Institutional Equities · Initiating Coverage Reuters: IGAS.NS; Bloomberg: IGL IN Indraprastha Gas Restrictions On Pollution-generating Fuels To Boost Gas Demand We initiate coverage

Institutional Equities

Initi

atin

g C

over

age

Reuters: IGAS.NS; Bloomberg: IGL IN

Indraprastha Gas

Restrictions On Pollution-generating Fuels To Boost Gas Demand We initiate coverage on Indraprastha Gas (IGL) with Buy rating and FY20E earnings-based target price of Rs394. Our bullish call is based on earnings growth because of: 1) Growth in sales volume on strong government support for making a shift to natural gas as a preferred fuel. 2) Recent favourable judgement from the Supreme Court banning some alternate fuels because of environmental concerns. 3) Monopoly situation with high entry barriers. 4) Strong balance sheet with a net cash position. 5) Strong free cash flow to the firm, despite rising capex. 6) RoE of 19% and RoCE of +30% likely over FY18E-FY20E.

Strategy focused on NCR, geographical expansion to drive volume-led growth: IGL is focused on developing and maintaining infrastructure in NCR and adjoining areas to increase natural gas usage for energy needs. High barriers to entry and lack of competition in focus areas together with strong government support will drive growth.

Government’s plan to increase natural gas usage; environmental concerns to drive conversion to CNG, PNG: The government has repeatedly indicated its intention to shift to natural gas as a preferred fuel for energy. To improve growth in compressed natural gas or CNG and piped natural gas or PNG (residential), government supplies natural gas at a competitive rate to make it cheaper relative to other alternative fuels.

3 year earnings CAGR (FY17-20E) of 15% based on volume growth at CAGR of 14%: We expect the earnings growth of 15% during F17-20E based on the expected sales volume growth of 14%. The key driver for the earnings growth is expected to be volume since the company expects to be maintain EBITDA/scm within a range.

Strong balance sheet despite capex for sustained growth gives comfort: Despite high capex to improve the infrastructure network for CNG and PNG, the company has a debt-free balance sheet. Capex for the past five years has been met consistently from internal accruals.

Strong operational cash flow supported by negative working capital: IGL has consistently shown a healthy positive operational cash flow which has provided for the annual capex and a consistent positive free cash flow. Consequently, IGL has been able to pay of it’s debt. The capex is expected to rise to Rs6bn from FY18, but we believe the company will be able to meet the requirement from internal accruals. The company has consistently maintained negative working capital because of high payables relative to inventory and recievables.

Strong free cash flow despite rise in capex, likely over FY18E-FY20E: With a rise in capex, we expect free cash flow to decline over FY18E-FY20E. We expect free cash flow to remain firm at Rs2bn in FY18E, but rise to Rs5bn in FY20E.

RoE and RoCE expected to remain at approximately 19% and +30%, respectively: We expect RoE and RoCE for FY18E-20E to remain at around 19% and +30%%. RoCE is higher relative to RoE as the company has net cash which reduces the capital employed compared to equity.

Recommend Buy rating on IGL with a target price of Rs394: Our valuation of IGL is based on 30xFY20E earnings. Despite FY18E-FY20E earnings CAGR of 15%, we have valued the stock at 30x FY20E earnings because of: 1) Strong probability of higher-than-expected earnings growth following the recent Supreme Court announcement banning the usage of pet coke and furnace oil. 2) Strong balance sheet with net cash position. 3) Strong operational cash flow together with negative working capital which is expected to provide for future capex. 4) Strong monopolistic situation in NCR region ensuring earnings visibility. 5) Government’s focus on growth in natural gas as the preferred mode for meeting energy needs will aid in driving sales. 6) Rising environmental concerns in NCR have added to strong focus of the government on pushing natural gas as the preferred energy provider.

BUY

Sector: Oil & Gas

CMP: Rs315

Target Price: Rs394

Upside: 25%

Amit Agarwal Research Analyst [email protected] +91-22-3926 8033

Key Data

Current Shares O/S (mn) 700.0

Mkt Cap (Rsbn/US$bn) 225.2/4.2

52 Wk H / L (Rs) 326/159

Daily Vol. (3M NSE Avg.) 2,717,682

Share holding (%) 2QFY18 1QFY18 4QFY17

Promoter 45.0 45.0 45.0

DII - - -

General Public 55.0 55.0 55.0

One Year Indexed Stock Performance

8090

100110120130140150160170180190200

Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17

INDRAPRASTHA GAS Nifty 50

Price Performance (%)

1 M 6 M 1 Yr

Indraprastha Gas 8.1 57.6 81.8

Nifty Index 3.0 9.7 21.1

Source: Bloomberg

Y/E March (Rsmn) FY15 FY16 FY17 FY18E FY19E FY20E

Revenues 36,810 36,858 38,154 43,431 49,616 56,319

YoY (%) (6.1) 0.1 3.5 13.8 14.2 13.5

EBITDA 7,930 7,717 9,643 11,368 13,000 14,802

Margin (%) 21.5 20.9 25.3 26.2 26.2 26.3

PAT 4,377 4,105 6,069 7,159 8,119 9,191

YoY (%) 21.5 (6.2) 47.9 18.0 13.4 13.2

EPS (Rs) 6.3 5.9 8.7 10.2 11.6 13.1

RoE (%) 20.9 16.6 20.2 20.2 19.5 18.9

EV/EBITDA (x) 28.4 29.0 23.2 19.7 17.2 15.1

P/E (x) 51.2 54.6 36.9 31.3 27.6 24.4

Source: Company, Nirmal Bang Institutional Equities Research

13 November 2017


Indraprastha Gas 2

Valuation

IGL stock currently trades at a premium to its historical trading pattern in terms of P/E and EV/EBITDA as Exhibit 1 and Exhibit 2 below indicates. The stock has been trading in the range of +/-1SD in respect of P/E as well as EV/EBITDA.

The key reasons for strong performance of the stock is driven by: 1) Strong push by the government for increasing the usage of natural gas as a preferred fuel. 2) Many decisions of theSupreme Court favouring usage of natural gas as a preferred fuel. The decisions were driven by concerns over rising pollution level because of usage of pet coke and furnace oil (for industrial and commercial purposes) and MS and HSD in automobile/other sectors. 3) Natural gas is also cheaper relative to MS and HSD which helped growth in demand as more and more motorists shift to natural gas.

