Not just Delhi, Not just Gujarat: These 4 companies are building India’s new gas highway

For many years, city gas companies focused mainly on large metro markets. They built pipelines there. Volumes became stable. Now the situation is changing.

Growth is coming from smaller cities and new industrial pockets. More vehicles are shifting to gas. Local industries are also looking at cleaner fuel options. To keep growing, these companies need to move into these newer areas rather than depend only on old markets.

There is also a broader push behind this shift. Pollution concerns are rising in many urban centres. Governments want cleaner transport and industrial fuel. Gas infrastructure has to reach places where it was earlier absent. Expansion is not just a growth choice now. It is becoming a necessity to stay relevant and competitive.

The Growth Runway: Why New Geographical Areas are the Next Volume Drivers

This is also a practical time to look at such businesses. Many new geographical areas are still in the rollout stage. Pipelines are being laid. CNG stations are being added. When a network reaches a certain scale, volumes usually pick up faster. Growth from a low base can look strong for a few years. That creates better earnings visibility compared to mature markets.

The four stocks selected here reflect that expansion trend. They are actively building in multiple areas. A clear part of their capital spending is going into new districts. Their growth depends on adding territory, not just tweaking prices in old markets. Some other players are largely focused on strengthening existing cities. That is why these four fit the expansion theme better.

#1 Adani Total Gas: Scaling the EV-Gas Hybrid Model

Adani Total Gas is engaged in the city gas distribution (CGD) business and supplies natural gas to domestic, commercial, industrial and vehicle users.

Adani Total Gas is expanding its CGD footprint across India. The company operates in 34 Geographical Areas covering 95 districts. Including its joint venture with Indian Oil, the combined reach extends to 53 geographical areas across 125 districts. The focus remains on building infrastructure in newer territories to drive long-term volume growth.

In the December quarter, the company added 18 Compressed Natural Gas (CNG) stations, taking the total to 680. The steel pipeline network expanded to 14,862 inch-kilometres, while the Medium Density Polyethylene (MDPE) pipeline crossed 8,100 kilometres. Domestic Piped Natural Gas (PNG) connections increased by nearly 35,000 during the quarter, taking the total household base to 10.5 lakh homes.

CNG volumes grew 17% year-on-year (YoY), while PNG volumes rose 3%. Around 45,000 new vehicles were added quarter-on-quarter within the company’s geographical areas. Revenue from operations increased 17% YoY to Rs 1,631 crore. Profit After Tax (PAT) grew 10% to Rs 157 crore.

Regulatory changes during the quarter supported cost efficiency. The Petroleum and Natural Gas Regulatory Board (PNGRB) introduced a simplified two-zone transmission tariff. Supplies of PNG and CNG now attract Zone 1 tariff irrespective of distance. The company passed part of the benefit to consumers through calibrated price reductions.

The company is also scaling adjacent businesses. Through Adani TotalEnergies E-mobility (ATEL), it operates nearly 5,000 electric vehicle (EV) charging points across 26 states and Union Territories. A large part of the company’s gas supply comes from domestic fields.

This includes Administered Price Mechanism (APM) gas, New Well Gas and High Pressure High Temperature gas. Together, these sources make up roughly two-thirds of the total supply mix. The rest depends on market-linked purchases.As more pipelines are laid and CNG stations come up in new districts, the company is gradually widening its presence. The real impact of this expansion will be seen as volumes build up in these newer areas over time. Execution across newer geographical areas will remain key to sustaining momentum.

In the past year, share price of Adani Total Gas is down 11.9%.

Adani Total Gas 1 Year Share Price Chart

#2 Indraprastha Gas: Diversifying Beyond the Delhi-NCR Core

Incorporated in the year 1998, Indraprastha Gas (IGL) is in the business of city gas distribution in the National Capital Territory of Delhi.

