Indraprastha Gas Q2 performance driven by well volume growth

With this, the total gas sales volume grew by 32% year-on-year and 36% sequentially to 7.24 MMSCMD (Million Standard Cubic Meters Per Day). Notably, the gas volume has now crossed pre-Covid levels, adding to the firm’s outlook IGL,

Coupled with strong volume growth, the price hike by the company has meant that PNG and CNG sales revenues grew by 35% and 53%, respectively, year-on-year. This increased total revenue from operations by 40% year-over-year.

However, while volume growth impacted, there was some disappointment on operating performance. The company is continuously increasing the prices to deal with the rising prices of domestic gas. Still, the domestic gas allocation is not adequate, say analysts. The company still had to source gas from the spot market. There was some pressure on margins due to exceptionally high spot gas prices.

The company’s Ebitda (earnings before interest tax depreciation and amortization) grew 30% year-over-year. However, the Ebitda margin stood at 29%, down from the 31% seen in the year-ago quarter.

Going forward, the demand dynamics remain favourable. With the opening up of economic activities, demand for gas from the automobile and industrial sectors continues to increase. The need for clean and cheap fuel means that the country sees a strong demand for natural gas. IGL has a high sales share in the CNG segment and given the firmness in petrol and diesel prices, the cost dynamics remain favorable for CNG. Overall, the volume of growth remains firm.

Sharekhan analysts expect 14% CAGR (Compound Annual Growth Rate) in volumes during FY 2011-24 on account of growth in existing geographies and expansion into new geographies.

However, the rising gas price environment has posed some challenges on the margin front. Domestic gas prices, which have been revised with effect from October 1, are expected to rise further during the next review.

Analysts at Kotak Institutional Equities said that “the expected sharp rise in domestic gas prices from April 2022 onwards remains a major headwind in the near future, even as major discounts of CNG for liquid auto fuels as input gas to IGL”. may allow most of the increase in cost to pass”. They have cut forward estimates to factor in a slightly lower margin.

The same is being reflected in stock prices that have corrected more than 15% since their September highs.