CMP 261.00
Target Price 292.00
ISIN: INE203G01019
FEB 11th
, 2012
INDRAPRASTHA GAS LIMITED
Result Update: Q3 FY13
BUYBUYBUYBUY
Stock Data
Sector Oil & Gas
BSE Code 532514
Face Value 10.00
52wk. High / Low (Rs.) 391.80/170.00
Volume (2wk. Avg ) 54000
Market Cap ( Rs in mn ) 36540.00
Annual Estimated Results (A*: Actual / E*: Estimated)
Years FY12A FY13E FY14E
Net Sales 25192.33 33982.33 42138.09
EBITDA 6411.74 7916.41 9443.11
Net Profit 3064.32 3674.09 4325.45
EPS 21.89 26.24 30.90
P/E 11.92 9.95 8.45
Shareholding Pattern (%)
1 Year Comparative Graph
BSE SENSEX INDRAPRASTHA GAS LTD
SYNOPSIS
Indraprastha Gas, incorporated in 23 Dec,
1998, is a joint venture of GAIL (India),
Bharat Petroleum Corporation & the Govt. of
the National Capital Territory of Delhi.
IGL is the sole supplier of CNG and PNG in
Delhi, Noida, Greater Noida & Ghaziabad,
plans to promote wider usage of gas for
various applications through co-generation,
gas geysers, gensets etc.
IGL has posted a net profit after tax of Rs.
863.38 mn for the quarter ended December
31, 2012 as compared to Rs. 691.50 mn for
the quarter ended December 31, 2011.
Total Income has increased from Rs. 6646.11
million for the quarter ended December 31,
2011 to Rs. 8720.47 million for the quarter
ended December 31, 2012.
Indraprastha Gas Ltd is keen to buy Asian
Development Bank’s 5.2 per cent stake in
Petronet LNG Ltd.
IGL has hiked 7% price on the domestic piped
natural gas for households in the National
Capital Territory (NCT) of Delhi, Noida, Greater
Noida and Ghaziabad.
Net Sales and PAT of the company are expected
to grow at a CAGR of 34% and 19% over 2011
to 2014E respectively.
Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Indraprastha Gas Ltd 261.00 36540.00 21.89 11.92 2.97 50.00
Gail India Ltd 338.50 427920.90 29.12 11.58 1.98 87.00
Gujarat Gas Ltd 306.75 39443.30 18.88 16.29 5.19 1100.00
VA Tech Wabag Ltd 518.00 13735.20 33.63 15.40 2.95 300.00
Investment Highlights
Results updates- Q3 FY13,
Indraprastha Gas Ltd, one of India's natural gas
distribution companies. IGL was incorporated to
implement the compressed natural gas (CNG)
expansion programme and the piped natural gas
(PNG) project for varied applications in the domestic
and commercial sector, reported its financial results
for the quarter ended 31 Dec, 2012.
Months Dec-12 Dec-11 % Change
Net Sales 8694.46 6631.34 31.11%
PAT 863.38 691.50 24.86%
EPS 6.17 4.94 24.86%
EBITDA 1897.01 1519.17 24.87%
Indraprastha Gas Ltd announced an increase of 24.86% in net profit to Rs 863.3 million for the quarter ended
Dec. 31, 2012 as compared to Rs 691.5 million in the prior-year period. Revenue for the quarter rose by 31.11%
to Rs.8694.46 million from Rs.6631.34 million, when compared with the prior year period. Reported earnings
per share of the company stood at Rs.6.17 a share during the quarter, registering at 24.86% increase over
previous year period. Profit before interest, depreciation and tax is Rs.1897.01 millions as against Rs.1519.17
millions in the corresponding period of the previous year.
Expenditure :
During the quarter the total expenditure cost rose
by 33 per cent mainly on account of increase in
Stock in trade along with consideration of
depreciation in the rupee impact and witnessed.
Total expenditure in Q3FY13 was at Rs.7297.65
million as against Rs.5494.93 million in Q3FY12.
Employee benefit expenses cost Rs.138.19 against
Rs.106.80 millions in the corresponding period of
the previous year. Other Expenditure was at Rs.
926.07 million and Purchase of stock in trade are Rs.
5760.17 million in Q3FY13 are the primarily
attributable to growth of expenditure.
