CMP 261.00

Target Price 292.00

ISIN: INE203G01019

FEB 11th

, 2012

INDRAPRASTHA GAS LIMITED

Result Update: Q3 FY13

BUYBUYBUYBUY

Stock Data

Sector Oil & Gas

BSE Code 532514

Face Value 10.00

52wk. High / Low (Rs.) 391.80/170.00

Volume (2wk. Avg ) 54000

Market Cap ( Rs in mn ) 36540.00

Annual Estimated Results (A*: Actual / E*: Estimated)

Years FY12A FY13E FY14E

Net Sales 25192.33 33982.33 42138.09

EBITDA 6411.74 7916.41 9443.11

Net Profit 3064.32 3674.09 4325.45

EPS 21.89 26.24 30.90

P/E 11.92 9.95 8.45

Shareholding Pattern (%)

1 Year Comparative Graph

BSE SENSEX INDRAPRASTHA GAS LTD

SYNOPSIS

Indraprastha Gas, incorporated in 23 Dec,

1998, is a joint venture of GAIL (India),

Bharat Petroleum Corporation & the Govt. of

the National Capital Territory of Delhi.

IGL is the sole supplier of CNG and PNG in

Delhi, Noida, Greater Noida & Ghaziabad,

plans to promote wider usage of gas for

various applications through co-generation,

gas geysers, gensets etc.

IGL has posted a net profit after tax of Rs.

863.38 mn for the quarter ended December

31, 2012 as compared to Rs. 691.50 mn for

the quarter ended December 31, 2011.

Total Income has increased from Rs. 6646.11

million for the quarter ended December 31,

2011 to Rs. 8720.47 million for the quarter

ended December 31, 2012.

Indraprastha Gas Ltd is keen to buy Asian

Development Bank’s 5.2 per cent stake in

Petronet LNG Ltd.

IGL has hiked 7% price on the domestic piped

natural gas for households in the National

Capital Territory (NCT) of Delhi, Noida, Greater

Noida and Ghaziabad.

Net Sales and PAT of the company are expected

to grow at a CAGR of 34% and 19% over 2011

to 2014E respectively.

Peer Groups CMP Market Cap EPS P/E (x) P/BV(x) Dividend

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Indraprastha Gas Ltd 261.00 36540.00 21.89 11.92 2.97 50.00

Gail India Ltd 338.50 427920.90 29.12 11.58 1.98 87.00

Gujarat Gas Ltd 306.75 39443.30 18.88 16.29 5.19 1100.00

VA Tech Wabag Ltd 518.00 13735.20 33.63 15.40 2.95 300.00

Investment Highlights

Results updates- Q3 FY13,

Indraprastha Gas Ltd, one of India's natural gas

distribution companies. IGL was incorporated to

implement the compressed natural gas (CNG)

expansion programme and the piped natural gas

(PNG) project for varied applications in the domestic

and commercial sector, reported its financial results

for the quarter ended 31 Dec, 2012.

Months Dec-12 Dec-11 % Change

Net Sales 8694.46 6631.34 31.11%

PAT 863.38 691.50 24.86%

EPS 6.17 4.94 24.86%

EBITDA 1897.01 1519.17 24.87%

Indraprastha Gas Ltd announced an increase of 24.86% in net profit to Rs 863.3 million for the quarter ended

Dec. 31, 2012 as compared to Rs 691.5 million in the prior-year period. Revenue for the quarter rose by 31.11%

to Rs.8694.46 million from Rs.6631.34 million, when compared with the prior year period. Reported earnings

per share of the company stood at Rs.6.17 a share during the quarter, registering at 24.86% increase over

previous year period. Profit before interest, depreciation and tax is Rs.1897.01 millions as against Rs.1519.17

millions in the corresponding period of the previous year.

Expenditure :

During the quarter the total expenditure cost rose

by 33 per cent mainly on account of increase in

Stock in trade along with consideration of

depreciation in the rupee impact and witnessed.

Total expenditure in Q3FY13 was at Rs.7297.65

million as against Rs.5494.93 million in Q3FY12.

Employee benefit expenses cost Rs.138.19 against

Rs.106.80 millions in the corresponding period of

the previous year. Other Expenditure was at Rs.

926.07 million and Purchase of stock in trade are Rs.