While the reasons above indicate the potential demand for natural gas as a preferred source of energy in India, the growth over the past five years has been driven by relatively lower prices of CNG versus MS and HSD. Further, PNG is increasingly becoming the preferred domestic fuel compared to LPG because of the ease of delivery and relatively being priced cheaper to LPG.

In our view, while the stock price of IGL seems expensive based on the past six-year trading history, it is expected to trend higher because of: 1) Anticipated strong growth in demand because of under- penetration in NCR on reasons stated above. 2) Strong balance sheet with net cash position. 3) Strong and consistent FCFF despite consistent capex to aid growth. 4) Clear visibility on earnings and sales growth. 5) Capex funded by internal accruals.

Exhibit 1: Forward P/E Exhibit 2: Forward EV/EBITDA

-

5

10

15

20

25

30

Ma

r-1

0

Au

g-1

0

Jan

-11

Ma

y-1

1

Oct

-11

Fe

b-1

2

Jul-1

2

No

v-1

2

Ap

r-1

3

Se

p-1

3

Jan

-14

Jun

-14

Oct

-14

Ma

r-1

5

Jul-1

5

De

c-1

5

Ma

y-1

6

Se

p-1

6

Fe

b-1

7

Jun

-17

No

v-1

7

Forward P/E Average Stdev +1 Stdev-1

(x)

-

2

4

6

8

10

12

14

16

18

20

Ma

r-1

0

Jul-1

0

Oct

-10

Fe

b-1

1

Ma

y-1

1

Au

g-1

1

De

c-1

1

Ma

r-1

2

Jul-1

2

Oct

-12

Jan

-13

Ma

y-1

3

Au

g-1

3

No

v-1

3

Ma

r-1

4

Jun

-14

Oct

-14

Jan

-15

Ap

r-1

5

Au

g-1

5

No

v-1

5

Ma

r-1

6

Jun

-16

Se

p-1

6

Jan

-17

Ap

r-1

7

Jul-1

7

No

v-1

7

Forward EV/EBITDA Average Standard deviation +1 Standard Deviation -1

(x)

Source: Company, Nirmal Bang Institutional Equities Research Source: Company, Nirmal Bang Institutional Equities Research

Relative domestic valuation

The relative comparison table below shows that IGL is the largest stock relative to its universe and is trading at a multiple which is higher relative to Mahanagar Gas or MGL and Gujarat Gas or GGL. However, with the recent Supreme Court judgements banning the utlilisation of pet coke and furnace oil, we expect an overall volume growth of 8% over the next few years and an immediate impact of 2%. In our view, given the acute concern on the environmental issues in NCR, the probability of higher growth in sales volumes in NCR is far higher than in any other city.


Indraprastha Gas 3

Exhibit 3: Peer Fundamentals and Valuation Ratios

Company Name

Price OS Mkt cap Sales (Rsmn) EBITDA (Rsmn) EBITDA margin (%) PAT (Rsmn)

(Rs) (mn) (mn) FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20

IGL 315 700 220,500 43,431 49,616 56,319 11,368 13,000 14,802 26 26 26 7,159 8,119 9,191

MGL 1,252 99 123,699 23,220 25,265 27,439 7,661 8,010 7,975 33 32 29 4,771 5,042 5,014

Gujarat Gas 922 138 126,994 63,544 69,514 77,530 10,637 12,083 13,687 17 17 18 4,657 5,284 6,363

GSPL 209 564 117,996 12,888 15,229 N/A 11,365 13,563 N/A 88 89 N/A 7,879 9,804 N/A

Company Name

Price OS Mkt cap RoE (%) PE (x) EV/EBITDA (x) Net Debt (x)

(Rs) (mn) (mn) FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20 FY18 FY19 FY20

IGL 315 700 220,500 20.2 19.5 18.9 30.7 27.1 23.9 19.4 16.9 14.9 (7,035) (9,882) (14,031)

MGL 1,252 99 123,699 24.6 23.2 21.4 25.0 23.6 24.4 15.4 14.7 14.8 (5,866) (5,866) (5,866)

Gujarat Gas 922 138 126,994 21.2 24.7 24.0 27.8 22.9 20.0 14.1 12.4 11.0 22,944 22,944 22,944

GSPL 209 564 117,996 16.8 18.2 N/A 15.0 12.0 N/A 10.1 8.5 N/A (2,649) (2,649) (2,649)

Source: Company, Bloomberg, Nirmal Bang Institutional Equities Research

Relative valuation- international

IGL stock trades in line with it’s Chinese peers, although it is relatively costlier when compared with companies based in Hong Kong. In our view, the acute environmental problems faced in NCR is expected to be the main trigger for higher than expected sales growth of IGL.

Exhibit 4: Relative valuation – international

Company Name/Area Price

(USD) OS (mn)

Mkt cap (USD mn)

P/E - FY1 P/E - FY2 EV/EBITDA-

FY1 EV/EBITDA -

FY2

China

CHONGQING GAS GROUP CORP L-A 1.40 1,556 2,175 37 33 23 21

SHENZHEN GAS CORP LTD-A 1.22 2,214 2,697 19 17 12 11

Average - - - 28 25 18 16

Hong Kong

CHINA TIAN LUN GAS HOLDINGS 0.73 989 726 13 11 10 8

CHINA SUNTIEN GREEN ENERGY-H 0.28 1,839 521 8 7 10 9

ENN ENERGY HOLDINGS LTD 7.53 1,082 8,151 15 14 9 8

Average - - - 12 11 10 8

Indonesia

PERUSAHAAN GAS NEGARA PERSER 0.13 24,242 3,193 15 13 7 7

Pakistan

SUI NORTHERN GAS PIPELINES 1.13 634 714 18 16 12 11

Average - - - 18 16 12 11

Source: Bloomberg


Indraprastha Gas 4

Valuation based on Discounted Cash Flows

We have done the DCF based on the assumptions given below and have arrived at a target price of Rs463. In our model, we have assumed a steady EBITDA at Rs5.96/scm based on our conversation with the company and its performance in the past few quarters.

