gurgaon CNG market is around 1.2-1.5 million metric standard cubic metre per day (mmscmd)
for Rewari and Karnal in Haryana
New markets, increasing curbs on diesel vehicles, ban on the use of pet coke, and focus on domestic PNG connections will help the company
sustain 11-12 per cent volume growth.
The recent decision of the Uttar Pradesh government to cut taxes on natural gas to 10 per cent could
improve volume growth even further.
The difference between the price of CNG in Delhi and the neighbouring areas in Uttar Pradesh was around
Rs 5 per scm, mainly on account of higher tax rates.