5760.17 million in Q3FY13 are the primarily

attributable to growth of expenditure.

Latest Updates

� IGL has decided to invest in the equity shares of Central U.P. Gas Ltd by way of acquisition of 3,00,00,000

equity shares of Rs. 10 each of UGCL (constituting 50% of the paid-up equity share capital of UGCL) at a price

of Rs. 23 per equity share aggregating Rs. 69,00,00,000 from certain financial investor shareholders of CUGL

subject to the finalization & execution of definitive agreements in this regard and compliance with applicable

laws.

� Indraprastha Gas Ltd is keen to buy Asian Development Bank’s 5.2 per cent stake in Petronet LNG Ltd. ADB

stake going to IGL will help resolve long—standing dispute between Petronet’s principal promoters and the

firm’s management led by its Chairman and Oil Secretary.

� Indraprastha Gas Ltd has drawn out plans to further consolidate its presence in Delhi and NCR by investing

over Rs. 500 crores during the financial year 2012-13.

� Indraprastha Gas Limited (IGL) has hiked 7% price on the domestic piped natural gas (PNG) for households

in the National Capital Territory (NCT) of Delhi, Noida, Greater Noida and Ghaziabad with effect from,

February 10, 2013.

Company Profile

Indraprastha Gas Ltd took over Delhi City Gas Distribution Project in 1999 from GAIL (India) Limited (Formerly

Gas Authority of India Limited). The project was started to lay the network for the distribution of natural gas in

the National Capital Territory of Delhi to consumers in the domestic, transport, and commercial sectors. With the

backing of strong promoters – GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL) – IGL plans to

provide natural gas in the entire capital region. The company supplies natural gas in domestic and commercial

sectors along with alternative auto fuel. It operates approximately at 124 CNG stations & supplies piped natural

gas (PNG) to approximately 13,085 domestic and 117 commercial consumers. IGL is headquartered at New Delhi.

Business Areas

� Compressed Natural Gas (CNG)

CNG is gaseous fuel and is a mixture of hydrocarbons mainly Methane. For use in Automobiles as fuel, it is

compressed to a pressure of 200-250 Kg/cm² to enhance the vehicle on-board storage capacity. The

transport sector uses natural gas as Compressed Natural Gas. Indraprastha Gas Ltd continues to augment its

infrastructure so as to meet the increasing demand of CNG arising out of growing number of CNG vehicles in

Delhi. The growth drivers for increase in demand of CNG are - car manufacturers coming up with CNG

variants and Delhi Government’s directive making it mandatory for all LCVs operating in Delhi to run on CNG.

� Natural Gas (PNG)

PNG is mainly methane – CH4 with a small percentage of other higher hydrocarbons. The ratio of carbon to

hydrogen is least in methane and hence it burns almost completely making it the cleanest fuel. It is procured

from the oil / gas wells and transported through a network of pipelines across the country. The domestic and

commercial sectors use it as Piped Natural Gas.

On the PNG front, Indraprastha Gas Ltd has planned to expand its business activities in Delhi and its

neighboring towns like Noida, Greater Noida and Ghaziabad. IGL is also working towards expanding its PNG

network to cover all charge areas of Delhi by 2012. Industrial and commercial segments would be the focus

areas for the organization in the future.

� R-LNG

R-LNG is being supplied to industrial establishments.

Awards

� Declared as the winner in the category of Urban Infrastructure at the Infrastructure Excellence Awards 2012

Companies Business Expansion

� In Compressed Natural Gas has a new concept of Private Bus Cluster introduced by Government of Delhi is

expected to reach 1,000 buses by the end of this financial year . Delhi Government plan to introduce 45,000

new auto rickshaws it is advantage to increase in volume of sales. Growth in private car owners segment is

expected to maintain the trend of previous years.