Exhibit 5: Discounted Cash Flow Model (Rsmn)

Target Price as on 30th September 2018 Sep-18 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28

Years 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5

FCFF 4,115 5,586 9,536 10,883 12,376 14,041 15,902 17,987 20,327 22,960

EBITDA 13,000 14,802 16,590 18,527 20,694 23,121 25,846 28,910 32,362 36,257

Tax rate 33% 33% 33% 33% 33% 33% 33% 33% 33% 33%

Depreciation 2,213 2,572 2,755 2,939 3,123 3,306 3,490 3,674 3,857 4,041

Capital Expenditure (6,000) (6,000) (3,000) (3,000) (3,000) (3,000) (3,000) (3,000) (3,000) (3,000)

Changes in Working capital 677 823 515 503 484 463 438 410 378 342

Discount Rate 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%

Discount Factor 0.95 0.86 0.78 0.71 0.64 0.58 0.53 0.48 0.43 0.39

Discounted Terminal Value 2,49,593 - - - - - - - - -

Discounted FCFF as on September 2018 3,917 4,817 7,451 7,703 7,936 8,158 8,371 8,578 8,783 8,988

Discounted Free Cash Flow 3,24,293 - - - - - - - - -

Total number of shares 700 - - - - - - - - -

Target Price 463 - - - - - - - - -

Source: Nirmal Bang Institutional Equities Research

Assumptions:

We have used the following assumptions to calculate the Free Cash Flows to Firm (FCFF):

We computed the EBITDA for the year by multiplying the Volume sales (PNG+CNG) by the Rs/SCM EBITDA.

We have considered EBITDA at Rs 5.96 per SCM.

In terms of PNG growth we have considered that the average domestic users will increase by 13% annually between FY18-FY21 and post FY21 we have considered that average annual users to grow by 7%.

An annual growth of 7% is considered for Commercial/Industrials segment.

We have considered an average growth of 13% for CNG volumes.

We have added back the tax benefit on depreciation as it is non-cash expense

We then subtract capital expenditure for the year

Finally we add/(subtract) any changes in the working capital to arrive at the FCFF

The FCFF for each year is discounted for the next 9.5 years. (Refer Exhibit - Discount Rate)

The Terminal Value is computed at the end of 9.5 years considering a long term growth rate 6.54% (in line with inflation rate) and is discounted as of September 2018

We have added the Present Value of FCFF and Terminal Value to arrive at the Target Price as of September 2018

We have considered a time horizon of nine and a half years for discounting the free cash flows

We have considered an average EBITDA growth of 12% for the forecast period

Tax Rate of 33% has been considered for forecast the period

Depreciation has been considered as a percentage of Gross Block

We have considered a Capital Expenditure of Rs 6000 mn till FY20 based on guidance provided by the management, post which we have assumed an annual capital expenditure of Rs 3000mn.


Indraprastha Gas 5

Discount Rate

Cost of Capital

Risk Free Rate 7%

Beta 0.6

Equity Market Risk Premium 7%

Cost of Equity 10.4%

Source: Bloomberg

Risk free rate is Yield on 10 Yr Government Security

Beta is considered as the Adjsuted Beta


Indraprastha Gas 6

Key reaons for our bullish view

1. Natural gas seen as a preferred energy provider by the government.

2. Rising environmental concerns have led to favourable decisions by Indian courts which is expected to increase demand in NCR.

3. Natural gas is cheaper than alternate CNG substitutes like MS and HSD.

4. Visbility in demand growth supported by the government and Indian courts.

5. Monopoly in NCR- high barriers to entry because of huge initial capex.

6. Earnings CAGR of 15% likely over FY18E-FY20E.

7. Strong balance sheet- net cash position.

8. Consistent free cash flow gives added comfort.

9. Valuation is rich, but downside potected as IGL is the sole provider of CNG and PNG in NCR. Also, there are strong future growth prospects.

Natural gas seen as a preferred energy provider by the government

The government, in its recent announcements, has maintained that it focuses on increasing the utilisation of natural gas as the preferred energy provider in India. The main reasons for the government’s stated intention are: 1. Availbility of cheaper LNG relative to other energy sources like MS, HSD etc. 2. Natural gas is a ‘clean gas’ which helps in lowering pollution caused by other fossil fuels.

The government has stated that it proposes to increase the utlisation of natural gas from 6.5% of total energy consumption currently to approximately 15% of total energy requirement in India by 2030E, which implies a CAGR of 10% over FY18E-FY30E. This is in line with the international norms where natural gas accounts for 24% of total energy requirement . In India, natural gas usage, as a percentage of total energy consumption, is 24% only in the state of Gujarat.

Rising environmental concerns led to favourable decisions by Indian courts which are expected to increase demand in NCR

Rising pollution in NCR has forced the government to reduce the consumption of other sources of energy via innovative means. The Delhi government has started an expriment whereby cars with even and odd numbers will be allowed on the roads on alternate days, thereby reducing the number of cars on the roads. Vehicles with CNG were exempt from this rule. Further, in a recent judgement , the Supreme Court has banned the usage of pet coke and furnace oil by the industry in NCR which implies that all companies using furnace oil and pet coke will have to shift to natural gas for their energy needs. Natural gas is cheaper than MS and HSD and therfore it will be the sole beneficiary of the judgement.

Visibility in demand growth supported by the government and Indian courts

Given the factors above, in our view the visbility of demand growth for natural gas as a preferred fuel is visible. The demand for natural gas is expected to be supported by recent government announcements and the judgements of courts. While we have factored in a growth in sales volume of 14%, we expect the actual sales volume to trend higher as IGL increases its penetration of the core market.

Natural gas is cheaper than alternate CNG substitutes like MS and HSD

Natural gas is cheaper than MS and HSD as a transport fuel. While CNG retails at Rs40.82/kg, HSD retails at Rs60.47/litre and MS retails at Rs76.55/litre. Further, in case of industrial fuels, while PNG is priced at Rs28.94/scm, light diesel oil is priced at Rs32.88/litre and commercial LPG at Rs54.86/kg. Natural gas is also believed to increase fuel efficiency.

Monopoly in NCR- high barriers to entry

Currently, IGL is the sole provider of natural gas for NCR. In our view, for any 3rd party to enter the market, would involve high capex to set up the CNG stations even if the new company were to get the 3rd party rights to transport natural gas through the pipeline owned by IGL.


Indraprastha Gas 7

Earnings CAGR of 15% likely over FY18E-FY20E.

Key drivers:

1. Volume growth

2. Pricing growth

CNG sales volume growth of 13% annually likely over FY18E-FY20E

With IGL being the exclusive provider of CNG, historical growth was driven primarily by the conversion of public vehicles to CNG as per Supreme Court judgement, and the gradual conversion of private vehicles to CNG because of lower fuel cost.

