Whalesbook
Profit Hit by Soaring Gas Costs
Indraprastha Gas Ltd. (IGL) faced a challenging fourth quarter for fiscal year 2026, with net profit declining 21% year-on-year to Rs 277.1 crore. Revenue saw a modest 5.7% increase, reaching Rs 4,584.5 crore. This widening gap highlights the pressure on profitability from increased input costs. The company's operational performance reflects this strain: EBITDA contracted by 11% to Rs 423 crore, and EBITDA margins shrank to 10.1% from 11.6% in the previous quarter. Unit EBITDA also fell 16%, directly tied to a 2.8% rise in gas costs to Rs 36.8 per scm. The stock reflected these concerns, closing Monday's trading session down 0.32% at Rs 152.12, adding to a 27.51% drop over the last 12 months.
Global Tensions Disrupt Gas Supply, Raise Costs
The main reason for IGL's shrinking margins is the sharp rise in gas costs. This is due to supply chain issues in West Asia, with the US-Iran conflict affecting key shipping routes and disrupting Liquefied Natural Gas (LNG) shipments from Qatar Energy. While IGL has raised CNG prices twice in May, whether it can fully pass these costs on without hurting demand or losing market share to rivals is a key question. Competitor Mahanagar Gas Ltd. (MGL) faces similar pressures, with its EBITDA per scm declining to a 13-quarter low in Q2 FY26. Both companies have strong balance sheets with very little debt, with IGL's debt-to-equity ratio at 0.01 and MGL's at 0.03. MGL trades at a lower P/E ratio of about 11.8x compared to IGL's 12.8x, suggesting differing market views. MGL's RSI is 48.0, IGL's is 43.99, both suggesting a neutral market view. India's energy sector as a whole benefits from government goals to increase natural gas use, providing a long-term boost for both companies.
Risks to Demand and Future Growth
While IGL holds a strong position in the Delhi NCR region and is committed to shareholder returns via a total dividend of Rs 4.75 per share for FY26, it faces significant challenges. Relying on imported LNG exposes the company to the volatility of global events and currency swings. Repeated price increases, while needed to protect margins, risk slowing demand growth. This is especially true as electric vehicles could challenge the CNG market long-term. IGL's management has a history of navigating regulations, but current global cost pressures are significant. The stock's significant year-to-date drop suggests cautious market sentiment, and continued margin drops could extend this. Competitor Mahanagar Gas Ltd. (MGL) also saw its stock decline significantly over the past year.
Analyst Views and Company's Path Forward
Analysts hold a mixed but cautiously optimistic view on IGL. The consensus rating is 'Hold' with an average 12-month price target of Rs 165.00, suggesting limited immediate upside but overall stability. Some analysts project a price target as high as Rs 267.75. MGL, meanwhile, has a 'Moderate Sell' consensus rating from analysts, with an average price target of Rs 1,000.00. Looking ahead, IGL's strategy to expand its PNG network and manage input costs through smart procurement and pricing will be key. Sustaining volume growth above 3% annually and securing new contracts will shape IGL's path in FY27 and beyond, especially as EV adoption rises. An upcoming earnings conference call on May 19, 2026, will offer more details on management's plans for these changing market conditions.