Indraprastha Gas Ltd

OVERVIEW:

Share Market Industry Dividend Industry ndustr Book value per

Price Capitalisation EPS PE PE Yield ROE ROE ROA y EOA share

504.1 35301 Cr 15.55 32.34 11.86 0.56 19.50% 23.30% 12.90% 2.80% 84.45%

COMPANY PROFILE:
The company has entered into a joint venture with Siti Energy to set up City
Gas Distribution Projects at Sonepat and Panipat located at Haryana.
Indraprastha Gas was awarded the Golden Peacock Eco-Innovation Award.
In 2012 IGL launched a new CNG concept in Delhi
In 2013 the company decided to invest in equity shares of Central UP Gas
Limited (CUGL) by way of acquisition of 30000000 equity shares, constituting
50% of the paid-up equity share capital of CUGL.
Business
CNG- The company's core business is to distribute CNG and PNG in Delhi. It
has a presence in areas including Sarita Vihar, Jasola, Dwarka, Rohini,
Pitampura, Janakpuri, Maya Enclave, Saket, Hauz Khas, Paschim Vihar,
Vikaspuri, Dilshad Garden, and many more.
R-LNG- The company is also engaged in supplying Regasified Liquid Natural
Gas (R-LNG) to 16 industrial consumers. It is further exploring new gas supply
sources under this segment.
Commercial and Industrial usage- Under the commercial sector all leading
hotels, restaurants, malls, commercial complexes, and hospitals in the NCT of
Delhi are being supplied PNG by IGL.
NEWS AND ANNOUNCEMENT:
APRIL 21: Indraprastha gas to supply CNG to Delhi transport corporation till
December 2030.
FEB 21: Indraprastha gas Q3FY21 PAT at Rs 382 crores YoY income at Rs 1446
crore VS 1664 crore YoY.

OCT 20: IGL likely to foray into electric vehicle charging in tie-up with
Mahindra powerol.

Shareholding Pattern:
% HOLDING Promoters :
● 45% (GAIL-22.5% & BPCL- 22.5%)
● Government of NCT of Delhi - 5%
● Foreign Institutional Investors - 23%
● Mutual Funds - 6%
● Insurance Companies - 10%
● Public / Others - 11%
Management :
● IGL Board is fairly well diversified with ten members including two each
from GAIL and BPCL, one from Govt. of Delhi, and five independent
directors. The company is a beneficiary of its strong parentage and gets
significant support from GAIL and BPCL relating to operations and
management. By the presence of Govt. of Delhi as a minority shareholder,
the company gets support for speedy administrative approvals. The
company has highly qualified senior management personnel with several
years of experience in the Oil & Gas sector.
● Management average tenure is .6 year
● CEO: Elavathur Ranganathan (57 yo) Mr. Elavathur Subramania
Ranganathan has been Managing Director at Indraprastha Gas Limited
since September 28, 2020. Mr. Ranganathan has served as Director of
Marketing and Additional Director at GAIL (India) Limited since July 1,
2020. He was the Managing Director and Director at Indraprastha Gas
Limited from June 01, 2016, until June 16, 2020. Mr. Ranganathan served as
Whole Time Director at GAIL (India) Limited. He started his career in GAIL
in 1985 and has been associated with the Hazira Vijaipur Jagdishpur
Pipeline. He has also worked as Head of Regional Pipeline System in
Cauvery Basin and in charge of Operation and Maintenance of Regional
pipeline system in Krishna Godavari Basin. Mr. Ranganathan has worked as
Executive Director (Corporate O&M) and General Manager (Projects) in
GAIL (India) Ltd.,

● CEO compensation analysis and tenure:

Total compensation 10.96M/YEAR
Salary 10.22M/YEAR
Company earning 12.49B/YEAR
 CEO TENURE .58

● Elavathur's total compensation is below average for companies of similar

size in the Indian market.
● Elavathur's compensation has been consistent with company performance
over the past year.
● Board member average tenure 1.8 years.
● The Board of directors is not considered experienced ( 1.8 years average
tenure), which suggests a new board.
● Leadership team average tenure.6 year
● The management team is not considered experienced ( 0.6 years average
tenure), which suggests a new team.

