Odd or Even, Indraprastha Gas Wins Riding on Delhi’s Green Wave
IGL is the biggest beneficiary of the enhanced demand for CNG, being the sole supplier in most of NCR.
The second phase of ‘odd-even’ in Delhi was a success, Delhi Chief Minister Arvind Kejriwal claims but his detractors point to IndiaSpend data that shows that pollution in fact rose 23 percent during #OddEvenDobara.
While the jury is still out on whether the national capital has benefitted, one company has been a sure winner – Indraprastha Gas (IGL).
The company’s management is confident of adding another 18 CNG fuelling facilities by the end of this month.
The decision to significantly ramp up the number of IGL outlets was taken in December last year. That’s when an oil ministry statement suggested that IGL will open 200 new retail outlets in 2016.
IGL is a joint venture between the Central government-owned companies GAIL and BPCL and the Delhi government.
IGL Clocks Runaway Sales
Delhi’s odd-even scheme mandates, barring a few exceptions, that all non-CNG vehicles must ply on alternate days of the week. Delhi’s government first implemented the scheme in January 2016 and then again in April 2016.
IGL’s average daily CNG sales increased 8 percent since January, recording a peak CNG sale of 27.26 lakh kg per day. The company’s 5-year compounded average sales growth is 6 percent.
SC Hits the Brakes on Diesel
It’s not just the Delhi government’s drive against pollution. In December last year, the Supreme Court banned the registration of diesel-run private cars and SUVs exceeding an engine capacity of 2000 cc in Delhi. In the same verdict the Supreme Court ordered all taxi cabs and aggregator services to run on CNG by 1 March 2016.
After extending the deadline twice, the Supreme Court recently refused to give more time to cab operators to convert to CNG and banned diesel cabs in the city from 1 May.
Diesel’s Loss is CNG’s Gain
These combined actions have prompted more cars to turn CNG.
The Delhi transport department estimates that 27,000 of the 60,000 taxis registered in the city run on diesel. Of these, approximately 2,000 have converted to CNG since February 2016.
IGL is the biggest beneficiary of this enhanced demand for CNG, being the only supplier in most of the National Capital Region. Gurgaon is supplied by Adani Gas.
Brokerages Give a Thumbs up
Brokerage firm Ventura had anticipated this increase in demand. In its report last year it forecast a 13 percent compounded annual growth in IGL’s FY18 sales to Rs. 4339.8 crore.
Research firm Philip Capital said in a January 2016 report that IGL’s volume growth will see a 10 percent CAGR in FY17‐19, as against an earlier expected growth of 5 percent.
The growing volumes auger well for IGL and investors have reacted positively. IGL’s share has appreciated 26 percent since December 2015.
With a third round of odd-even restrictions under consideration, IGL would be a stock worth watching out for.
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