Exhibit 8 below shows that the growth in number of buses on the roads declined steadily until FY16. The number of CNG buses started rising again from FY17 with a increase of 12%. Based on our interaction with the management and the planned increase as per Delhi government, we expect an increase of 1,900 buses (9% YoY) in FY18E and by 5% in FY19E and FY20E. To determine the volume consumption, we have assumed average CNG consumption for buses at 70kg/day and also assumed that only 33% of the buses run on any particular day.

We have assumed an increase of 7% annually over FY18E-FY20E based on the historical trend for auto-riskshaws. For cars/taxis,we assume a growth rate 15% annually over FY18E-FY20E. For auto-rickshaws and car/taxis also, we have assumed that only 33% of the total auto-rickshaws and cars/taxis are on the road on a particular day. We have assumed average CNG consumption for cars/taxis at 8kg/day and for auto-rickshaws at 3kg/day based on our interaction with th management.

Our assumption for taking 33% utilisation of the total strength of buses, cars/taxis and auto-rickshaws is based on the historical trend.

Based on the above, we have arrived at an annual growth in CNG sales at 13% annually over FY18E-FY20E.

Exhibit 6: CNG volume and growth Exhibit 7: Consumption per vehicle

18%

15%

7%

2%4% 5%

13%13% 12% 12%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18E

FY

19E

FY

20E

CNG volume CNG volume growth

(scm/mn)

-16%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Consumption per vehicle % change Y-o-Y

(Actuals/scm) (%)


Exhibit 8: Number of buses and growth (YoY) Exhibit 9: Number of Auto-rickshaws and growth (YoY)

20%

13%

0%

4%

-1% -1%

12%

9%

5% 5%

-5%

0%

5%

10%

15%

20%

25%

-

5,000

10,000

15,000

20,000

25,000

30,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

E

FY

19

E

FY

20

E

Number of buses Growth in Buses (YoY)

(Quantity)

25%

29%

21%

6%

10%7% 7% 7% 7% 7%

0%

5%

10%

15%

20%

25%

30%

35%

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

E

FY

19

E

FY

20

E

Number of Auto-rickshaws Growth in Auto-rickshaws (YoY)

(Quantity)




Indraprastha Gas 8

Exhibit 10: Number of Car/taxi and growth (YoY) Exhibit 11:Total vehicles and growth (YoY)

29%27% 28%

12%8%

6%

14% 15% 15% 15%

0%

5%

10%

15%

20%

25%

30%

35%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

E

FY

19

E

FY

20

E

Number of Cars/Taxi Growth in Cars/Taxis (YoY)

(Quantity)

27% 28%

25%

10%

8%6%

12% 13% 13% 13%

0%

5%

10%

15%

20%

25%

30%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

E

FY

19

E

FY

20

E

Total vehicles Growth in Vehicles (YoY)

(Quantiity)


PNG- recent Supreme Court judgement to be a catalyst for growth.

The growth rate of PNG volume declined sharply until FY15, but grew 4%YoY in FY16 and 19% in FY17. The strong growth in FY17 was driven by 17% growth in the number of residential users and 11% rise in commercial/industrials users. Sales volume per user also increased 2%YoY which led to total growth of 19%. We have estimated increase in the number of households by 13% YoY in FY18E, by 15% in FY19E and by 16% in FY20E. This is based on an estimated increase in the number of users by 1,00,000 in FY18E (as per IGL) and 1,25,000 in FY19E and 1,50,000 in FY20E, given the growth trend.

The increase in number of users from the industry has trended downwards in FY16-FY17 and in keeping with the trend we have increased the users from the industry growing 7% annually over FY18E-FY20E. However, given the recent Supreme Court judgment banning the usage of furnace oil and pet coke, we expect strong growth in the next few years. IGL indicated that if the entire industy in NCR shifts to natural gas from furnace oil and pet coke, there could be an increase of 0.35mmscmd, a growth of 25% over the sale of PNG in FY17. However, as IGL does not have connectivity to all industrial areas, the immediate impact is expected to be an addition of 0.07 mmscmd. In our model, we have assumed an addition of 0.0175mmscmd in FY18E and 0.07 mmscmd in FY19E and FY20E over and above the current estimated sales.

Exhibit 12: PNG volume, volume growth

107%

57%

18%

7%

-7%4%

19% 17% 21%17%

-20%

0%

20%

40%

60%

80%

100%

120%

-

100

200

300

400

500

600

700

800

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

PNG volume PNG volume growth (RHS)

(scm/mn)



Indraprastha Gas 9

Exhibit 13: Domestic PNG users and growth (YoY) Exhibit 14: Commercial/Industrial users and growth (YoY)

35% 36%

16% 19%22%

13%17%

13%15% 16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

E

FY

19

E

FY

20

E

Domestic users Domestic users growth (YoY)

(Quantity)

38%

66%60%

36%

22%

13% 11%7% 7% 7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

FY

11

FY

12

FY

13

FY

14

FY

15

FY

16

FY

17

FY

18

E

FY

19

E

FY

20

E

Industrial/Commercial users Industrial/Commercial growth (YoY)

(Quantity)


Selling price of gas

The selling price of PNG and CNG are based on cost-plus basis. IGL plans to maintain EBITDA/scm in range of Rs5-6.The average blended selling price of natural gas is given in Exhibit17 and the selling price of CNG and PNG are given in Exhibit 16 and Exhibit 15 below.

Historical EBITDA has been maintained at Rs5-Rs6/scm. In our model we have assumed that EBITDA will continue to remain in the same band and most of the revenue growth will be driven primarily by volume growth.

Exhibit 15: PNG price trend Exhibit 16: CNG price trend

19

22

26

30

32

28

23 23 23 23

15

17

19

21

23

25

27

29

31

33


(Rs/scm)

20

23

28

32

2827

26 26 26 26

15

17

19

21

23

25

27

29

31

33


(Rs/scm)


Cost of gas sold

The natural gas received by IGL is a mix of APM (administered pricing mechanism), PMT (Panna Mukta Tapti), and spot LNG. The price of APM gas is based on the previous twelve months average price of gas with one quarter lag in Henry Hub, Russia Gas, Alberta and National Balancing Point and is at a discount to LNG price. PMT gas is priced at a fixed rate of Rs5.7/scm. The spot price of gas from LNG varies on the current pricing of gas. As per the government’s directive, APM gas is to be utilised only for CNG and PNG household and is allocated by the Centre based on demand in the previous six months.


