The broker Nuvama Institutional Equities has a ‘Reduce’ call on Indraprashta Gas and cut the target price by 7% to Rs 166. The lower rating and price target are on the back of sector multiples’ de-rating due to ad-hoc government policies causing uncertainty, which is similar to that of oil marketing companies (OMCs). They are trading at a considerable discount.

The company reported its Q4FY25 results, and the EBITDA came ahead of expectations. However, the one-off provision reversal of Rs 110 crore for April 2019-April 2021 due to the revision of trade margins with OMCs impacted performance. Its EBITDA stood at Rs 500 crore in Q4FY25, down 5% year-on-year. 

Nuvama on IGL: Volumes below guidance

Another reason behind the downgrade is that its volumes were 3% below guidance, coming in at 9.2 mmscmd (million metric standard cubic meters per day). It was adversely impacted by the changes in APM allocation, causing supply disruptions in certain geographical areas.

However, the company’s management is expecting a gradual recovery in EBITDA margins to Rs 7-8 scm in Q4FY25 from Rs 4.6/scm. “Management expects short-term margins to initially range from Rs 6–7/scm and gradually rise to sustainable guidance of Rs 7–8/scm on better fixed cost absorption as new geographical areas ramp up volumes, rationalisation of gas costs on flexible take-or-pay contracts and CNG price hikes, if need be,” said Nuvama. 

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Nuvama on IGL: Volume growth downside

The city gas distributor guided for 10% volume growth in FY26, for which the broker sees

downside because of the potential implementation of the Delhi EV policy, continued volume loss from DTC buses as they switch fleet to electric and demand slowdown due to price hikes reducing CNG’s competitiveness to alternative fuels and EVs.

IGL Q4 result

The company reported a decline of 9% in net profit to Rs 349.23 crore in Q4 FY25 despite a rise of 10% in net sales to Rs 3932.78 crore. Its total sales volumes for the fourth quarter of the financial year 2024-25 stood at 826.40 million scm, an increase of 4% YoY. 

IGL stock performance 

The share price of Indraprstah Gas has neither risen nor fallen in the past five trading days. The stock has declined 6.5% in the previous one month and 10% in the last six months. The stock has fallen 18.5% over the previous one year.