IGL extends gain on plan to take over the natural gas supply in Gurugram

The stock rallied 6% to Rs 297, extending its 11% rally in past two days after the company agreed to take over the supply of natural gas in Gurugram district from Haryana City Gas Distribution.

Shares of Indraprastha Gas (IGL) have rallied 6% to Rs 297 per share on the BSE in early morning trade on Friday, extending their 11% rally in the past two trading days after the company agreed to take over the supply of natural gas in Gurugram district from Haryana City Gas Distribution (HCGDL). The Supreme Court has suggested that IGL take over the natural gas supply in Gurugram from  HCGDL.

“It is also agreed between the parties that the valuation of the ongoing concern including the infrastructure (pipeline, etc.) may be valued by an independent valuer such as Deloitte Haskins and Sells LLP,” according to a Supreme Court order uploaded on the stock exchanges by IGL.

Deloitte Haskins will have to submit the report within four weeks or by November 30. The apex court will hear the case next on December 6, it added.

Meanwhile, the board of directors of IGL is scheduled to meet on Monday, November 5, to consider the financial results for the quarter and half year ended September 30, 2018.

The brokerage firm Motilal Oswal Securities expects volume growth to continue for city gas distribution (CGD) players. Spot, as well as crude-linked LNG prices, are up YoY in 2QFY19; the INR has also depreciated. However, CGD players have already taken price hikes in Q2FY19, which should take care of the increased cost.

“We prefer IGL among CGD players due to the higher longevity of volume growth compared to MGL, and higher share of CNG v/s PNG, supporting stable EBITDA/SCM. The recent stock price correction offers an excellent opportunity to add,” the brokerage firm said in result preview.

IGL had hit a 52-week low of Rs 215 on October 8, corrected 38% from its 52-week high level of Rs 344 touched on January 1, 2018, in intra-day trade.

Prabhudas Lilladher expects IGL margins to be maintained led by price hikes in the quarter. Volume momentum will also be maintained.

Strong volume growth (CNG:+7% y-o-y, PNG:+16.8% y-o-y) along with price hikes (CNG:+8% y-o-y, PNG:+22% y-o-y) will lead to strong revenue growth. However, higher feedstock costs and depreciating INR will lead to lower margins, Edelweiss Securities said in result preview.

At 09:34 am; IGL was trading 2.5% higher at Rs 285 on the BSE, as compared to 1.2% rise in the S&P BSE Sensex. A combined 1.95 million equity shares changed hands on the counter on the BSE and NSE so far.