Indraprastha Gas 10

Exhibit 17: Cost of natural gas

9

12

16

19

1615

12 12 12 12

8

10

12

14

16

18

20


(per scm)



Indraprastha Gas 11

EBITDA

Exhibit 18 shows EBITDA (Rs/5-6scm) over FY12-FY20E.

Exhibit 18: EBITDA (per scm) Exhibit 19: EBITDA margin

4.93

5.20

5.67 5.65 5.65

5.27

5.76

5.95 5.95 5.96

4.50

4.70

4.90

5.10

5.30

5.50

5.70

5.90

6.10


(per/scm)

28%

25%

23%

20%

22%21%

25%26% 26% 26%

18%

20%

22%

24%

26%

28%

30%


(%)


We expect the EBITDA margin to be maintained at around 26% over FY18E-FY20E. We expect EBITDA (Rs/scm) to rise marginally from Rs5.76/scm to Rs5.96/scm in FY19-20E. The rise in EBITDA (Rs/scm) is because of the higher growth in Gross margin (Rs/scm) relative to the likely increase in other expenses (CNG+PNG distribution expenses) and repairs and maintenance in Rs/scm terms (expected to grow by around 1%-3% annually over FY18E-FY20E). We have been conservative and despite growth in sales volume by 14% annually, we have taken a marginal increase (Rs/scm) to the estimated cost.

Historically, EBITDA margin declined as there was a sharp increase in expenses (Rs/scm) because of strong growth in the pipeline and other infratstructure network. Further, the growth in sales volume declined until FY14 because of higher gas price. However, with the decline in price of gas from FY15 leading to higher demand, capacity utilisation of the infrastructure improved which reduced the expenses (Rs/scm) following better operating leverage. Other expenses are higher in FY17 because of the rise in rental costs for the company.

Exhibit 20: Operating expenses

Expense (Rs/scm) FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

Gross Profit 6.88 7.54 7.63 7.77 7.76 8.65 8.88 8.94 9.02

Change (YoY)% 5.9 9.7 1.1 1.8 -0.1 11.6 2.7 0.6 0.8

CNG+PNG Distribution 0.19 0.21 0.21 0.24 0.25 0.24 0.25 0.25 0.26

Change (YoY) % 22.3 7.0 2.1 13.4 2.2 (1.0) 1.0 2.0 2.0

Employee Benefit Expenses 0.36 0.42 0.43 0.47 0.54 0.55 0.56 0.58 0.59

Change (YoY) % (5.7) 18.3 1.5 9.3 15.5 0.8 2.0 3.0 3.0

Take or Lay Expenses - - - - 0.10 - - - -

Repairs and Maintenance 0.44 0.60 0.64 0.68 0.82 0.88 0.89 0.91 0.93

Change (YoY) % 4.9 36.2 8.2 5.1 20.8 7.9 0.9 2.0 2.0

Other Expenses 0.7 0.6 0.7 0.7 0.8 1.2 1.2 1.3 1.3

Change (YoY) % 13.7 (5.3) 5.7 5.9 8.2 55.4 1.0 2.0 2.0

EBITDA 5.20 5.67 5.65 5.65 5.27 5.76 5.95 5.95 5.96

Change (YoY) % 5.4 9.0 (0.2) (0.1) (6.8) 9.3 3.4 (0.1) 0.2



Indraprastha Gas 12

Strong balance sheet

In FY16, IGL became a debt-free company with net debt-to-equity ratio of -0.18x. IGL has shown strong balance sheet health where the net debt-to-equity ratio has been trending downwards from 0.33x in FY11 to -0.20x in FY17. We expect net debt-to-equity ratio of -0.29x by FY20E after considering IGL’s capability to manage capital expenditure through internal acruals and also provide for dividend. IGL is expected to make a capital expenditure of Rs6,000mn over FY18E-FY20E and still be able to maintain a healthy balance sheet.

Exhibit 21: Net debt-to-equity ratio Exhibit 22: Net fixed assets

0.33 0.29

0.20

0.04

(0.04)(0.18) (0.20) (0.20)

(0.24)(0.29)

(0.40)

(0.30)

(0.20)

(0.10)

-

0.10

0.20

0.30

0.40


(x)

15,018

19,547 21,386 21,576 22,099

23,045

24,689

28,851

32,638

36,067

10,000

15,000

20,000

25,000

30,000

35,000

40,000


(Rsmn)


A key contributing factor to IGL’s healthy balance sheet is its negative working capital cycle. Since 2011, IGL has never had a positive working capital cycle and it is one of the reasons why the company does not require debt in the near future. Though debtor days have increased from 16 days in FY11 to 19 days in FY17, credior days recovered from 26 days in FY14 to 48 days in FY17 and helped maintain the negative working capital cycle. IGL had only eight days of inventory as of FY17-end. The company reported 21 days of negative working capital in FY17, which we expect to normalise to 11 days over FY18E-FY20E. Going forward, we have assumed the debtor, creditor and inventory days to be 22 days, 40 days and 8 days, respectively, over FY18E-FY20E.

Exhibit 23: Debtor days Exhibit 24: Creditor days

16

19 19

20

23 24

19

22 22 22

12

14

16

18

20

22

24

26


(Days)

62

43

35

26

29

33

48

40 40 40

20

25

30

35

40

45

50

55

60

65


(Days)



Indraprastha Gas 13

Exhibit 25: Inventory days Exhibit 26: Working capital days

12

8

6

5

6

7

8 8 8 8

4

5

6

7

8

9

10

11

12

13


(Days)

(35)

(16)

(10)

(1) (0) (2)

(21)

(11)(11) (11)

(40)

(35)

(30)

(25)

(20)

(15)

(10)

(5)

-

5


(Days)


Strong operating cash flow

IGL has strong operating cash flow, mainly supported by negative working capital. As we can obeserve in Exhibit 27, the company has sufficient cash flow from operations for making capital expenditure and dividend payout. The company’s cash flow margin (Exhibit 29) dipped to 16% in FY14 primarily because of an increase in debtor days from 19 days in FY13 to 20 days in FY 14, but creditor days declined substantially from 62 days in FY11 to 26 days in FY14. Cash flow margin improved post stabilisation of debtor and creditor days. Considering that the company will be able to maintain a stable negative working capital through FY18-FY20, we have derived a cash flow to sales of 0.18x-0.2x going forward with operating cash to current liabilities ratio being 0.79x-0.88x over FY18E-FY20E.

