Geojit Financial Services has initiated coverage on Indraprastha Gas with a target price of Rs 168, suggesting the company’s recent earnings slump may be bottoming out. While high gas sourcing costs severely impacted Q1 FY27 profit, analysts point to volume growth and new government incentives as potential drivers for recovery.
Geojit Financial Services has initiated coverage on Indraprastha Gas (IGL) with an 'Accumulate' rating and a target price of Rs 168. This update comes as the company navigates a challenging financial period, with analysts suggesting that the first quarter of fiscal year 2027 may mark the lowest point in the current earnings cycle.
In the recently concluded June quarter, IGL reported a 17.1% year-on-year increase in standalone revenue to Rs 4,583 crore, supported by a rise in sales volumes to 879 million standard cubic meters. However, the operational reality was different, as high global prices for liquefied natural gas (LNG) pushed up sourcing costs significantly. This resulted in a sharp contraction in profit margins, which fell to 6.4%, causing a substantial drop in profit after tax for the period.
Despite these margin pressures, the investment outlook remains focused on a potential recovery. A key factor in this perspective is a new government incentive scheme for City Gas Distribution companies, which became effective on September 1, 2026. This policy is designed to encourage the expansion of domestic piped natural gas connections. Analysts believe this could provide essential support for volume growth and help in stabilizing operational performance in the coming quarters.
Investors, however, should remain cautious of risks that could influence this recovery path. The company remains highly sensitive to global energy price fluctuations; persistent inflation or volatility in LNG costs could continue to keep profit margins under pressure. Additionally, the regulatory environment remains a critical factor, as any potential shifts in government policy regarding pricing flexibility for CNG and domestic piped gas could impact the company’s financial flexibility.
The primary monitorable for shareholders will be how the company manages its gas sourcing costs in relation to the benefits of the new government incentive scheme. Future financial performance will depend on whether the growth in sales volumes can effectively offset high input costs and restore profit margins to more stable levels.