On 13th May 2026, India took a significant step towards the country’s long-term energy security.
The government approved a ₹37,500 crore coal gasification scheme to scale coal-to-gas production to 100 million tonnes (MT) by 2030. Right now, there are only a few demonstration units, meaning India is effectively starting from scratch.
Clearly, a major investment opportunity is taking shape.
Naturally, most investors would focus on coal miners and companies directly linked to coal-gasification projects. They are the first-order beneficiaries. But, in large industrial themes, some of the biggest opportunities lie one layer deeper, called the second-order beneficiaries.
For example, in the AI race, everyone is focusing on chip makers and data centre players. But some of the serious wealth opportunities are emerging in the supporting infrastructure layer. Like cooling systems, power equipment makers, electricity utilities, and transmission networks needed to run AI infra at scale.
The Second-Order Play: Why Oxygen Matters
In the case of the coal gasification theme, one of the second-order beneficiaries is oxygen.
Coal gasification converts solid coal into syngas through a high-temperature reaction with oxygen. It is an oxygen-hungry process.
In fact, oxygen is the most critical industrial raw material. It is used in steelmaking, refining, chemicals, semiconductors, engineering, healthcare, and manufacturing. Which means oxygen is not merely a coal gasification opportunity, but a broader industrial infrastructure theme.
How is Oxygen Supplied
Industrial oxygen is not something you bottle and ship. Because, logistically, it’s difficult.
Typically, producing 1 tonne of steel requires roughly 70-100 Kg of pure oxygen. Now, consider that many large steel plants in India operate at capacities of 4-6 MT annually.
At that scale, oxygen demand runs into hundreds of thousands of tonnes every year.
Similarly, in the coal gasification process, the oxygen requirement is more intense, ranging between 300 and 1,000 Kg per tonne of syngas produced, depending on coal quality and the process used.
That’s why, for large industrial customers, oxygen needs to be produced on-site through large Air Separation Units (ASUs), which separate oxygen, nitrogen, and argon from air. These are highly capital-intensive and long-cycle assets. To put scale into perspective, a single 2,150-tonne-per-day ASU installed at SAIL’s Bokaro steel plant cost nearly ₹750 crore. And that’s just one unit, serving one customer.
Given the massive upfront investment and the critical nature of uninterrupted gas supply, industrial gas companies typically operate through long-term agreements. For example, Linde India signed a 20-year agreement with Tata Steel to build and operate ASUs for its Kalinganagar plant.
Therefore, once a plant is built and contracted, the revenue is sticky and predictable.
For small customers, oxygen is produced centrally and transported via specially designed tankers.
Both models share a common trait: high barriers to entry, long customer relationships, and recurring revenue.
Oxygen Demand Is Quietly Becoming a Structural Story
Oxygen is part of the broader industrial gases industry, which includes gases such as nitrogen, argon, helium, hydrogen, and other speciality gases.
India’s oxygen demand is not dependent on just one industry. In fact, the demand is rising from multiple industries simultaneously.
Coal gasification is one driver. Steel expansion is another. Beyond these, industries such as chemical, semiconductor, engineering, electronics manufacturing, healthcare, and wastewater treatment are all quietly increasing their consumption of industrial gases.
For instance, India plans to increase its annual steel production capacity from the present 220 MT to 300 MT by 2030. The size of India’s semiconductor market is expected to double in size, reaching $110 billion by 2030. India is targeting a 5-6% share of the global chemical value chain, positing itself as a serious manufacturing alternative to China.
All these mean oxygen demand could potentially rise much faster than overall industrial growth itself. But there is a supply-side constraint.
Despite being freely available, oxygen capacity cannot be increased overnight. It requires huge capital investments, deep technical expertise, and long project timelines to produce at scale.
That’s why industrial gas companies are more than a cyclical play. They behave more like infrastructure utilities. Essential, difficult to replace, and impossible to replicate quickly.
Oligopoly Pricing Power: Why Industrial Gases Escape the Commodity Trap
Industrial gas companies operate very differently from traditional commodity businesses.
The product may sound simple, but the business isn’t.
A steel plant, refinery, or gasification complex cannot function without an uninterrupted oxygen supply. Even temporary disruptions can impact production economics and plant utilization.
This makes industrial gas suppliers deeply integrated utility partners.
The economics of the business are also very different from cyclical commodities. Unlike commodity producers, industrial gas companies enjoy pricing power due to an oligopolistic market structure, high customer stickiness, high switching costs, and long asset lifecycles.
This is one reason why industrial gas companies globally are valued more like infrastructure utilities than traditional manufacturing businesses.