Exhibit 27: Operating cash flow Exhibit 28: Operating cash flow to current liabilities ratio

5,930

7,328

6,380 6,022

6,702

4,554

7,985

9,704

11,064

814 901 901 1,011

1,011 1,601

1,060 1,851 2,080

5,962 3,706

2,385 2,010

2,523 3,314

6,001 6,000 6,000

-

2,000

4,000

6,000

8,000

10,000

12,000


Operating cash flow Gross Dividend Capial Expenditure

(Rsmn)

1.34

1.06 0.96

0.87 0.87

0.48

0.79 0.86 0.88

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60


(x)


Exhibit 29: Cash flow to sales ratio Exhibit 30: Cash flow to average total liabilities

0.24

0.22

0.160.16

0.18

0.12

0.180.20 0.20

0.10

0.12

0.14

0.16

0.18

0.20

0.22

0.24

0.26


(x)

26%

28%

22%

20% 20%

11%

17% 18% 17%

0%

5%

10%

15%

20%

25%

30%


(%)



Indraprastha Gas 14

DuPont analysis

IGL’s RoE declined from 26% in FY11 to about 20% in FY17. The company has become debt-free in FY16 and its zero leverage has negatively impacted RoE which fell to 17% in FY16. Asset turnover of IGL witnessed a sharp decline from 1.38 in FY14 to 0.91 in FY17, which also contributed to the decline in RoE. Decline in asset turnover was caused by lower realisation in PNG which caused poor net sales growth over FY15-FY17. In FY15, PNG price was Rs32/scm, whereas in FY17 it was Rs23/scm. The drop in net sales together with the inrease in total assets via increase in gross fixed assets (capex), investments, and cash and bank balances caused the asset turnover to drop. Going forward, we expect the RoE to decline further to 19% in FY20E as the company does not require any debt (no leverage benefit) and asset turnover will further decline to 0.89 in FY20E . We expect the asset turnover to decline as we assume that the gas pricing environment is not likely to change, resulting in poor realisation.

Exhibit 31: DuPont analysis Exhibit 32: RoE

-0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00


NI/EBT EBT/EBIT

EBIT/SALES TOTAL ASSETS/TOTAL EQUITY

SALES/TOTAL ASSETS

(x)

0.26

0.25

0.24

0.20 0.21

0.17

0.20 0.20 0.19

0.19

0.15

0.17

0.19

0.21

0.23

0.25

0.27


(x)


Exhibit 33: DUPONT Analysis

DUPONT (x) FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E FY20E

NI/EBT 0.67 0.68 0.67 0.67 0.67 0.65 0.67 0.67 0.67 0.67

EBT/EBIT 0.97 0.92 0.92 0.95 1.00 1.02 1.13 1.12 1.12 1.13

EBIT/SALES 0.23 0.20 0.17 0.14 0.18 0.17 0.21 0.22 0.22 0.22

TOTAL ASSETS/TOTAL EQUITY 1.76 1.89 1.76 1.62 1.46 1.38 1.39 1.35 1.33 1.31

SALES/TOTAL ASSETS 0.99 1.08 1.28 1.38 1.20 1.07 0.91 0.91 0.90 0.89

ROE 0.26 0.25 0.24 0.20 0.21 0.17 0.20 0.20 0.19 0.19


IGL versus MGL comparison

Exhibit 34 below shows that IGL has a larger infrastructure relative to MGL with 10,718km of pipeline network compared to only 4,838km of network in case of MGL. Consequently, the sales of IGL in volume terms is nealrly 2x of MGL with total sales at 4.59mmscmd in FY17 compared to 2.57mmscmd of MGL in FY17. We note that while the sales volume of both IGL and MGL posted a five-year CAGR of 6%, the sales volume of PNG for IGL was higher with a five-year CAGR of 8% compared to only 5% in case of MGL. We expect the growth in sales volume of PNG to increase sharply for IGL after the recent Supreme Court judgement which has banned the utilisation of pet coke and furnace oil in NCR on environmental concerns.The actual increase in sales could be a spread over a few years as IGL needs to increase the pipeline to cater to all industries in NCR.


Indraprastha Gas 15

Exhibit 34: IGL vs MGL – a comparison

(Rsmn) FY12 FY13 FY14 FY15 FY16 FY17 CAGR (%)

CNG Customers (IGL) 0.55 0.69 0.75 0.82 0.87 0.97 12.05

Growth (%) - 25.0 9.8 8.3 6.3 11.9 -

CNG Customers (MGL) 0.23 0.29 0.36 0.42 0.47 0.54 18.12

Growth (%) - 23.5 24.1 16.7 11.9 14.9 -

PNG Customers (IGL) 0.33 0.39 0.46 0.56 0.64 0.75 17.4

Growth (%) - 16.3 18.9 22.0 13.5 16.6 -

PNG Customers (MGL) 0.56 0.64 0.70 0.80 0.86 0.95 11.2

Growth (%) - 14.3 9.4 14.3 7.5 10.5 -

MMSCMD

CNG Volume (IGL) 2.57 2.75 2.82 2.94 3.08 3.48 6.2

Growth (%) - 7.2 2.2 4.4 4.6 12.9 -

CNG Volume (MGL) 1.43 1.52 1.66 1.77 1.8 1.9 5.8

Growth (%) - 6.3 9.2 6.6 1.7 5.6 -

PNG Volume (IGL) 0.77 0.91 0.98 0.91 0.94 1.11 7.5

Growth (%) - 17.8 7.0 -7.2 3.5 18.7 -

PNG Volume (MGL) 0.53 0.56 0.59 0.62 0.63 0.67 4.8

Growth (%) - 5.7 5.4 5.1 1.6 6.3 -

Pipleline Network (IGL) - Kms - - - - - 10,718 -

Pipleline Network (MGL) - Kms - - - - - 4,838 -

CNG Filling Stations (IGL) - - - - - 421 -

CNG Filling Stations (MGL) - - - - - 203 -

Commercial/Industrial Consumers (IGL) - - - - - 2,870 -

Commercial/ Industrial Consumers (MGL) - - - - - 3,280 -


IGL has shown strong growth in balance sheet size with a five-year CAGR of 11% primarily through internal accruals, indicating the ability of the company to support it’s growth. MGL has shown a similar growth in balance sheet size of 11% five-year CAGR.