Indraprastha Gas (IGL) is accelerating expansion beyond its core Delhi market. The company now operates across 12 Geographical Areas in four states. Management indicated that nearly 57% of incremental volumes are coming from outside Delhi and the National Capital Region, signaling a gradual shift in growth drivers.

Infrastructure additions continue to support this strategy. The steel pipeline network has crossed 2,500 kilometres, while the MDPE network stands at about 29,200 kilometres. IGL has added 45 CNG stations during the year, taking the total base to over 970 stations. Newer geographical areas are growing between 17% to 18%, compared with 8 to 10% in the mature Delhi and National Capital Region (NCR) markets.

In the December quarter, total sales volumes rose 3% YoY to 867 million standard cubic metres. CNG volumes increased 3%, while PNG volumes grew 5%. Excluding the impact of fleet transition by Delhi Transport Corporation, underlying CNG growth was over 10%.

Revenue for the quarter increased 8% YoY to Rs 4,465 crore. PAT grew 25% to Rs 358 crore. The company expects margin improvement as transmission tariff benefits and tax changes reflect fully in upcoming quarters.

With steady expansion in new geographical areas and planned addition of around one million standard cubic metres per day annually, IGL is positioning growth outside its legacy markets. Execution in emerging districts and sustained demand in the CNG segment will be central to maintaining momentum.

In the past year, share price of Indraprastha Gas is down 13%.

Indraprastha Gas 1 Year Share Price Chart

#3 Gujarat Gas: Navigating the ‘Morbi’ Volatility

Gujarat Gas (GGL) is a government company. Formerly known as GSPC Distribution Networks (GDNL), GGL is engaged in the business of Natural gas in India. The business of natural gas involves distribution of gas from sources of supply to centres of demand and to end customers.

GGL continues to expand its footprint across multiple states. The company operates in 27 geographical areas spread across six states and one Union Territory (UT). Its pipeline network now spans over 44,550 kilometres, serving nearly 23.8 lakh domestic customers, over 4,400 industrial users and close to 16,000 commercial establishments. Its strategy still revolves around expansion in both established and developing fields.

Additionally, the organization is expanding its CNG network. In the next two to three years, it hopes to operate 1,000 CNG stations, up from the present 833. CNG volumes rose 11% YoY in the December quarter, with a more notable 22% increase in regions outside of Gujarat, indicating traction in more recent geographies.

Despite the holiday disruptions, non-Morbi industrial volumes increased 7% YoY because of pipeline connectivity in developing clusters including Ahmedabad rural, Dahej, Kutch, and Thane.

The company has been investing in steel pipeline infrastructure to unlock demand in these regions. During the first nine months of the year, it invested about Rs 408 crore in infrastructure and plans a full-year capital expenditure of Rs 650 to Rs 700 crore.

Financial performance showed mixed trends. Revenue for the quarter stood at Rs 3,865 crore, compared to Rs 4,333 crore in the same period last year. PAT increased to Rs 266 crore marking a YoY growth of about 20%.

Gas sourcing remains a key variable. Allocation shortfalls in Administered Price Mechanism gas have been offset through long-term and spot sourcing. Management expects global liquefied natural gas supply additions over the next few years to support pricing stability.

With infrastructure largely in place across new industrial belts and continued CNG station additions, Gujarat Gas is positioning itself for volume recovery in industrial clusters and steady growth in transport fuel demand. Execution in newer Geographical Areas and pricing dynamics in key markets such as Morbi will remain crucial to sustaining expansion momentum.

In the past year, share price of Gujarat Gas is up 7.1%.

Gujarat Gas 1 Year Share Price Chart

#4 IRM Energy: The Early-Cycle Expansion Play

Incorporated in 2015, IRM Energy is in the business of selling and distributing natural gas.

IRM Energy is advancing its footprint across multiple emerging markets under the CGD framework. The company is authorised to operate in nine geographical areas across four states, namely Gujarat, Punjab, Rajasthan and Tamil Nadu. Most of these areas remain in the development phase, with infrastructure rollout forming the backbone of its growth strategy.