Latest Updates
� IGL has decided to invest in the equity shares of Central U.P. Gas Ltd by way of acquisition of 3,00,00,000
equity shares of Rs. 10 each of UGCL (constituting 50% of the paid-up equity share capital of UGCL) at a price
of Rs. 23 per equity share aggregating Rs. 69,00,00,000 from certain financial investor shareholders of CUGL
subject to the finalization & execution of definitive agreements in this regard and compliance with applicable
laws.
� Indraprastha Gas Ltd is keen to buy Asian Development Bank’s 5.2 per cent stake in Petronet LNG Ltd. ADB
stake going to IGL will help resolve long—standing dispute between Petronet’s principal promoters and the
firm’s management led by its Chairman and Oil Secretary.
� Indraprastha Gas Ltd has drawn out plans to further consolidate its presence in Delhi and NCR by investing
over Rs. 500 crores during the financial year 2012-13.
� Indraprastha Gas Limited (IGL) has hiked 7% price on the domestic piped natural gas (PNG) for households
in the National Capital Territory (NCT) of Delhi, Noida, Greater Noida and Ghaziabad with effect from,
February 10, 2013.
Company Profile
Indraprastha Gas Ltd took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly
Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in
the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the
backing of strong promoters – GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) – IGL plans to
provide natural gas in the entire capital region. The company supplies natural gas in domestic and commercial
sectors along with alternative auto fuel. It operates approximately at 124 CNG stations & supplies piped natural
gas (PNG) to approximately 13,085 domestic and 117 commercial consumers. IGL is headquartered at New Delhi.
Business Areas
� Compressed Natural Gas (CNG)
CNG is gaseous fuel and is a mixture of hydrocarbons mainly Methane. For use in Automobiles as fuel, it is
compressed to a pressure of 200-250 Kg/cm² to enhance the vehicle on-board storage capacity. The
transport sector uses natural gas as Compressed Natural Gas. Indraprastha Gas Ltd continues to augment its
infrastructure so as to meet the increasing demand of CNG arising out of growing number of CNG vehicles in
Delhi. The growth drivers for increase in demand of CNG are - car manufacturers coming up with CNG
variants and Delhi Government’s directive making it mandatory for all LCVs operating in Delhi to run on CNG.
� Natural Gas (PNG)
PNG is mainly methane – CH4 with a small percentage of other higher hydrocarbons. The ratio of carbon to
hydrogen is least in methane and hence it burns almost completely making it the cleanest fuel. It is procured
from the oil / gas wells and transported through a network of pipelines across the country. The domestic and
commercial sectors use it as Piped Natural Gas.
On the PNG front, Indraprastha Gas Ltd has planned to expand its business activities in Delhi and its
neighboring towns like Noida, Greater Noida and Ghaziabad. IGL is also working towards expanding its PNG
network to cover all charge areas of Delhi by 2012. Industrial and commercial segments would be the focus
areas for the organization in the future.
� R-LNG
R-LNG is being supplied to industrial establishments.
Awards
� Declared as the winner in the category of Urban Infrastructure at the Infrastructure Excellence Awards 2012
Companies Business Expansion
� In Compressed Natural Gas has a new concept of Private Bus Cluster introduced by Government of Delhi is
expected to reach 1,000 buses by the end of this financial year . Delhi Government plan to introduce 45,000
new auto rickshaws it is advantage to increase in volume of sales. Growth in private car owners segment is
expected to maintain the trend of previous years.
