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Indraprastha Gas
Our verdict on Indraprastha Gas isn’t the consensus take — see where we landed, and the one risk the bull case glosses over.
See the verdict — free →Does management do what it says?
The company has spent INR 847 crores in the first 9 months of FY26 against a full-year plan of approximately INR 1,250 crores, indicating they are on track to meet the core capex target. (1 in progress, 1 met across 2 tracked commitments)
“So, we have plans for around Rs. 1,200-Rs. 1,400 on our core in the CAPEX”
Management reported that excluding DTC volumes, CNG sales grew by 10% in Q3 FY26, hitting the upper end of their guidance range despite operational headwinds like pollution-related school closures. (1 exceeded, 2 missed, 2 met across 5 tracked commitments)
“So do we maintain that guidance in terms of like exiting this year at 10 MMSCMD... Yes, we maintain the guidance that, as you know, the CGD sector, the last quarter is the best sector.”
The phase-out is progressing rapidly; DTC bus operations on CNG have dropped from 3,200 last quarter to 2,000 this quarter, with daily sales to DTC falling to ~30,000 kg. (2 in progress across 2 tracked commitments)
“So, in next two years, we are expecting those buses to go out. Whatever is remaining, very less buses are there.”
The EBITDA per SCM for Q1 FY26 stood at Rs. 6.16, which falls within the guided short-term range of Rs. 6 to Rs. 7. (1 met, 1 missed across 2 tracked commitments)
“We are confident that Rs. 7-Rs. 8 guidance we will be able to maintain... But our long term guidance remains on Rs. 7-Rs. 8 and we are on path to that.”
Management has slightly raised the target for CNG station commissioning to 102 for the fiscal year. (1 revised, 1 in progress across 2 tracked commitments)
“But for the entire year we have a plan of 102 target for commissioning.”
See the full cited Management analysis of Indraprastha Gas
How durable is the business?
CNG volume growth accelerated to 6% overall and 8% when excluding the declining DTC bus segment, driven by a record 18,000 vehicle conversions per month. (4 expanding)
“The growth in overall CNG sales is 6% and if we exclude DTC sales, the growth in CNG is almost 8%.”
IGL continues to expand its physical infrastructure, adding 45 CNG stations in the year to date and reaching a total of 973 stations, further solidifying its last-mile reach. (1 expanding)
“So almost 975 stations by -- you can say, 973 to be specific as on end of 31st of January... We have added and commissioned 45 CNG stations till now during the year”
PNG sales showed robust double-digit growth of 11%, with domestic sales leading at 12% and industrial/commercial segments also showing strong double-digit performance. (4 expanding across 1 engine)
“In the PNG segment, the PNG segment also demonstrated growth with average daily sales of around 2.5 million SCM per day... representing a growth of 5%.”
The physical moat expanded significantly with the commissioning of 293 km of steel pipeline and 3,834 km of MDPE pipeline in a single year. (2 expanding)
“Our steel pipeline network now extends over 2,500 kilometers, while our MDP network has reached approximately 29,200 kilometers. This infrastructure enables us to supply natural gas to more than 32.75 lakh households”
New GAs continue to be the primary growth engine, with volume growth accelerating to 32% compared to the previous 17%. (4 expanding)
“And the other the newer GS, we can say, around 13% to 14%... whereas the outside or the new GS is contributing to almost 17% growth.”
See the full cited Business Model analysis of Indraprastha Gas
Where does growth come from?
IGL is maintaining a steady pace of network expansion, adding 91 new CNG stations in FY24 and planning another 80 for FY25. The cumulative network has grown consistently from 500 stations in FY19 to 882 in FY24. (5 steady across 5 signals, 1 leading indicator)
“So roughly around 80 to 100 CNG stations we are targeting year-over-year for maybe roughly next 3 years to 5 years. So out of the total capex, almost you can say 40% to 45% will go on the CNG”
Expansion into new Geographical Areas (GAs) is accelerating as IGL moves beyond Delhi into Uttar Pradesh, Haryana, and Rajasthan. The company is now authorized for 11 GAs across multiple states, with sales already starting in newer areas like Kanpur, Ajmer, and Pali. (5 accelerating across 5 signals, 1 leading indicator)
“Noida, Ghaziabad is growing at around 6.2%, whereas the outside or the new GS is contributing to almost 17% growth.”
The company is diversifying its business into green energy and infrastructure. They are planning to spend between INR 600 to 700 crores on new initiatives like renewables and Compressed Biogas (CBG).
“Actually, we will be adding the diversification capex, BD capex... into renewables, into CPG, into LNG Infra... INR600 crores, INR700 crores diversification.”
The company is seeing a massive surge in vehicle conversions to CNG, driven by a reduction in government taxes (GST) on CNG vehicles from 28% to 18%. Monthly conversions have jumped from 21,000 to 26,000 vehicles. — Monthly CNG Vehicle Conversions: 23.8% increase from average
“the GST 2.0, and particularly on CNG vehicles was reduced from 28% to 18%, resulting in a phenomenal increased vehicle conversions, which have risen -- which have raised from average of 21,000 to 26,000 per month.”
The domestic PNG segment is showing accelerating growth, with sales volumes increasing 16% year-on-year in the current quarter. (1 accelerating, 4 steady across 5 signals)
“This infrastructure enables us to supply natural gas to more than 32.75 lakh households... the domestic PNG sales growth was around 8%”
See the full cited Future Growth analysis of Indraprastha Gas
What could break the thesis?
The risk is intensifying as DTC volumes have dropped significantly from 1.8-1.9 MMSCMD levels to 1.1 MMSCMD, with management confirming that all new DTC tenders will be electric-only. (3 intensifying, 1 easing, 1 high-severity)
“what we have been made to understand from DTC, I think by March, this DTC volume will be almost 0.”
Margins are showing signs of recovery; EBITDA per SCM increased to 6.03 in Q4 from 4.34 in Q3, though still below the long-term target of 7-8. (3 easing, 1 stable, 1 high-severity)
“So around 7% to 8% rupee devaluation is there, which is -- which has resulted in around INR2, INR2.5 increase in gas cost”
The risk is INTENSIFYING as the company is now actively bidding for a major international joint venture in Saudi Arabia (40% equity stake) covering 5 industrial cities, adding execution and geopolitical risk. (1 intensifying, 1 emerging, 2 easing, 1 resolved)
“The New Labour Code became effective 21st November '25... we have made provisions of around INR28 crores in the current quarter as a onetime impact.”
The risk remains high as APM gas allocation has dropped to approximately 42% of the sourcing mix, forcing reliance on more expensive domestic and imported sources. (1 intensifying)
“domestic was around 43%, NWG 7%, HPST 6% and 42% for RLNG.”
Industrial demand has recovered to 8% growth, while commercial PNG grew 14%, suggesting the slowdown risk is currently easing. (1 easing)
“Industrial PNG volume rose 8%, backed by 419 new industrial connections... Commercial PNG sales increased by 14%”
See the full cited Risk analysis of Indraprastha Gas
Read the full thesis on Indraprastha Gas
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