ICRA reaffirms ratings of Indraprastha Gas; maintains 'stable' outlook

The credit ratings agency ICRA has reaffirmed its rating on the credit instruments of Indraprastha Gas worth Rs 4,000 crore at '[ICRA] AAA' and '[ICRA] A1+'.

"Outlook on the long-term rating is stable, the company said.

ICRA said that the ratings reaffirmation factors in the company's favourable business risk profile arising from its current exclusive position in the city gas distribution (CGD) business in Delhi (or National Capital Territory, NCT) and infrastructure exclusivity (up to December 2023) for its NCT operations.

The ratings also draw comfort from the favorable demand outlook and growth prospects for the compressed natural gas (CNG) and piped natural gas (PNG) segments over the medium to long term and the company's secure gas tie-up with GAIL for a large portion of its current operations.

The ratings also reflect the company's strong financial risk profile with robust profitability and cash generation from operations and its strong return and credit metrics.

Further, the ratings favorably consider IGL's strong parentage, with GAIL and BPCL being the main shareholders.

ICRA notes that the sales volumes of the company across all segments barring PNG (domestic) have been adversely impacted due to the COVID-19 pandemic. However, with the easing of lockdowns volumes across most segments (barring commercial) have largely recovered and the company expects the impact on aggregate volumes in FY2021 to be less than 10% of its FY2019 volumes.

The credit ratings agency further said that the liquidity profile of the company is expected to remain superior with healthy cash accruals, large cash and liquid investments, nil debt and negative net working capital intensity.

Though the capex plans of the company are expected to remain high going forward, nevertheless the healthy cash accruals and large cash and liquid investments are expected to maintain the liquidity comfortable.

Indraprastha Gas (IGL) is a natural gas distribution company. It supplies natural gas as cooking and vehicular fuel. As on 30 June 2021, GAIL, BPCL and the Delhi government held 22.5%, 22.5% and 5%, respectively, stake in the company.

The company's consolidated net profit surged to Rs 277.95 crore in Q1 FY22 from Rs 35.18 crore in Q1 FY21. Net sales increased to Rs 1257.39 crore in the quarter ended June 2021 as against Rs 638.57 crore during the previous quarter ended June 2020.

The scrip shed 0.16% to end at Rs 564.05 on the BSE on Thursday. The domestic equity market was shut of Friday (10 September 2021) on account of Ganesh Chaturthi.

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