Financial Highlight
Balance sheet as at March31st, 2012
(A*- Actual, E* -Estimations & Rs. In Millions)
FY12 FY13E FY14E
EQUITY AND LIABILITIES:
Shareholders’ Funds:
Share Capital 1400.00 1400.00 1400.00
Reserves and Surplus 10889.40 14563.47 18888.92
Net worth (a) 12289.40 15963.47 20288.92
Non-Current Liabilities:
long-term borrowings 3375.00 4387.50 5352.75
Deferred Tax Liabilities [Net] 627.20 878.08 1141.50
Other Long Term Liabilities 1928.10 2718.62 3642.95
Long Term Provisions 54.10 64.92 76.61
Long term liabilities (b) 5984.40 8049.12 10213.81
Current Liabilities:
Short-term borrowings 515.20 587.33 657.81
Trade Payables 1811.60 2210.15 2607.98
Other Current Liabilities 1811.50 2536.10 3296.93
Short Term Provisions 815.50 817.13 817.95
Current Liabilities © 4953.80 6150.71 7380.66
Total (a+b+c) 23227.60 30163.30 37883.40
ASSETS:
Non-Current Assets:
Fixed Assets:
Tangible Assets 15787.70 20739.77 26339.51
Intangible Assets 8.20 8.45 8.70
Capital work-in-progress 3751.30 4291.49 4892.30
(d) 19547.20 25039.70 31240.50
Long Term Loans and Advances (e) 54.00 59.40 64.15
Current Assets:
Current Investments 984.10 1613.92 2324.05
Inventories 373.80 392.49 412.11
Trade Receivables 1298.00 1921.04 2535.77
Cash and Bank Balances 319.90 499.04 682.34
Short Term Loans and Advances 556.10 539.42 523.23
Other Current Assets 94.50 98.28 101.23
(f) 3626.40 5064.20 6578.74
Total (d+e+f) 23227.60 30163.30 37883.40
Annual Profit & Loss Statement for the period of 2011 to 2014E
Value(Rs.in.mn) FY11 FY12 FY13E FY14E
Description 12m 12m 12m 12m
Net Sales 17504.63 25192.33 33982.33 42138.09
Other Income 30.85 61.15 119.12 172.73
Total Income 17535.48 25253.48 34101.46 42310.82
Expenditure -12518.08 -18841.74 -26185.05 -32867.71
Operating Profit 5017.40 6411.74 7916.41 9443.11
Interest -131.63 -478.84 -582.25 -681.23
Gross profit 4885.77 5932.90 7334.16 8761.88
Depreciation -1028.71 -1431.98 -1890.15 -2305.98
Profit Before Tax 3857.06 4500.92 5444.01 6455.90
Tax -1259.39 -1436.60 -1769.93 -2130.45
Net Profit 2597.67 3064.32 3674.09 4325.45
Equity capital 1400.00 1400.00 1400.00 1400.00
Reserves 8638.64 10889.38 14563.47 18888.92
Face value 10.00 10.00 10.00 10.00
EPS 18.55 21.89 26.24 30.90
Quarterly Profit & Loss Statement for the period of 30th
June, 2012 to 31st
Mar, 2013E
Value(Rs.in.mn) 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13E
Description 3m 3m 3m 3m
Net sales 7606.79 8551.90 8694.46 9129.18
Other income 31.41 33.07 26.02 28.62
Total Income 7638.20 8584.97 8720.48 9157.81
Expenditure -5809.53 -6486.06 -6823.47 -7065.99
Operating profit 1828.67 2098.91 1897.01 2091.82
Interest -155.18 -140.33 -141.25 -145.49
Gross profit 1673.49 1958.58 1755.76 1946.33
Depreciation -426.80 -477.03 -474.19 -512.13
Profit Before Tax 1246.69 1481.55 1281.57 1434.20
Tax -396.20 -489.42 -418.19 -466.12
Net Profit 850.49 992.13 863.38 968.09
Equity capital 1400.00 1400.00 1400.00 1400.00
Face value 10.00 10.00 10.00 10.00
EPS 6.07 7.09 6.17 6.91
Ratio Analysis
Particulars FY11 FY12 FY13E FY14E
EPS (Rs.) 18.55 21.89 26.24 30.90
EBITDA Margin (%) 28.66% 25.45% 23.30% 22.41%
PBT Margin (%) 22.03% 17.87% 16.02% 15.32%
PAT Margin (%) 14.84% 12.16% 10.81% 10.26%
P/E Ratio (x) 14.07 11.92 9.95 8.45
ROE (%) 25.88% 24.93% 23.02% 21.32%
ROCE (%) 44.77% 48.48% 48.91% 47.80%
Debt Equity Ratio 0.35 0.32 0.26 0.21
EV/EBITDA (x) 7.94 6.26 5.07 4.25
Book Value (Rs.) 71.70 87.78 114.02 144.92
P/BV 3.64 2.97 2.29 1.80
Charts
Outlook and Conclusion
� At the current market price of Rs.261.00, the stock P/E ratio is at 9.95 x FY13E and 8.45 x FY14E
respectively.
� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.26.24 and
Rs.30.90 respectively.
� Net Sales and PAT of the company are expected to grow at a CAGR of 34% and 19% over 2011 to 2014E
respectively.
� On the basis of EV/EBITDA, the stock trades at 5.07 x for FY13E and 4.25 x for FY14E.
