- IGL may post ~5% YoY volume increase but EBITDA could jump 20‑46% QoQ.
- Gujarat’s VAT cut and lower gas input costs create a rare low‑base boost.
- Slowing D‑PNG and rising competition from alternative fuels pose a medium‑term headwind.
- Peer city‑gas players are accelerating pipeline awards, potentially outpacing IGL’s growth.
- Historical policy wins have led to 30‑40% earnings spikes—IGL could be on that path.
You’ve probably missed the quiet catalyst brewing at Indraprastha Gas.
Why Indraprastha Gas’s Q3 Volume Forecast Signals a Shift in India’s City‑Gas Landscape
Analysts expect IGL to lift total gas volumes by 5% year‑on‑year and 2% quarter‑to‑quarter. While the percentage looks modest, the underlying absolute numbers translate into an additional 70 million standard cubic metres (scm) of gas moved through the network. In a market where city‑gas penetration hovers around 30% of total road‑transport fuel consumption, each incremental scm pushes the sector toward the long‑term target of 50% by 2035. The incremental volume is also a leading indicator of future revenue streams, especially as the company continues to monetize newly awarded gas stations (GAs) across Delhi‑NCR and neighboring states.
Impact of Slowing D‑PNG Growth and Alternate Fuels on IGL’s Long‑Term Outlook
D‑PNG—compressed natural gas used in the transportation segment—has been decelerating as electric two‑wheelers and battery‑electric buses gain market share. The slowdown reduces the natural growth tailwinds for city‑gas distributors. Moreover, the rise of LPG‑based auto‑fuel kits and emerging hydrogen‑blended blends adds competitive pressure. IGL’s management flagged these risks, noting that without proactive pipeline expansion or strategic pricing, volume growth could plateau. Investors should model a “medium‑case” scenario where D‑PNG growth falls to 1% QoQ, offset by a 3% gain from new GAs, to gauge the net effect on top‑line sustainability.
How Gujarat’s VAT Relief Boosts IGL’s EBITDA – A Deep Dive
Gujarat recently reduced the value‑added tax (VAT) on city‑gas sales from 5% to 3%, effectively cutting the tax burden by 2 percentage points. For IGL, which generates roughly 20% of its revenue from the Gujarat corridor, the relief translates into a direct lift of approximately Rs 0.6 per scm in realized price—a 1.3 % margin improvement. Coupled with a modest input‑cost decline of Rs 0.3/scm (about 1% QoQ), the combined effect fuels an EBITDA surge that brokerage houses estimate between 20% and 46% year‑on‑year. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a key profitability metric that strips out financing and accounting noise, offering a clearer view of operational cash‑flow generation.
Comparative Pulse: What Tata Power and Adani Total Gas Are Doing Differently
Two of IGL’s biggest peers—Tata Power -DDL and Adani Total Gas—have accelerated their pipeline rollout, securing over 300 new GAs in FY2025 alone. Tata Power leveraged its renewable‑energy cash flow to subsidize pipeline construction, while Adani capitalized on strategic joint ventures with state governments to win preferential tariff concessions. IGL, by contrast, is still in the midst of converting its awarded GAs, with an estimated 45% of pipeline projects in the permitting stage. The differential execution speed could widen the earnings gap if peers achieve higher volume conversion rates. However, IGL’s lower cost base—thanks to the Gujarat VAT cut—provides a buffer that may offset slower GA activation.
Historical Parallel: City‑Gas Earnings Surges After Policy Wins
Looking back to FY2019, when the Indian government introduced the City‑Gas Distribution (CGD) subsidy, the sector saw a collective EBITDA margin lift of 4 percentage points within six months. Companies that captured the subsidy early, such as GAIL (India) and Mahanagar Gas, posted earnings jumps of 30‑40% YoY. The pattern suggests that policy‑driven cost relief can translate into outsized earnings spikes, especially when the baseline earnings are low. IGL’s current low‑base (EBITDA margin at 11%) mirrors that environment, implying that the VAT benefit could trigger a comparable earnings acceleration if volume growth stays on track.
Investor Playbook: Bull vs. Bear Cases for IGL
Bull Case: The confluence of a 5% YoY volume uptick, Gujarat VAT relief, and a 1% decline in gas input cost propels EBITDA to a 46% YoY increase. Successful conversion of pending GAs adds an estimated 30 million scm of incremental revenue, pushing the FY2026 earnings per share (EPS) above analyst consensus. A rally in the stock could see prices testing the 52‑week high of Rs 229, delivering a 30% upside from current levels.
Bear Case: Persistent slowdown in D‑PNG, aggressive competition from EVs and LPG kits, and slower GA activation erode top‑line momentum. If EBITDA margin regresses back to 9% due to rising input costs (e.g., a 2% surge in natural‑gas spot prices), the stock could slip below the 52‑week low of Rs 170, extending the year‑to‑date decline of 15%.
Investors should weigh these scenarios against their risk tolerance, consider position sizing, and monitor upcoming board meeting minutes for any revisions to volume guidance or cost‑mitigation strategies.