IGL’s earnings prospects are bright, but valuations seem pricey
The need for cleaner and cheaper fuel has continued to drive gas demand in the country, aiding prospects for city gas distribution companies or CGDs. The Air Quality Commission mandate that all industries operating in New Delhi must begin using piped natural gas by 31 January 2021 is expected to aid gas demand in the national capital region of Delhi (Delhi-NCR) further. Indraprastha Gas Ltd (IGL), the CGD catering to Delhi-NCR, remains the key beneficiary.
IGL is already in a sweet spot, with growth being led by rising compressed natural gas (CNG) demand from automobiles and piped natural gas (PNG) demand from households and industrials. Growing concerns over pollution in Delhi is leading to a further rise in industrial demand and will benefit IGL’s PNG volumes.
IGL currently supplies PNG to about 5,566 industrial/commercial users. At least 1,644 industries and 50 industrial areas are being identified that need to switch over to PNG, which will benefit IGL, according to analysts.
