Shares of Indraprastha Gas (IGL) hit a fresh 52-week low at Rs 453.75 in Tuesday’s intra-day trade, and the stock was down 2 per cent in past the two trading days on the BSE amid concerns of aggressive influx of electric vehicles (EVs) into Delhi. IGL supplies compressed natural gas (CNG) to the transport sector and piped natural gas (PNG) to the domestic industrial and commercial sectors in Delhi and the NCR.
In the past one month, the stock of IGL has underperformed the market by falling 8 per cent, as compared to 7 per cent rally in the S&P BSE Sensex. It slipped 25 per cent from its 52-week high level of Rs 604 touched on September 14, 2021.
According to a PTI report, the Delhi government on Saturday notified a draft "aggregator's policy" under which ride aggregators and delivery services will have to mandatorily adopt electric vehicles while procuring new fleet. Aggregators and delivery services would need to ensure 10 per cent of all new two-wheelers and 5 per cent of all new four-wheelers are electric in the next three months while 50 per cent of all new two-wheelers and 25 per cent of all new four-wheelers are electric by March 2023, the report suggested.
Aggregators account for 30-40 per cent of total CNG sales for IGL. In the near term, while the EPS may not be impacted, concerns remain on the ask rate of 6 per cent terminal growth implied by the CMP, Motilal Oswal Financial Services said in stock update.
While we acknowledge that the draft is open for public comments for 60 days and the timelines may be diluted, the direction remains in line with our expectation. Delhi being one of the most polluted cities globally is bound to see policy-led transition to EVs just like the judiciary-led transition to CNG decades back, the brokerage firm said.
As per our DCF model, the CMP of IGL implies a terminal volume growth of 6 per cent, which is difficult to achieve considering the rising penetration of EVs. Domestic APM gas prices are expected to witness another steep hike of USD2- 4/mmBtu in Apr’22, followed by another, but muted, growth in October 2022. Oil Marketing Companies (OMCs) have also demanding a doubling of commissions for sale of CNG from their premises, Motilal Oswal Financial Services said with ‘neutral’ rating on the stock.