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Indraprastha Gas Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤13th Feb 26

Summary : Indraprastha Gas reported strong Q3 FY'26 results driven by regulatory tailwinds, network expansion, and robust volume growth, with confident outlook despite some operational headwinds.

Management Perspective positive : Management expressed delight in performance, highlighted positive regulatory changes, and showed confidence in achieving future volume and margin targets despite acknowledging headwinds.

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY'26 total sales volume grew 3% year-on-year to 867 million SCM.
  2. EBITDA increased 31% year-on-year to INR473 crores.
  3. Profit after tax (PAT) grew 25% year-on-year to INR358 crores.
  4. Network expanded to over 2,500 km of steel pipeline and 29,200 km of MDP.
  5. Added and commissioned 45 CNG stations during the year.

Future Growth Prospects

  1. Regulatory changes (VAT, tariff regime) will positively impact gas costs.
  2. GST reduction on CNG vehicles from 28% to 18% increased conversions.
  3. Aggressively pursuing growth in new geographical areas, contributing 57% incremental volume.
  4. Maintaining guidance of adding 1 million SCM/day volume annually.
  5. Core business capex planned at INR1,200-1,500 crores for FY'27-'28.

Management Insights

  1. Q3 FY'26 demonstrated steady operational execution and improving margin visibility.
  2. Two major regulatory recalibrations have positive structural implications for CGD sector.
  3. Company is aggressively pursuing growth in new geographical areas.
  4. Confident in achieving an exit rate of 10 MMSCMD for Q4 FY'26.
  5. Future gas sourcing strategy aims for 50% RLNG and 50% domestic sources.

Signs of Skepticism

  1. EBITDA margin guidance of INR7/SCM needs clearer bridge from current INR5.4/SCM.
  2. DTC volume numbers provided by management were inconsistent across different statements.
  3. Immediate material impact of CVG excise duty exemption on network ramp-up is unclear.

Risk Factors

  1. Volatility in gas costs and adverse forex impacts procurement expenses.
  2. One-time provision of INR28 crores for New Labour Code implementation.
  3. DTC and DIMTS fleets migrating to electric mobility impacts CNG volumes.
  4. GRAP implementation and pollution issues temporarily reduced Delhi volumes.
  5. M&A in CGD sector is difficult due to regulatory penalties on GAs.

Good To Know

  1. Gujarat VAT replaced by 2% Central Sales Tax on domestic gas from December 2025.
  2. Gas transmission tariff regime rationalized from 3-zone to 2-zone effective January 2026.
  3. New Labour Code became effective November 2025, leading to INR28 crore provision.
  4. Total capex for the first 9 months of FY'26 was INR847 crores.
  5. Current operative CNG station count is approximately 925, after 55-60 DTC stations closed.

Key Drivers

  1. Favorable regulatory changes implemented.
  2. GST cut boosts CNG vehicle conversions.
  3. Aggressive expansion in new geographies.
  4. Strong volume growth guidance.

Key Analyst Discussions

Competitive Environment

  1. M&A in CGD sector is challenging due to regulatory penalties on GAs.
  2. Smaller entities may struggle with sourcing, favoring larger players.

Market Trends & Consumer Behavior

  1. DTC bus phase-out is expected to be complete by March 2026.
  2. GST reduction on CNG vehicles increased conversions to 26,000 per month.
  3. GRAP implementation temporarily impacted Delhi CNG volumes in Q3.
  4. Demand for commercial and industrial PNG is showing steady traction.

Financial Highlights

  1. EBITDA margin guidance of INR7/SCM is targeted, up from INR5.4/SCM.
  2. Benefits from transmission tariff and Gujarat VAT reduction expected to boost margins.
  3. Gas sourcing breakup: 43% APM, 7% NWG, 6% HPST, 42% RLNG.
  4. Q3 PAT grew 25% YoY to INR358 crores, EBITDA grew 31% YoY.
  5. Core business capex target is INR1,200-1,500 crores for FY'27-'28.

Product Composition

  1. CNG sales grew 3% YoY, PNG sales grew 5% YoY.
  2. Domestic PNG grew 8%, commercial PNG also grew 8%.
  3. New geographical areas contribute 57% of incremental volume.
  4. Anticipate 65-70% incremental volume from CNG, 30-35% from PNG.

Strategic Considerations

  1. Targeting 80-100 new CNG stations annually for network expansion.
  2. Sourcing strategy aims for 50% RLNG and 50% domestic gas.
  3. Planning a 200-megawatt captive power plant via tender route.
  4. Participating in Middle East tender for industrial gas supply.
  5. Diversification capex of INR500-800 crores for renewables, CPG, LNG.
Indraprastha Gas Ltd (IGL) Concall Report Analysis & Insights | Dhanarthi