Financial Highlight

Balance sheet as at March31st, 2012

(A*- Actual, E* -Estimations & Rs. In Millions)

FY12 FY13E FY14E

EQUITY AND LIABILITIES:

Shareholders’ Funds:

Share Capital 1400.00 1400.00 1400.00

Reserves and Surplus 10889.40 14563.47 18888.92

Net worth (a) 12289.40 15963.47 20288.92

Non-Current Liabilities:

long-term borrowings 3375.00 4387.50 5352.75

Deferred Tax Liabilities [Net] 627.20 878.08 1141.50

Other Long Term Liabilities 1928.10 2718.62 3642.95

Long Term Provisions 54.10 64.92 76.61

Long term liabilities (b) 5984.40 8049.12 10213.81

Current Liabilities:

Short-term borrowings 515.20 587.33 657.81

Trade Payables 1811.60 2210.15 2607.98

Other Current Liabilities 1811.50 2536.10 3296.93

Short Term Provisions 815.50 817.13 817.95

Current Liabilities © 4953.80 6150.71 7380.66

Total (a+b+c) 23227.60 30163.30 37883.40

ASSETS:

Non-Current Assets:

Fixed Assets:

Tangible Assets 15787.70 20739.77 26339.51

Intangible Assets 8.20 8.45 8.70

Capital work-in-progress 3751.30 4291.49 4892.30

(d) 19547.20 25039.70 31240.50

Long Term Loans and Advances (e) 54.00 59.40 64.15

Current Assets:

Current Investments 984.10 1613.92 2324.05

Inventories 373.80 392.49 412.11

Trade Receivables 1298.00 1921.04 2535.77

Cash and Bank Balances 319.90 499.04 682.34

Short Term Loans and Advances 556.10 539.42 523.23

Other Current Assets 94.50 98.28 101.23

(f) 3626.40 5064.20 6578.74

Total (d+e+f) 23227.60 30163.30 37883.40

Annual Profit & Loss Statement for the period of 2011 to 2014E

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 17504.63 25192.33 33982.33 42138.09

Other Income 30.85 61.15 119.12 172.73

Total Income 17535.48 25253.48 34101.46 42310.82

Expenditure -12518.08 -18841.74 -26185.05 -32867.71

Operating Profit 5017.40 6411.74 7916.41 9443.11

Interest -131.63 -478.84 -582.25 -681.23

Gross profit 4885.77 5932.90 7334.16 8761.88

Depreciation -1028.71 -1431.98 -1890.15 -2305.98

Profit Before Tax 3857.06 4500.92 5444.01 6455.90

Tax -1259.39 -1436.60 -1769.93 -2130.45

Net Profit 2597.67 3064.32 3674.09 4325.45

Equity capital 1400.00 1400.00 1400.00 1400.00

Reserves 8638.64 10889.38 14563.47 18888.92

Face value 10.00 10.00 10.00 10.00

EPS 18.55 21.89 26.24 30.90

Quarterly Profit & Loss Statement for the period of 30th

June, 2012 to 31st

Mar, 2013E

Value(Rs.in.mn) 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13E

Description 3m 3m 3m 3m

Net sales 7606.79 8551.90 8694.46 9129.18

Other income 31.41 33.07 26.02 28.62

Total Income 7638.20 8584.97 8720.48 9157.81

Expenditure -5809.53 -6486.06 -6823.47 -7065.99

Operating profit 1828.67 2098.91 1897.01 2091.82

Interest -155.18 -140.33 -141.25 -145.49

Gross profit 1673.49 1958.58 1755.76 1946.33

Depreciation -426.80 -477.03 -474.19 -512.13

Profit Before Tax 1246.69 1481.55 1281.57 1434.20

Tax -396.20 -489.42 -418.19 -466.12

Net Profit 850.49 992.13 863.38 968.09

Equity capital 1400.00 1400.00 1400.00 1400.00

Face value 10.00 10.00 10.00 10.00

EPS 6.07 7.09 6.17 6.91

Ratio Analysis

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 18.55 21.89 26.24 30.90

EBITDA Margin (%) 28.66% 25.45% 23.30% 22.41%

PBT Margin (%) 22.03% 17.87% 16.02% 15.32%

PAT Margin (%) 14.84% 12.16% 10.81% 10.26%

P/E Ratio (x) 14.07 11.92 9.95 8.45

ROE (%) 25.88% 24.93% 23.02% 21.32%

ROCE (%) 44.77% 48.48% 48.91% 47.80%

Debt Equity Ratio 0.35 0.32 0.26 0.21

EV/EBITDA (x) 7.94 6.26 5.07 4.25

Book Value (Rs.) 71.70 87.78 114.02 144.92

P/BV 3.64 2.97 2.29 1.80

Charts

Outlook and Conclusion

� At the current market price of Rs.261.00, the stock P/E ratio is at 9.95 x FY13E and 8.45 x FY14E

respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.26.24 and

Rs.30.90 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 34% and 19% over 2011 to 2014E

respectively.

