Motilal Oswal maintained its ‘Buy’ rating on Indraprashta Gas. The brokerage house has a target price of Rs 250 on the stock, which implies an upside of 14% from the current levels. Indraprastha Gas could see a potential EBITDA/scm upside of 16-20% due to a change in the tax rate on gas sourced from Gujarat.
Motilal Oswal on IGL: Operating margins to see moderate increase
IGL could see EBITDA margin benefits of Rs 0.7-1.3 per standard cubic metre (scm) from the Petroleum and Natural Gas Regulatory Board’s (PNGRB) move to a two-zone tariff regime. The earlier value-added tax (VAT) of 15% has been replaced with a 2% central sales tax (CST), which is effective from October 01, 2025. However, the official confirmation is still awaited.
Motilal Oswal on IGL: If tax change materialises, net profit to see gains
Motilal Oswal estimates a Rs 0.9/scm EBITDA margin gain for IGL. Currently, the brokerage estimated Rs 5.9 per scm EBITDA margin for IGL in FY26, Rs 6.5 in FY27, and Rs 6.5 in FY28. Hence, if this tax change materialises, it would lead to an increase of 8% for FY26, 15% for FY27, and 15% for FY28 net profit estimates.
Motilal Oswal on IGL: Soft crude oil prices to also add to margin expansion
Another factor contributing to the margin expansion is the reduction in the cost of crude oil. A soft crude price outlook, coupled with a lower pricing slope for natural gas amid the upcoming LNG oversupply, will reduce gas costs, according to the brokerage. This should also ease concerns around the APM deallocation affecting margins.
Motilal Oswal on other CGDs
Mahanagra Gas would also record a Rs 0.3/scm EBITDA margin gain, while Gujarat Gas is unlikely to see any substantial benefit. “While Mahanagar Gas has been our preferred pick in the CGD (city gas distributor) space, we estimate a minor EBITDA upside of 3-4% for Mahanagar Gas from this tax change (if confirmed),” said Motilal Oswal.