Pipeline expansion continued during the year. The steel pipeline network increased to 1,042 kilometres, while the MDPE network reached 3,780 kilometres. The number of CNG stations rose to 122 from 96 a year earlier, reflecting active build-out across licensed territories. Management indicated that volumes in newer GAs are gradually ramping up as infrastructure scales.

Operational growth remained steady despite being at an early stage of network maturity. Total sales volumes for the quarter stood at 206 million standard cubic metres, compared to 200 million standard cubic metres in the same period last year. CNG volumes rose 11% YoY, supported by station additions and vehicle conversions.

Valuations

Let’s now turn to the valuations of the companies in focus, using the Enterprise Value to EBITDA multiple as a yardstick.

Valuations of Companies in focus

Sr No	Company	EV/EBITDA Ratio	3-Year Avg EV/EBITDA	Industry Median	ROCE	ROE
1	Adani Total Gas	47.8	70.3	7.6	17.5%	16.8%
2	Indraprastha Gas	8.1	10.2	7.6	20.8%	16.4%
3	Gujarat Gas	12.9	13.9	7.6	19.5%	14.2%
4	IRM Energy	6.0	7.4*	7.6	8.3%	4.7%

source: screener.in

(*IRM was listed only in October 2023, hence we have used 1-year average EV/EBITDA to compare)

Valuations among the four city gas companies are quite different. Adani Total Gas is trading at 47.8 times EV/EBITDA. That is far higher than the industry median of 7.6 times. The premium suggests that investors are factoring in its aggressive expansion.

Indraprastha Gas trades at 8.1 times, which is not very different from its three-year average of 10.2 times. Gujarat Gas trades at 12.9 times, again close to its historical range of 13.9 times. IRM Energy, listed only in October 2023, trades at 6 times EV/EBITDA, compared to its one-year average of 7.4 times.

Return ratios help in understanding how well capital is being used. Indraprastha Gas is reporting a Return on Capital Employed (ROCE) of 20.8% and a Return on Equity (RoE) of 16.4%. Gujarat Gas shows a ROCE of 19.5% and a ROE of 14.2%. Both companies are delivering steady returns relative to the capital invested in the business.

Adani Total Gas reports ROCE of 17.5% and ROE of 16.8%. These are healthy numbers for a utility-style business. IRM Energy reports lower ratios, with ROCE at 8.3% and ROE at 4.7%, as it is still building out its network.

The difference comes down to stage of growth. Adani Total Gas is priced for expansion. Indraprastha Gas and Gujarat Gas are more established businesses. Their return numbers have been fairly consistent over time. Their valuations also sit closer to where they have traded in the past.

IRM Energy is still in expansion mode. It is putting money into new areas and building its network. That usually means lower returns in the initial years. The lower valuation multiple reflects that stage of the business.

For investors, the choice depends on whether they prefer stability or are willing to back expansion-led growth.

Conclusion

The city gas business is moving into its next stage. Many big cities are already covered. Growth will now depend on how quickly companies can build and scale in newer Geographical Areas. That process is gradual. Pipelines are laid first. Stations come up next. Volumes build slowly over time.

Adani Total Gas is trading at a premium because the market is betting on strong expansion. Indraprastha Gas and Gujarat Gas offer more predictable numbers, with steady returns and valuations closer to long-term averages. IRM Energy is still at an early stage. Its lower return ratios reflect ongoing investment rather than weak demand.

For investors, this space needs patience. Expansion does not translate into profits overnight. The key will be how efficiently capital is deployed and how fast new areas start contributing to earnings. Over the next few years, execution will matter more than short-term price swings. It may be a good idea to add these stocks to your watchlist and track how this story unfolds.

Disclaimer:

Note: We have relied on data from www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.

The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.

Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to deep dive into the world of companies, studying their performance, and uncovering insights that bring value to her readers.

Disclosure: The writer and her dependents do not hold the stocks discussed in this article.

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