Operating cash flow (after working capital changes) including current investments (primarily investments in mutual funds) have posted a five-year CAGR of 6% over FY12-FY17. However, net profit showed a CAGR of 15% over FY12-FY17, in line with the five-year sales CAGR of 15%. Operating cash flows of MGL have registered a five-year CAGR of 5% over FY12-FY17. During FY12-FY17 average volume supplied MGL is about 59% of the volume supplied by IGL. Whereas, The Operating cash flow of MGL is on an average 66% of the IGL’s operating cash flow. MGL has a better operating cash flow due to a better negative working capital as compared to IGL. The five year average negative working capital days (FY13-FY17) of IGL is 7 days vs 14 days for MGL.

However, growth increased sharply over the past three years. On a three-year CAGR of -1% (FY14-FY17), net profit rose 19% with operating cash flow including working capital changes and current investments posting a CAGR of 17%. The sales growth was weak following the decline in the price of natural gas. However, as IGL’s sale price of natural gas is cost-plus based, the lower sales price only helped in increasing sales volume and raising EBITDA margin.


Indraprastha Gas 16

Exhibit 35: IGL vs MGL – Financial Performance

Finanacial Performance (Rsmn) FY12 FY13 FY14 FY15 FY16 FY17

Income Statement

Sales (IGL) 25,187 33,670 39,222 36,810 36,858 38,154

Sales (MGL) 13,090 15,144 18,852 20,949 20,783 20,340

Growth (IGL) (%) - 33.7 16.5 (6.1) 0.1 3.5

Growth (MGL) (%) - 15.7 24.5 11.1 (0.8) (2.1)

EBIDTA (IGL) 6,345 7,581 7,824 7,930 7,717 9,643

EBIDTA (MGL) 5,181 5,145 5,227 5,304 5,565 6,968

EBIDTA Growth (IGL) (%) - 19.5 3.2 1.4 (2.7) 25.0

EBITDA Growth (MGL) (%) - (0.7) 1.6 1.5 4.9 25.2

EBITDA Margin (IGL) (%) 25.2 22.5 19.9 21.5 20.9 25.3

EBITDA Margin (MGL) (%) 39.6 34.0 27.7 25.3 26.8 34.3

Net Profit (IGL) 3,064 3,541 3,603 4,377 4,105 5,444

Net Profit (MGL) 3,077 2,985 2,972 3,010 3,109 3,934

Net Profit Growth (IGL) (%) - 15.6 1.7 21.5 (6.2) 32.6

Net Profit Growth (MGL) (%) - (3.0) -0.4 1.3 3.3 26.6

Net Profit Margin (IGL) (%) 12.2 10.5 9.2 11.9 11.1 15.9

Net Profit Margin (MGL) (%) 23.5 19.7 15.8 14.4 15.0 19.3

Balance Sheet

Debt to Equity (IGL) 0.32 0.23 0.18 0.07 - -

Debt to Equity (MGL) 0.01 0.01 0.01 0.01 0.00 0.26

Current Ratio (IGL) 0.82 0.70 0.93 0.87 1.02 1.39

Current Ratio (MGL) 1.07 1.01 1.06 1.09 1.46 1.26

Working Capital Cycle (IGL) (16.00) (9.60) (0.53) (0.41) (2.33) (20.75)

Working Capital Cycle (MGL) 9.17 (11.42) (8.07) (10.23) (11.99) (28.70)

Inventory Days (IGL) 8.12 6.14 4.72 5.76 6.75 7.98

Inventory Days (MGL) 7.65 5.67 4.70 4.54 4.93 7.73

Payable Days (IGL) 42.93 35.13 25.69 29.49 32.86 47.99

Payable Days (MGL) 21.48 38.82 33.93 31.54 33.13 53.39

Receivable Days (IGL) 18.81 19.39 20.44 23.32 23.77 19.27

Receivable Days (MGL) 22.99 21.74 21.16 16.77 16.21 16.97

Cash Flow

Operating Cash Flow (IGL) 6,497 7,770 5,435 5,953 6,290 8,935

Operating Cash Flow (MGL) 4,280 4,389 3,977 4,267 4,254 5,467

FCFF (IGL) (26) 3,657 3,343 2,240 4,219 1,272

FCFF (MGL) 1,023 1,535 1,978 1,660 1,968 2,690



Indraprastha Gas 17

Financials

Exhibit 36: Income statement

Y/E March (Rsmn) FY16 FY17 FY18E FY19E FY20E

Net sales 36,858 38,154 43,431 49,616 56,319

Growth YoY (%) 0.1 3.5 13.8 14.2 13.5

COGS 22,761 20,837 23,283 26,394 29,703

Operating Costs 2,732 2,824 3,188 3,679 4,215

Other expenses 3,647 4,849 5,592 6,543 7,599

EBITDA 7,717 9,643 11,368 13,000 14,802

EBITDA growth (%) (2.7) 25.0 17.9 14.4 13.9

EBITDA margin (%) 20.9 25.3 26.2 26.2 26.3

Depreciation 1,577 1,671 1,838 2,213 2,572

EBIT 6,140 7,973 9,529 10,787 12,230

EBIT (%) 16.7 20.9 21.9 21.7 21.7

Net interest expense (111) (416) (458) (593) (747)