� Price to Book Value of the stock is expected to be at 2.29 x and 1.80 x respectively for FY13E and FY14E.
� We recommend ‘BUY’ in this particular scrip with a target price of Rs.292.00 for Medium to Long term
investment.
Industry Overview
India is the world’s fourth largest consumer of primary energy and accounts for about 4.6 per cent of the world's
energy consumption after China, US and Russia.
Vandana Hari, Asia Editorial Director, Platts, believes that India’s tremendously growing energy demand has
made the country an energy leader on the global platform with more than 28 billion tonnes of prognosticated
reserves.
The Government of India's New Exploration Licensing Policy (NELP) launched in 1997-98 has garnered
investments over US$ 14 billion and has resulted in 87 oil and gas (O&G) discoveries. NELP has encompassed all
the ingredients of a favourable investment climate, fiscal stability, transparency of the rule of law, contract
stability, minimal policy induced uncertainties and a stable legal and regulatory framework.
The refining sector in India has also undergone a silent transformation wherein the country emerged as a major
export hub. With a refining capacity of 215 million metric tonnes per annum (MMTPA), exports of petroleum
products have now crossed 60 million tonnes (MT), raking-in revenues of about US$ 60 billion. ‘Petroleum
products’ have emerged as the single largest component of merchandise exports from India.
Production and Consumption – Key Statistics
The hydrocarbons sector is continuously undergoing changes and policy modifications are in-tune with them.
Natural gas is rapidly contributing to the energy requirements owing to commercial development of coal bed
methane, shale gas, underground coal gas and gas hydrates.
President Pranab Mukherji anticipates that natural gas usage will increase significantly in the years to come
while urging the need to connect various parts of India with gas pipelines so that economic benefits of natural
gas reach to all. The Government of India (GoI) is also lending full support to companies acquiring overseas O&G
assets and imports of liquefied natural gas (LNG).
Diesel & Petrol
• Petroleum products are India’s biggest export earner, fetching revenue of about US$ 59 billion annually.
Export of these products stood at 28.9 MT during April-September 2012, according to the petroleum
ministry’s data wing, the Petroleum Products Planning and Analysis Cell (PPAC).
• During 2011-12, the consumption of petroleum products was about 148 million metric tonne (MMT)
showing an import dependence of more than 75 per cent.
• Diesel consumption, which makes up for more than 40 per cent of the fuel sales, registered a growth rate
of 7.2 per cent at average 87, 000 barrels per day (b/d) in September and October 2012 wherein
automobile sector contributed majorly (as reflected in the sale of diesel vehicles).
Gas
India's shale gas reserves are at about 290 trillion cubic feet (TCF), of which 63 TCF could be recovered,
according to a study by US Energy International Agency. Shale gas is natural gas formed from being trapped
within shale formations.
Natural gas sector constitutes about 9.8 per cent of primary energy consumption which is projected to grow up
to 20 per cent by 2025 as per Indian Hydrocarbon vision. About 65 per cent of natural gas consumption is
accounted by power and fertiliser sectors. Petroleum and Natural Gas Regulatory Board chairman S. Krishnan
stresses on the need to evolve a strategy to meet significantly higher share of energy needs from natural gas and
take its contribution in the country’s energy basket from 9.8 per cent to 25 per cent in the medium term.
• The production of natural gas in India was 135 million metric standard cubic metres per day (MMSCMD)
during 2011-12.
