🧂 At a Glance
In a world obsessed with EVs, solar panels, and Adani vs Ambani battles, Indraprastha Gas Ltd (IGL) is the nerdy topper quietly compounding wealth. With a rock-solid balance sheet, monopoly-like market share in Delhi NCR, and a dividend payout that would make LIC blush, IGL is the boAt charger of the energy world — unsexy, but essential.
🔬 Business Model 101: Your Car’s CNG Is Powered By This
IGL is a city gas distribution (CGD) company. It supplies:
- CNG (Compressed Natural Gas) to vehicles via 800+ stations 🛻
- PNG (Piped Natural Gas) to 25+ lakh households 🍳
- Gas to 10,000+ industrial/commercial users 🏭
Monopoly Much?
- Operates across Delhi NCR, Kanpur, Rewari, Muzaffarnagar, Ajmer, Fatehpur, etc.
- Backed by GAIL + BPCL + Delhi Government
- No private player can enter its territories easily (thank you regulatory moat)
📊 5-Year Financial Recap: Stable, Profitable, and Cash-Rich
| Metric | FY21 | FY22 | FY23 | FY24 | FY25 |
|---|---|---|---|---|---|
| Revenue (₹ Cr) | 4,941 | 7,710 | 14,133 | 14,000 | 14,928 |
| EBITDA (₹ Cr) | 1,495 | 1,894 | 2,044 | 2,388 | 1,973 |
| EBITDA Margin | 30% | 25% | 14% | 17% | 13% |
| PAT (₹ Cr) | 1,173 | 1,502 | 1,640 | 1,983 | 1,713 |
| EPS (₹) | 8.38 | 10.73 | 11.71 | 14.18 | 12.27 |
| Dividend Payout | 21% | 26% | 56% | 32% | 90% (!!) |
| Cash from Ops | 1,546 | 1,898 | 2,231 | 1,532 | 2,199 |
🎯 Key takeaway:
Even in FY25 when margins dipped, IGL churned out ₹2,199 Cr of cash — more than its net profit. That’s the power of negative working capital and low debt.
💸 Dividend Lovers, Assemble
| Year | Dividend / Share | Dividend Yield |
|---|---|---|
| FY21 | ₹1.75 | 0.84% |
| FY22 | ₹2.60 | 1.25% |
| FY23 | ₹6.50 | 3.11% |
| FY24 | ₹4.50 | 2.15% |
| FY25 | ₹11.00 | 5.25% 🔥 |
Yes, in FY25, IGL paid ₹11/share as dividend — a ~5.25% yield at current prices.
🧠 This was made possible due to:
- Strong cash flows
- Low capex needs (most infra is built)
- Minimal debt (₹93 Cr on a ₹15,000+ Cr asset base)
💥 What Went Wrong in FY25?
Despite great dividends, margins shrank from 17% to 13%.
Why?
- Higher spot gas prices due to geopolitical tensions
- Pressure to absorb cost hikes due to social sensitivity of pricing fuel in Delhi
- Rise of EVs in 2W and 3W segments cutting into CNG volumes
But:
- Gross margins have already bottomed out
- Q4FY25 OPM bounced back to 13% from 10% in Q3
So no, this isn’t the start of a downfall — more like a hiccup in an otherwise boringly consistent story.
📈 Valuation: Cheap or Fairly Priced?
| Metric | Value |
|---|---|
| CMP | ₹209 |
| EPS (FY25) | ₹12.27 |
| P/E | 17.0x |
| P/B | 2.75x |
| ROCE | 21% |
| ROE | 17% |
🧮 Fair Value Calculation:
Let’s use two valuation methods:
🧠 Method 1: DCF-style Earnings Approach
- Normalized PAT: ₹1,800 Cr
- Reasonable P/E for consistent utility: 18x
- Market Cap = ₹32,400 Cr
- Shares = 280 Cr
- ➡️ FV = ₹116/share
Okay… but wait. That’s too conservative. Market thinks IGL deserves more due to:
- Monopoly-like market
- High dividend
- Clean energy play
⚙️ Method 2: Yield + Growth Hybrid
- Dividend Yield: 5.2%
- Expected EPS Growth: 8% CAGR
- Terminal P/E (based on peers): ~18–20x
➡️ Fair Value Range = ₹185 to ₹240
🎯 At CMP ₹209, IGL is fairly priced, with upside if volume or margins expand.
👥 Shareholding Pattern: Stable Hands, Long-Term Vision
| Entity | FY25 Mar |
|---|---|
| Promoters (GAIL + BPCL) | 45.00% |
| FII | 14.67% (down from 21%) |
| DII | 26.18% (up steadily) |
| Government | 5% |
| Public | 9.15% |
📌 FIIs have reduced stake, but Domestic Institutions (Mutual Funds + LIC etc.) are loading up, increasing from 16.7% to 26.2% in just 2 years.
🏗️ Capex Plans & Risks
👷 What’s IGL investing in?
- New cities: Hamirpur, Banda, Kaithal, Hapur etc.
- More EV charging stations (yes, hedging against CNG risk)
- Pipeline expansion for industries
- Joint Ventures with GAIL/IOCL for long-term asset light growth
😬 Risks to Watch
- EV adoption in 3W/4W (Ola, Uber fleets going electric)
- Regulatory pricing cap pressure
- Geopolitical gas price volatility
- Delhi air quality mandates — either boon or curse depending on how govt enforces clean fuels
🧠 TL;DR
- CNG + PNG cash cow with monopoly zones
- Margins have dipped, but cash flows are still elite
- FY25 dividend was massive (₹11/share = 5.25% yield)
- Not a growth rocketship, but a steady, safe gas pipeline
- Trades at a fair 17x P/E
⚖️ EduInvesting Fair Value Range
₹185 to ₹240/share
(CMP ₹209 is well within fair zone — ideal for long-term dividend + stability investors)
🎯 Verdict:
IGL is the kind of stock that won’t make your heart race… but will help you retire 5 years earlier. Perfect for a core portfolio holding when you’re done chasing multibaggers and just want clean, compounding cash.
✍️ Written by Prashant | 📅 18 June 2025
Tags: Indraprastha Gas, IGL Stock Analysis, 5-Year Recap, Dividend Stocks India, City Gas Distribution, CNG vs EV, BPCL, GAIL, IGL Fair Value, PSU Dividend Gems
