Sector Update | 21 September 2020
Oil & Gas
Oil & Gas
IGL: Looking for the right tilt
between risk and rewards
CGDs to record 10% volumes CAGR over next decade
Key business perspectives from Annual Reports of IGL IN, MAHGL IN, and GUJGA IN
The government intends to increase the share of natural gas in India’s primary energy
mix to 15% by 2030 from 6% currently.
To promote a clean-fuel economy, the government has adopted a systematic
approach to focus on all aspects – upstream, midstream, and downstream, including
CGD network development.
We look at the Annual Reports of all the listed CGDs to understand the key takeaways.
Customer additions across segments for all companies
GUJGA: Gas and LPG prices on
a see-saw; Margins to remain
IGL added 270k new residential consumers, a strong 22% addition, taking the
total number of consumers to 1.4m. In comparison, MAHGL added 100k
consumers, taking the total to 1.26m households. GUJGA also added 93k
households, taking the total number to 1.4m.
52 net new
CNG stations, near IGL’s number of 55, while MAHGL
added just 20 CNG stations. With this, IGL took its total count to 555, GUJGA to
396, and MAHGL to 256.
GUJGA services >3,700 industrial consumers and 12,600 commercial customers.
IGL services >5,500 industrial and commercial consumers. MAHGL services 3,949
commercial and 72 industrial consumers.
In terms of pipeline infrastructure, GUJGA remains ahead of the other two with
a total network of 24,300km (MDPE/steel), while IGL has a total network of
14,605km and MAHGL of 5,630km.
IGL’s gross margin expanded to INR11.9/scm in FY20 from INR11/scm in FY19.
MAHGL also raised its gross margin to INR14.8/scm in FY20 from INR12.9/scm in
FY19. Both companies managed to achieve this despite being predominantly
CNG players on account of declining domestic gas prices. GUJGA, a
predominantly industrial play, maintained its gross margins at INR7/scm, almost
Largely flat opex resulted in IGL expanding its EBITDA/scm to INR6.4/scm in FY20
from 5.8/scm in FY19 and MAHGL expanding its EBITDA/scm to INR9.8/scm in
FY20 from INR8.2/scm in FY19.
With much higher volumes in FY20, GUJGA was
instead able to cut its opex/scm by ~20% YoY in FY20, with EBITDA/scm
expanding to INR4.7 in FY20 from INR4.1 in FY19.
In FY20, the companies adopted the new lower tax rate and recorded DTL
benefits (MAHGL: INR0.6b, IGL: 11.4b, GUJGA: INR3b), leading to a jump in full-
year PAT (by 45% YoY, 44% YoY, ~2x YoY, respectively).
With the 10
round of CGD bidding, 70% of the country’s population and 50%
of the total area have been covered. With the completion of these projects,
CGDs’ sales volumes are expected to grow at a CAGR of 10% through 2020–30.
GUJGA was awarded six geographical areas (GAs) in the 10
the company is looking forward to the 11
round of CGD bidding, which may
include GAs contiguous to its operating areas.
EBITDA margin expansion across the board
Opportunities galore – prefer GUJGA
Swarnendu Bhushan- Research Analyst
- Research Analyst
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.