Oil & Gas - Key Developments and Investments
• ONGC Videsh Ltd (OVL) has decided to invest around US$ 5 billion to acquire ConocoPhillips’ 8.4 per cent
stake in the Kashagan field off North Caspian Sea. The deal, marking OVL’s biggest acquisition ever, is
expected to be closed in the first half of 2013 and it would enable OVL venture into the largest oil-proven
North Caspian Sea of Kazakhstan
• Indian energy firms have earned honour by getting placed in the 2012 Platts Top 250 Global Energy
Company Rankings . Of the 12 Indian companies represented in the 250, six have managed to make it to
the top 50 fastest growing companies wherein Cairn India took the top slot as the fastest-growing
company not just in Asia but in the world. Indian companies were much ahead in both categories - the
independent power producers (IPP) and gas utility - with NTPC Ltd and GAIL (India) topping their
respective regional segments, Platts ranking indicated
• Public sector Bharat Petroleum Corporation Ltd (BPCL) plans to infuse a capital outlay of Rs 45, 000
crore (US$ 8.26 billion) over 2012-17 to enhance its refining capacity and upstream operations. The
company seems to be very up-beat about its Mozambique discovery and intends to monetise the gas finds
by proposing to set up two LNG plants of 5 million tonnes per annum (MTPA) capacity each. BPCL is also
expanding its Kochi Refinery at a cost of over Rs 20, 000 crore (US$ 3.67 billion) wherein the capacity
would boost from 9.5 MTPA to 15.5 MTPA and the company would diversify into the petrochemical
sector to manufacture niche products
• India’s premier oil exploration and production company, ONGC, plans to invest Rs 11 lakh crore (US$
201.83 billion) between 2013 and 2030 and expects to produce 130 MT of oil and oil equivalent
hydrocarbons in 2030. The company would use its assets abroad to meet half of its requirements to
accomplish this goal while a substantial part of the investments would go into exploring ‘domestic, yet-to-
find’ reserves
• Reliance Industries Ltd and Venezuelan state oil company Petroleos de Venezuela, SA have inked a 15-
year heavy crude oil supply deal along with a memorandum of understanding (MoU) according to which
the two partners would further develop Venezuelan heavy oil fields. RIL is to explore upstream options
for joint participation in heavy oil projects of the Orinoco Oil Belt, according to the MoU.
RIL is estimated to invest around US$ 8 billion to develop the oil fields and it is contemplating to invest
about US$ 20 billion from 2012-13 till 2015-16 on sectors including petrochemicals and refining
• NYSE-listed Marsh & McLennan Companies’ Indian subsidiary Marsh has launched its insurance broking
and risk management services for India's energy sector. The company, which deals in insurance broking
and risk management, is targeting the increasing risk and insurance needs of the Indian O&G sector
Oil & Gas - Government Initiatives
India has been very active in O&G exploration and production activities on the global front and the Government
has played vital role in sustaining the country’s strategic position.
India and Canada have mutually agreed to share efforts in energy sector, particularly exports of Canadian oil and
natural gas as well as renewable energy cooperation while Iraq is set to become India’s strategic energy partner.
On the similar lines, Indian companies have been invited by the Government of Turkmenistan to explore
hydrocarbon at its Caspian Offshore region. Indian companies that expressed interest over the proposal include
ONGC Videsh and GAIL (India). Kakageldy Abdullaev, Acting Minister of Oil and Gas Industry and Mineral
Resources of Turkmenistan held discussions with India's Petroleum Minister S. Jaipal Reddy over the same.
Further, India has also evinced interest to set up fertiliser and petrochemical units in Mozambique.
The Indian Government is planning to incentivise energy firms to explore and produce natural gas domestically
by extending them similar fiscal incentives which are currently available to only crude oil producers, President
Pranab Mukherjee said. Currently, tax incentives are given for crude oil production while similar fiscal
concessions are denied to gas producers.
Jaipal Reddy has also informed that before India launches its tenth bidding round of O&G exploration blocks by
the end of 2012, the Government would implement a more investor friendly regime - both for investment and
from point of view of pricing. The modulations would be based on the recommendations made by the Rangarajan
committee, which is analysing existing production sharing contracts and matters related to pricing of gas.
Oil & Gas - Road Ahead
Majorly driven by transportation and industrial sectors, demand for oil is anticipated to surge immensely by
2020 while domestic power and fertiliser industries are projected to drive the demand for natural gas in the
country. Given the recent exploration and development efforts undertaken in India, domestic production of O&G
is expected to increase substantially. Furthermore, development of technologies enabling efficient use of fossil
fuels coupled with use of renewable energy sources could help in filling the demand-supply gap for O&G. The
Government has already started taking initiatives to reduce the country’s dependence on imports by encouraging
exploration of alternate fuel sources such as coal bed methane (CBM), gas hydrates, hydrogen fuel cell, and
blending of bio-fuels.
Disclaimer:
This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale
of any financial instrument or as an official confirmation of any transaction. The information contained herein is
from publicly available data or other sources believed to be reliable but do not represent that it is accurate or
complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall
not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the
information contained in this report. This document is provide for assistance only and is not intended to be and must
not alone be taken as the basis for an investment decision.
Firstcall India Equity Research: Email – [email protected]
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