The Hindu Business Line : Sustained buying seen in Indraprastha Gas

SUSTAINED buying interest has seen the stock of Indraprastha Gas Ltd (IGL) gain ground on the bourses in the recent past. The stock, which was ruling at around Rs 81 levels a week ago, has appreciated by more than 12 per cent to its current levels of Rs 91 on the bourses.

Brokers attribute the interest in the counter to the fact that the stock had been a `bad' laggard in the recent rally.

A recent `buy' report by two leading domestic brokerages has only added to the interest.

Indraprastha Gas, a joint venture of GAIL (India) Ltd, BPCL and the Government of the National Capital Territory of Delhi, 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 sectors.

Analysts tracking the company maintain the company has a good business model. "In the first half there were problems with regard to throughput in CNG. Now volume of throughput is on the rise. The main triggers at this counter will be the increase in volume of CNG sales and expansion of the PNG stations. However, it is the latter that will be the growth driver, going forward," said an analyst with a leading brokerage.

According to an ISec report, the existing CNG franchise is expected to grow at a steady 5 per cent CAGR

"A Supreme Court ruling on conversion of all public transport vehicles in the National Capital Territory (NCT) to CNG ensures a ready market and assured gas supplies for IGL. Even assuming a phased reduction of tax differential for these environment-friendly fuels, CNG will hold its own even if crude dips to $32/bl. IGL is undervalued even compared with regulated return utility stocks," adds the report.

Yet strong growth drivers apart, there are concerns about CNG and PNG coming under the petroleum regulators preview. Added to this is the competition that CNG faces from substitutes such as petrol and diesel while PNG faces competition from LPG etc. There are those who also feel that the upside at the counter is limited from these levels.

The stock ended the day at Rs 91.45, up 5 per cent, with around 15.44 lakh shares traded on the BSE. On the NSE the stock closed at Rs 90.90, up 4.60 per cent, with around 28.19 lakh shares traded.

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