Motilal Oswal has maintained a 'BUY' rating on Indraprastha Gas (IGL) with a target price of Rs 193 per share. This outlook follows the company's Q1 FY27 results, which showed a 48% year-on-year drop in standalone net profit due to rising gas purchase costs. Investors are now focusing on how the company manages margin compression and regulatory challenges in the coming quarters.
Motilal Oswal has reiterated its 'BUY' rating on Indraprastha Gas (IGL), keeping a target price of Rs 193 per share. This recommendation comes shortly after the company released its financial results for the first quarter of the 2027 fiscal year, which highlighted the significant pressure the business is currently facing from rising operational and gas procurement costs.
Financial Performance Overview
In the quarter ended June 30, 2026, Indraprastha Gas reported a stark contrast between its revenue growth and profitability. While revenue from operations climbed by approximately 16-17% compared to the same period last year, reaching Rs 5,040 crore, the bottom line told a different story. The company’s standalone net profit fell by 48% to Rs 186.18 crore. Similarly, the consolidated net profit saw a decline of 44% to Rs 237.92 crore. This divergence is primarily due to a sharp increase in the cost of gas purchases and other operating expenses, which compressed the company's EBITDA margins to approximately 6%, down from 13% in the previous year.
Despite the profit slump, the company’s core business volume remains steady. Total sales volume for the quarter increased by 6% year-on-year to 878.98 million standard cubic meters (SCM). The brokerage view suggests that while margins are currently tight, the long-term outlook remains supported by the company’s continued volume growth and a reasonable dividend yield.
Risks and Market Headwinds
Investors looking at the sector must account for several specific risks that could affect IGL’s future performance. A major point of concern is the long-pending demand from the Delhi Development Authority (DDA) regarding license fees. This contingent liability stands at Rs 330.73 crore and remains a significant regulatory monitorable for the company. Should this matter reach a resolution, it could have a material impact on the company’s financials.
Furthermore, the company is navigating a competitive environment where the rapid adoption of electric vehicles (EVs) in the Delhi-NCR region may impact demand for Compressed Natural Gas (CNG) over the long term. The ability of the company to pass on rising gas costs to consumers without hurting volume growth remains a critical challenge. If global gas prices remain volatile due to geopolitical tensions, the pressure on profit margins could persist.
Looking Ahead
For investors, the immediate focus will be on the company’s ability to manage its cost structure. The next important updates to watch include any commentary from management regarding price hikes to offset input costs, the status of the DDA license fee dispute, and the overall trajectory of CNG volume growth. While the brokerage maintains a positive view based on valuation, the actual recovery in profitability will depend on whether the company can successfully navigate these cost and regulatory pressures in the coming quarters.