New Geographical Areas:

IGL has started the sale of CNG at eight OMCs outlets & four DODO stations in
Rewari and the sale of PNG to Domestic households. IGL has recently got entry
into Gurgaon to lay infrastructure; Initially, permission has been given for the
area between the west side of Sohna Road and NH 8 in Gurugram district. IGL
has commissioned twelve CNG stations in the GA. The matter regarding the
taking over of supplies by IGL in Gurgaon District is in progress. IGL was
authorized for Karnal geographical area in the 8th round of bidding by PNGRB.
IGL has commissioned seven CNG stations in Karnal GA. IGL has been
authorized for Meerut (Except area already authorized), Muzaffarnagar & Shamli
geographical area in the 9th round of bidding by PNGRB in which IGL has
commissioned ten CNG stations. IGL has been authorized for Kaithal,
Kanpur(Except area already authorized), Fatehpur & Hamirpur, and Ajmer, Pali &
Rajsamand areas in the 10th round of bidding by PNGRB. CNG sale has started in
Kaithal on two OMCs and Kanpur(Except area already authorized), Fatehpur &
Hamirpur GA on five OMCs.
Dividend Policy provides a liberal payout Track record of last five years:

Year % of Equity
FY 16 60
FY 17 85
FY 18 100
FY 19 120
FY 20 140

● IGL dividend (0.56%) is higher than the bottom 25% of dividend payers in

the Indian market (0.44%).

● IGL High Dividend: 532514's dividend (0.56%) is low compared to the top

25% of dividend payers in the Indian market (1.91%).

● Stable dividends per share have been stable in the past 10 years.

● Growing dividend payments have increased over the past 10 year

FINANCIAL HEALTH:
 ● High quality earning.
● Growing Profit Margin: IGL current net profit margins (22%) are higher than
last year (18.3%).

● Consistent
growing
ROA AND
ROE.
● Consistent
growing
RICE.
● Decline in
ROCE in
2019 and
2020
because of
covid-19
lockdown
which leads to less CNG consumption during this two period
● IGL handles this issue very well by increasing supply to industrial areas.
● The company is debt-free.
● The company is consistently reducing its debt, IGLhas no debt compared
to 5 years ago when its debt to equity ratio was 3%.
● IGL has no debt, therefore it does not need to be covered by operating
cash flow.
● IGL has no debt, therefore coverage of interest payments is not a concern.
 STRENGTH WEAKNESSES
● Growth in Quarterly Net Profit with ● Companies with growing costs YoY for
increasing Profit Margin (YoY) long term projects

● Company with No Debt ● Inefficient use of capital to generate profits -

RoCE declining in the last 2 years
● Increasing Revenue every quarter for the
past 2 quarters ● Degrowth in Revenue and Profit

● Increasing profits every quarter for the past 2

quarters

● Strong cash generating ability from core

business - Improving Cash Flow from
operation for last 2 years

● Annual Net Profits improving for last 2 years

● Book Value per share Improving for last

2 years

● Company with Zero Promoter Pledge

● FII / FPI or Institutions increasing their

shareholding

OPPORTUNITIES THREAT
● Rising Delivery Percentage Compared to
Previous Day and Month, Strong
Volumes

● Brokers upgraded recommendation or target

price in the past three months

SWOAT ANALYSIS:

COMPETITIVE ANALYSIS:
 Market D/ ROC SALE RO
Company PE PAT
Capital E E S E
GAIL 59984 7.16 0.14 7268 16 72508 15.3
INDRAPRASTHA GAS 35834 32.93 0 1094 29 6485 22.6
PETRONET LNG 34485 12.89 0.01 2688 31 35452 25.2

● From the above table analysis I can say that Petronet lng is in a better
position as compared to indraprastha and gail.

CONCLUSION:
● IGL has strong fundamentals and financial position.
● IGL estimated future annual growth rate 20%.
● Oil and gas industry estimated future annual growth rate 12%.
● IGL Improve/Augment CNG infrastructure/Stations in Delhi & NCR to
meet the additional demand in view of conversion of private cars and
improvement in public transport system Improve penetration of PNG
business : Penetration of network in all charge areas Target
Industrial/Commercial customers in both Delhi & NCR.
● Bidding for new cities ,Synergy and Keeping pace with the changing
environment – Automation, Better Infrastructure
 VALUATION:
● Discount rate (cost of equity)=13.7%.
● Perpetual Growth Rate=7%.
● Risk-Free Rate
● Equity Risk Premium
● Gas Utilities Unlevered Beta
● Re-levered beta= 0.33 + [(0.66 * Unlevered beta) * (1 + (1 - tax rate)
(Debt/Market Equity))]
= 0.33 + [(0.66 * 0.449) * (1 + (1 - 35.0%) (0.24%))]=.632
● Levered Beta=.8
● Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
= 6.96% + (0.800 * 8.46%)=13.735

● Terminal value=FCF 2030 × (1 + g) ÷ (Discount Rate – g)

= ₹14,413.483 x (1 + 6.96%) ÷ (13.73% -
6.96%)=227,787.55
● Present value of terminal value = Terminal Value ÷ (1 + r)10
₹227,788 ÷ (1 + 13.73%)10
● Total equity value = Present value of next 10 years cash flows + Terminal Value

= ₹45,940 + ₹62,930=108,870

Equity value per share = Total value / Shares Outstanding

= ₹108,870 / 700 = 155.53.

AS compared to current price IGL share is overvalued.