>INDRAPRASTHA GAS LTD. (CD EQUIRESEARCH)

Company Brief
Indraprastha Gas Ltd., incorporated as a JV between GAIL, BPCL and the Delhi government, is the sole supplier of CNG to transport sector, PNG to domestic & commercial sectors & R‐LNG to industrial sector, in the National Capital Region (NCR) of Delhi.

Highlights
■ The company has a very sound business model due to its utility nature i.e fuel for the vehicles and piped natural gas for domestic and industrial consumers and hence is relatively immune from any economic downturn.

■ IGL is consolidating its presence in the NCR of Delhi by investing Rs 1,600 crore to expand its retail outlets and PNG network in and around the metropolis in the next three years.

■ IGL is looking for opportunities in the surrounding regions and has geared itself for competitive bidding being for setting up of City Gas Distribution Projects in various cities.

■ IGL has tied up for its future gas requirements by signing Gas Sale Agreements with GAIL & BPCL and the supply pact with RIL from KG D6 block, and hence will not have gas sourcing
issues over the medium term.

■ In view of forthcoming Commonwealth Games in 2010, a large number of high capacity buses and Radio Taxis running on CNG are expected to be added to the public transport fleet in the Capital, which would immensely benefit IGL.

■ IGL is a debt free company with surplus cash and investments of about Rs 250 crore and all the expansions have been undertaken with internal accruals.

■ At the current price of Rs 161, the stock trades at a P/E multiple of 11.1x FY10E earnings and 9.6x FY11E earnings. We recommend a “BUY” on the stock with a price target of Rs 205, assuming a P/E multiple of 12x FY11E earnings, an upside of 27% from the current levels, over a period of 12 months.

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