� On the basis of EV/EBITDA, the stock trades at 5.07 x for FY13E and 4.25 x for FY14E.

� Price to Book Value of the stock is expected to be at 2.29 x and 1.80 x respectively for FY13E and FY14E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.292.00 for Medium to Long term

investment.

Industry Overview

India is the world’s fourth largest consumer of primary energy and accounts for about 4.6 per cent of the world's

energy consumption after China, US and Russia.

Vandana Hari, Asia Editorial Director, Platts, believes that India’s tremendously growing energy demand has

made the country an energy leader on the global platform with more than 28 billion tonnes of prognosticated

reserves.

The Government of India's New Exploration Licensing Policy (NELP) launched in 1997-98 has garnered

investments over US$ 14 billion and has resulted in 87 oil and gas (O&G) discoveries. NELP has encompassed all

the ingredients of a favourable investment climate, fiscal stability, transparency of the rule of law, contract

stability, minimal policy induced uncertainties and a stable legal and regulatory framework.

The refining sector in India has also undergone a silent transformation wherein the country emerged as a major

export hub. With a refining capacity of 215 million metric tonnes per annum (MMTPA), exports of petroleum

products have now crossed 60 million tonnes (MT), raking-in revenues of about US$ 60 billion. ‘Petroleum

products’ have emerged as the single largest component of merchandise exports from India.

Production and Consumption – Key Statistics

The hydrocarbons sector is continuously undergoing changes and policy modifications are in-tune with them.

Natural gas is rapidly contributing to the energy requirements owing to commercial development of coal bed

methane, shale gas, underground coal gas and gas hydrates.

President Pranab Mukherji anticipates that natural gas usage will increase significantly in the years to come

while urging the need to connect various parts of India with gas pipelines so that economic benefits of natural

gas reach to all. The Government of India (GoI) is also lending full support to companies acquiring overseas O&G

assets and imports of liquefied natural gas (LNG).

Diesel & Petrol

• Petroleum products are India’s biggest export earner, fetching revenue of about US$ 59 billion annually.

Export of these products stood at 28.9 MT during April-September 2012, according to the petroleum

ministry’s data wing, the Petroleum Products Planning and Analysis Cell (PPAC).

• During 2011-12, the consumption of petroleum products was about 148 million metric tonne (MMT)

showing an import dependence of more than 75 per cent.

• Diesel consumption, which makes up for more than 40 per cent of the fuel sales, registered a growth rate

of 7.2 per cent at average 87, 000 barrels per day (b/d) in September and October 2012 wherein

automobile sector contributed majorly (as reflected in the sale of diesel vehicles).

Gas

India's shale gas reserves are at about 290 trillion cubic feet (TCF), of which 63 TCF could be recovered,

according to a study by US Energy International Agency. Shale gas is natural gas formed from being trapped

within shale formations.

Natural gas sector constitutes about 9.8 per cent of primary energy consumption which is projected to grow up

to 20 per cent by 2025 as per Indian Hydrocarbon vision. About 65 per cent of natural gas consumption is

accounted by power and fertiliser sectors. Petroleum and Natural Gas Regulatory Board chairman S. Krishnan

stresses on the need to evolve a strategy to meet significantly higher share of energy needs from natural gas and

take its contribution in the country’s energy basket from 9.8 per cent to 25 per cent in the medium term.

• The production of natural gas in India was 135 million metric standard cubic metres per day (MMSCMD)

during 2011-12.

