Motilal Oswal Sees Turning Point for Indraprastha Gas Amidst Easing Cost Pressures

Indraprastha Gas (IGL) has faced pressure in recent months due to higher gas costs, a weaker rupee, and concerns over Delhi's electric vehicle policy.

Motilal Oswal, a brokerage firm, believes the stock may be nearing a turning point. According to the report, IGL's margins may have reached their lowest point, while growth outside Delhi continues to provide support.

The report notes that the pressure from higher input costs may be easing, with Brent crude averaging $93 a barrel during the first half of FY27 compared to $69 in FY26. The Indian rupee also weakened to around Rs 95 against the US dollar from Rs 88.4 earlier.

Motilal Oswal expects recent price increases for compressed natural gas (CNG) and piped natural gas (PNG) to support margins from the second quarter of FY27. A recent Rs 3.9 per kg increase in CNG prices could provide an estimated Rs 1.4-1.5 per standard cubic metre boost to EBITDA.

The report estimates that three-wheelers account for around 6% of IGL's overall CNG volumes, and the transition to electric vehicles could affect volumes gradually rather than cause a sudden decline.

Motilal Oswal retains its 'Buy' rating with a target price of Rs 195 per share, implying an upside of around 27%. The stock is trading at around nine times estimated FY28 earnings, excluding the value of its joint ventures.