Other income 40 32 27 28 32

Share of Profits in Assocoiates - 625.30 675.32 729.35 787.70

Earnings before tax 6,292 9,045 10,689 12,138 13,797

Tax- total 2,187 2,976 3,530 4,019 4,605

Rate of tax (%) 35 33 33.0 33.1 33.4

Net profit 4,105 6,069 7,159 8,119 9,191

% growth (6.2) 47.9 18.0 13.4 13.2

EPS (FD) 6 9 10 12 13

% growth (6.2) 47.9 18.0 13.4 13.2

Net DPS 1.2 1.7 2.2 2.5 2.9

Net Payout ratio (%) 20.5 19.6 21.9 21.9 21.9


Exhibit 38: Balance sheet


Share capital 1,400 1,400 1,400 1,400 1,400

Reserves and surplus 23,376 28,717 33,986 40,217 47,266

Net worth 24,776 30,117 35,386 41,617 48,666

Loans - - - - -

Deposits from customers - - - - -

Long term provisions 145 203 236 279 327

Deferred tax liability 1,647 2,024 2,024 2,024 2,024

Total capital employed 26,568 32,344 37,646 43,919 51,017

Net fixed assets 23,045 24,689 28,851 32,638 36,067

Investments 3,235 3,661 3,953 4,270 4,611

Long term loans and advances 135 78 78 78 78

Other non current assets - 201.90 201.90 201.90 201.90

Current assets loans and adv. 7,889 13,301 14,637 17,964 22,633

Inventories 472 517 580 659 743

Debtors 2,400 2,014 2,560 2,925 3,320

Cash and bank 4,538 6,086 7,035 9,882 14,031

Loans and advances 326 25 25 25 25

Current investments and others - 4,179 4,179 4,179 4,179

Other current assets 154 480 258 295 335

Less Current liab. & prov. 7,737 9,586 10,075 11,232 12,574

Current liabilities 6,720 9,586 10,075 11,232 12,574

Provisions 1,017 - - - -

Net current assets 153 3,715 4,562 6,732 10,059

Miscellaneous - - - - -

Deferred Tax Assets 85 232 232.20 232.20 232.20

Total capital employed 26,568 32,344 37,646 43,919 51,017


Exhibit 37: Cash flow


Profit after Tax 4,105 5,444 6,484 7,390 8,403

Depreciation 1,577 1,671 1,838 2,213 2,572

Finanace costs (111) (416) (458) (593) (747)

Other Income (40) (32) (27) (28) (32)

Provisions 13 45 45 45 45

Working capital changes 1,159 (2,158) 102 677 823

Operating Cash Flow 6,702 4,554 7,985 9,704 11,064

Capital Expenditure (2,523) (3,314) (6,001) (6,000) (6,000)

Investments - - - - -

Other income 40 32 27 28 32

Cash flow from Investnents (2,483) (3,283) (5,974) (5,972) (5,968)

Proceeds/Repayment of borrowings

(1,453) - - - -

Finance costs 111 416 458 593 747

Dividend & dividend distribution tax (1,050) (1,607) (843) (1,888) (2,141)

Chg. in deposits from customers - - - - -

Changes in long term provision 32 58 33 42 48

Changes in Deferred tax liabilty 375 377 - - -

Others (12) 1,033 (710) 368 401

Cash flow from Financing (1,996) 276 (1,062) (885) (946)

Total Cash Generation 2,223 1,548 949 2,847 4,150

Opening Cash Balance 2,315 4,538 6,086 7,035 9,882

Closing Cash & Bank Balance 4,538 6,086 7,035 9,882 14,031

* Note: Profit after tax is computed after deducting Share of Profits from Associates Source: Company, Nirmal Bang Institutional Equities Research

Exhibit 39: Key ratios

Y/E March FY16 FY17 FY18E FY19E FY20E

Profitability & return ratios

EBITDA margin (%) 20.9 25.3 26.2 26.2 26.3

EBIT margin (%) 16.7 20.9 21.9 21.7 21.7

Net profit margin (%) 11.1 15.9 16.5 16.4 16.3

RoE(%) 16.6 20.2 20.2 19.5 18.9

RoCE (%) 30.3 33.2 33.6 34.0 35.3

Working capital & liquidity ratios

Recievables (days) 24 19 22 22 22

Inventory (days) 7 8 8 8 8

Payables (days) 33 48 40 40 40

Current ratio (x) 1.0 1.4 1.5 1.6 1.8

Valuation ratios

EV/sales (x) 6.1 5.9 5.2 4.5 4.0

EV/EBITDA (x) 29.0 23.2 19.7 17.2 15.1

P/E (x) 54.6 36.9 31.3 27.6 24.4

P/BV (x) 9.0 7.4 6.3 5.4 4.6



Indraprastha Gas 18

Disclaimer

Stock Ratings Absolute Returns

BUY > 15%

ACCUMULATE -5% to15%

SELL < -5%

This report is published by Nirmal Bang’s Institutional Equities Research desk. Nirmal Bang group has other business units with independent research teams separated by Chinese walls, and therefore may, at times, have different or contrary views on stocks and markets. Reports based on technical and derivative analysis may not match with reports based on a company's fundamental analysis. This report is for the personal information of the authorised recipient and is not for public distribution. This should not be reproduced or redistributed to any other person or in any form. This report is for the general information for the clients of Nirmal Bang Equities Pvt. Ltd., a division of Nirmal Bang, and should not be construed as an offer or solicitation of an offer to buy/sell any securities.

We have exercised due diligence in checking the correctness and authenticity of the information contained herein, so far as it relates to current and historical information, but do not guarantee its accuracy or completeness. The opinions expressed are our current opinions as of the date appearing in the material and may be subject to change from time to time without notice.

Nirmal Bang or any persons connected with it do not accept any liability arising from the use of this document or the information contained therein. The recipients of this material should rely on their own judgment and take their own professional advice before acting on this information. Nirmal Bang or any of its connected persons including its directors or subsidiaries or associates or employees or agents shall not be in any way responsible for any loss or damage that may arise to any person/s from any inadvertent error in the information contained, views and opinions expressed in this publication.

Nirmal Bang Equities Private Limited (hereinafter referred to as “NBEPL”) is a registered Member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited. NBEPL has registered with SEBI as a Research Entity in terms of SEBI (Research Analyst) Regulations, 2014. (Registration No: INH000001436 -19.08.2015 to 18.08.2020).

NBEPL or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by Analyst.

NBEPL or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. NBEPL /analyst has not served as an officer, director or employee of company covered by Analyst and has not been engaged in market-making activity of the company covered by Analyst.

The views expressed are based solely on information available publicly and believed to be true. Investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.

Access all our reports on Bloomberg, Thomson Reuters and Factset.

Team Details:

Name Email Id Direct Line

Rahul Arora CEO [email protected] -

Girish Pai Head of Research [email protected] +91 22 3926 8017 / 18

Dealing

Ravi Jagtiani Dealing Desk [email protected] +91 22 3926 8230, +91 22 6636 8833

Pradeep Kasat Dealing Desk [email protected] +91 22 3926 8100/8101, +91 22 6636 8831

Michael Pillai Dealing Desk [email protected] +91 22 3926 8102/8103, +91 22 6636 8830

Nirmal Bang Equities Pvt. Ltd.

Correspondence Address

B-2, 301/302, Marathon Innova,

Nr. Peninsula Corporate Park,

Lower Parel (W), Mumbai-400013.

Board No. : 91 22 3926 8000/1; Fax. : 022 3926 8010

Documents

Institutional Equities · Initiating Coverage Reuters: IGAS.NS; Bloomberg: IGL IN Indraprastha Gas Restrictions On Pollution-generating Fuels To Boost Gas Demand We initiate coverage