Oil & Gas - Key Developments and Investments

• ONGC Videsh Ltd (OVL) has decided to invest around US$ 5 billion to acquire ConocoPhillips’ 8.4 per cent

stake in the Kashagan field off North Caspian Sea. The deal, marking OVL’s biggest acquisition ever, is

expected to be closed in the first half of 2013 and it would enable OVL venture into the largest oil-proven

North Caspian Sea of Kazakhstan

• Indian energy firms have earned honour by getting placed in the 2012 Platts Top 250 Global Energy

Company Rankings . Of the 12 Indian companies represented in the 250, six have managed to make it to

the top 50 fastest growing companies wherein Cairn India took the top slot as the fastest-growing

company not just in Asia but in the world. Indian companies were much ahead in both categories - the

independent power producers (IPP) and gas utility - with NTPC Ltd and GAIL (India) topping their

respective regional segments, Platts ranking indicated

• Public sector Bharat Petroleum Corporation Ltd (BPCL) plans to infuse a capital outlay of Rs 45, 000

crore (US$ 8.26 billion) over 2012-17 to enhance its refining capacity and upstream operations. The

company seems to be very up-beat about its Mozambique discovery and intends to monetise the gas finds

by proposing to set up two LNG plants of 5 million tonnes per annum (MTPA) capacity each. BPCL is also

expanding its Kochi Refinery at a cost of over Rs 20, 000 crore (US$ 3.67 billion) wherein the capacity

would boost from 9.5 MTPA to 15.5 MTPA and the company would diversify into the petrochemical

sector to manufacture niche products

• India’s premier oil exploration and production company, ONGC, plans to invest Rs 11 lakh crore (US$

201.83 billion) between 2013 and 2030 and expects to produce 130 MT of oil and oil equivalent

hydrocarbons in 2030. The company would use its assets abroad to meet half of its requirements to

accomplish this goal while a substantial part of the investments would go into exploring ‘domestic, yet-to-

find’ reserves

• Reliance Industries Ltd and Venezuelan state oil company Petroleos de Venezuela, SA have inked a 15-

year heavy crude oil supply deal along with a memorandum of understanding (MoU) according to which

the two partners would further develop Venezuelan heavy oil fields. RIL is to explore upstream options

for joint participation in heavy oil projects of the Orinoco Oil Belt, according to the MoU.

RIL is estimated to invest around US$ 8 billion to develop the oil fields and it is contemplating to invest

about US$ 20 billion from 2012-13 till 2015-16 on sectors including petrochemicals and refining

• NYSE-listed Marsh & McLennan Companies’ Indian subsidiary Marsh has launched its insurance broking

and risk management services for India's energy sector. The company, which deals in insurance broking

and risk management, is targeting the increasing risk and insurance needs of the Indian O&G sector

Oil & Gas - Government Initiatives

India has been very active in O&G exploration and production activities on the global front and the Government

has played vital role in sustaining the country’s strategic position.

India and Canada have mutually agreed to share efforts in energy sector, particularly exports of Canadian oil and

natural gas as well as renewable energy cooperation while Iraq is set to become India’s strategic energy partner.

On the similar lines, Indian companies have been invited by the Government of Turkmenistan to explore

hydrocarbon at its Caspian Offshore region. Indian companies that expressed interest over the proposal include

ONGC Videsh and GAIL (India). Kakageldy Abdullaev, Acting Minister of Oil and Gas Industry and Mineral

Resources of Turkmenistan held discussions with India's Petroleum Minister S. Jaipal Reddy over the same.

Further, India has also evinced interest to set up fertiliser and petrochemical units in Mozambique.

The Indian Government is planning to incentivise energy firms to explore and produce natural gas domestically

by extending them similar fiscal incentives which are currently available to only crude oil producers, President

Pranab Mukherjee said. Currently, tax incentives are given for crude oil production while similar fiscal

concessions are denied to gas producers.

Jaipal Reddy has also informed that before India launches its tenth bidding round of O&G exploration blocks by

the end of 2012, the Government would implement a more investor friendly regime - both for investment and

from point of view of pricing. The modulations would be based on the recommendations made by the Rangarajan

committee, which is analysing existing production sharing contracts and matters related to pricing of gas.

Oil & Gas - Road Ahead

Majorly driven by transportation and industrial sectors, demand for oil is anticipated to surge immensely by

2020 while domestic power and fertiliser industries are projected to drive the demand for natural gas in the

country. Given the recent exploration and development efforts undertaken in India, domestic production of O&G

is expected to increase substantially. Furthermore, development of technologies enabling efficient use of fossil

fuels coupled with use of renewable energy sources could help in filling the demand-supply gap for O&G. The

Government has already started taking initiatives to reduce the country’s dependence on imports by encouraging

exploration of alternate fuel sources such as coal bed methane (CBM), gas hydrates, hydrogen fuel cell, and

blending of bio-fuels.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

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