ICICI Securities has kept its 'Buy' rating on Indraprastha Gas but reduced its price target to ₹190 after a difficult second quarter. While the company achieved record sales volumes, supply issues forced it to buy expensive gas, causing its first-ever operational loss. Investors are now watching to see if gas supplies normalize to help restore profit margins.
ICICI Securities has maintained its 'Buy' rating for Indraprastha Gas (IGL), but the brokerage has lowered its price target to ₹190 per share. This update follows a challenging second quarter for the company, where high costs significantly impacted profitability despite strong sales numbers.
Operational Costs Impact Profitability
For the second quarter of the 2027 fiscal year, IGL reported record sales volumes of 10.1 million metric standard cubic meters per day (mmscmd), an 8% growth compared to the same period last year. However, this growth in sales did not translate into higher profits. Instead, the company faced its first-ever operational loss at the EBITDA (earnings before interest, tax, depreciation, and amortization) level, which serves as a key measure of core business profit.
The margin pressure was primarily caused by a sharp increase in gas procurement costs. Due to supply disruptions in its regular long-term contracts, IGL was forced to rely on expensive spot gas, which was priced at over USD 30 per mmbtu. This sudden spike in input costs effectively wiped out the company's operating profits, leading to a net profit decline of more than 93% year-on-year.
Outlook and Investor Focus
Looking ahead, analysts expect some relief for the company as it receives better allocations of high-pressure, high-temperature gas. This change is expected to reduce the reliance on costly spot gas by the third quarter. Despite this potential improvement, ICICI Securities has reduced its earnings estimates for both fiscal years 2027 and 2028, reflecting the impact of these recent cost pressures.
The company’s stock has recently faced market pressure, touching a 52-week low near ₹125.63 in early November 2026. The key monitorable for investors moving forward will be the company’s ability to stabilize its supply chain and manage input costs to protect its profit margins in the coming quarters.