Among the listed players in India, Linde India and Ellenbarrie Industrial Gases are two key players. In the unlisted segment, Inox Air Products and Air Liquide India are prominent players. Inox Air is preparing for an IPO.
The Moat in the Numbers
Linde India is a subsidiary of UK-based BOC Group Ltd. The company has been operating in India since 1935 and runs 35 operating facilities across India.
Ellenbarrie Industrial Gases is a 100% Indian owned company and has a strong presence in the Eastern and Southern regions of India. Though smaller than Linde India in scale, the company has steadily expanded its footprint across various industrial gases to serve multiple industries.
Industrial Gases: Margin-Led Businesses
| Financial Metrics | Linde India | Ellenbarrie Industrials |
| 3-yr Compounded Sales Growth | 6% | 8% |
| 3-yr Compounded Profit Growth | 14% | 24% |
| EBITDA Margin (9MFY26) | – | 36% |
| EBITDA Margin FY25 | 35% | 33.50% |
| ROCE FY25 | 15.66% | 13.70% |
The numbers highlight why industrial gases are often viewed more like infrastructure businesses than traditional manufacturing companies.
Both companies stand out for their strong profitability profile with an EBITDA margin of above 30%.
One of the key highlights is that both companies are reporting faster profitability growth than sales growth. Reflecting strong operating leverage and pricing power.
Customer stickiness is another key metric.
Ellenbarrie reported 85% of revenue from repeat customers in FY25. Meanwhile, Linde India earned more than 80% of revenue from gas sales through onsite plants and pipelines to large-scale industrial players.
Premium Valuations for Industrial Gas Companies
Linde India is trading at a P/E ratio of 108, as of 15th April 2026, while the 5-year median PE is 105.
Ellenbarrie trades at a PE of 39, while the 5-year median PE is 59.
These are extremely rich valuations for companies with revenue growth in the single digits.
Clearly, the market is not valuing industrial gas companies like traditional businesses. Investors are assigning a premium for strong customer relationships, recurring revenues, infrastructure-like businesses, and high entry barriers.
Analysing the cash flow statement of both companies reveals something deeper about the business.
Cash Flow Statement (in ₹ Crores)
| Linde India | |||
| FY23 | FY24 | FY25 | |
| Cash From Operating Activity | 629 | 437 | 584 |
| Cash From Investing Activity | -306 | -539 | -1305 |
| Cash From Financing Activity | -119 | -105 | -112 |
| Ellenbarrie Industrial Gases | |||
| Cash From Operating Activity | 39 | 44 | 4 |
| Cash From Investing Activity | -114 | -122 | -57 |
| Cash From Financing Activity | 87 | 67 | 52 |
Industrial gas companies may report high EBITDA margins and stable operating profits, but sustaining growth requires continuous capital investment.
Both companies are consistently reporting negative investing cash flows. In FY25, Linde India generated an operating cash flow of ₹584 crore. But investing cash outflow surged to more than ₹1,300 crore, resulting in negative free cash flow.
This reflects continuous cash deployment into new ASUs, plants, and pipeline infrastructure for increasing distribution capacity.
This highlights the true nature of the sector. Growth requires continuous capital deployment.
This also means current valuations are effectively pricing in a much larger future opportunity.
However, the premium valuation leaves almost no room for error. If steel capacity expansion slows down, coal gasification fails to reach the intended scale, or semiconductor investments disappoint, the impact would not just trim earnings. It would call into question the entire growth trajectory the market is pricing in. In infrastructure-like businesses, valuation compression can be swift and steep even when the underlying business quality remains intact.
The Bigger Picture
Coal gasification was merely the trigger for this analysis. But the real opportunity is much larger.
India is undergoing an industrial transformation. Expanding steel production capacity, chemicals, semiconductors manufacturing, strengthening healthcare infrastructure, and now coal gasification at a national scale.
Each of these has one common input that cannot be easily imported, stockpiled, or rapidly scaled for production overnight when demand rises.
The premium valuations of oxygen producers indicate that the market is aware of this.
During the COVID crisis, India scrambled for oxygen. That crisis revealed something important. Oxygen was never merely a commodity. It was critical infrastructure hiding in plain sight.
Now, once again, it is becoming strategically important. Not for survival, but for industrialization.
The smarter move, this time, might be to not overlook the opportunity and perhaps add these stocks to your watchlist.
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.
Deepan Datta has spent over a decade studying stocks and mutual funds. His passion is to uncover interesting stories in the financial markets and share them through his writings with investors at large. He is focused on delivering clear, easy to understand and research-backed insights. Deepan began his career as a Research Associate at S&P Global, where he developed a strong foundation in financial research and data analysis.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article.
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