Indraprastha Gas Limited (IGL) is a premier entity in India's city gas distribution (CGD) sector, where it holds a consolidated leadership position. The company operates across 12 geographical areas spanning four states, managing a robust and scalable infrastructure network designed to meet the energy needs of a diverse and growing customer base. IGL's extensive network includes over 2,500 kilometers of steel pipeline and approximately 29,200 kilometers of MDPE (Medium-Density Polyethylene) pipeline. This infrastructure facilitates the supply of natural gas to over 3.27 million residential households (Piped Natural Gas - PNG), around 5,400 industrial customers, and approximately 7,400 commercial establishments. In the vehicular segment, the company serves a large customer base through a network of nearly 975 Compressed Natural Gas (CNG) stations. IGL's business model is centered on providing cleaner and more efficient fuel alternatives, contributing significantly to the energy transition in its operational territories.

Official Website: http://www.iglonline.net/

• Q3 FY26 Performance: The company reported strong year-on-year growth for the quarter ending December 31, 2025.

• Total Revenue: Stood at INR 4,465 crores, an 8% increase year-on-year, driven by volume growth.

• EBITDA: Reached INR 473 crores, marking a 31% year-on-year growth and a 7% sequential increase.

• Profit After Tax (PAT): Grew by a robust 25% year-on-year to INR 358 crores, compared to INR 285 crores in the corresponding quarter of the previous year.

• One-Time Provision: A provision of INR 28 crores was made in the quarter related to the New Labour Code. Excluding this one-time impact, the EBITDA would have been approximately INR 500 crores.

• Income from Investments: The company received a dividend of INR 40 crores from its investment in MNGL (Maharashtra Natural Gas Ltd) during the quarter. This follows a final dividend of INR 67 crores received in the previous quarter from MNGL (INR 58 crores) and CUGL (INR 9 crores).

The company demonstrated strong financial health with double-digit growth in profitability, supported by steady operational execution despite one-time financial provisions.

• Dominant Infrastructure: IGL operates a vast and established network of pipelines and CNG stations, creating a significant competitive moat and a high barrier to entry in its core operational areas.

• Scale and Leadership: As a leading player in India's CGD sector, the company benefits from economies of scale in gas sourcing, operational efficiency, and brand recognition.

• Diversified Portfolio: The business serves a wide range of customers across vehicular (CNG), residential (PNG), commercial, and industrial segments, which provides revenue stability and mitigates risks associated with any single segment.

IGL's strategic advantage is rooted in its extensive infrastructure, market leadership, and a well-diversified customer base that ensures resilient demand.

• Positive Regulatory Changes: The sector is benefiting from two major structural tailwinds:

1. Tax Rationalization: The replacement of a 15% Value-Added Tax (VAT) with a 2% Central Sales Tax (CST) on domestic gas sourced from Gujarat, effective December 2025, is set to lower gas input costs.

2. Transmission Tariff Reform: The Petroleum and Natural Gas Regulatory Board (PNGRB) rationalized the gas transmission tariff framework, reducing zones from three to two. IGL is a significant beneficiary, as its geographical areas now fall under the more favorable Zone 1 tariff for its high-volume CNG and domestic PNG segments.

• Demand Catalyst: The reduction of GST on CNG vehicles from 28% to 18% has spurred demand, with monthly vehicle conversions increasing from an average of 21,000 to 26,000.

• Industry Headwinds: The business has navigated volatility in international gas costs and adverse foreign exchange movements, with the Indian Rupee depreciating from approximately INR 87 to INR 91 against the dollar, which increased procurement expenses.

The industry outlook is favorable, supported by positive regulatory reforms and strong demand drivers, although companies must continue to manage input cost volatility.

• Overall Volume Growth:

• Total sales volume for Q3 FY26 grew 3% year-on-year, with average daily sales reaching 9.43 million standard cubic meters per day (MMSCMD) from 9.11 MMSCMD in the prior year.

• Segment-Wise Performance:

• CNG: Grew 3% year-on-year. Critically, when adjusted for the phased migration of institutional fleets (DTC and DIMTS buses) to electric, the underlying growth was a strong 10%.

• PNG: Grew 5% year-on-year to 2.5 MMSCMD. This was led by 8% growth in both the domestic and commercial sub-segments, while industrial demand was subdued.

• Geographical Expansion:

• New geographical areas outside of Delhi and NCR are the primary growth engine, contributing 57% of incremental volume and growing at a rate of 17%.

• In comparison, the mature Delhi market is flat (0.5-1% growth), while Noida/Ghaziabad is growing at 6.2%.

• Forward-Looking Guidance:

• Management is confident of exiting the financial year with a sales volume of 10 MMSCMD.

• The long-term strategy is to add 1 MMSCMD of volume annually over the next two years, projecting 8-10% growth in the NCR region and 17-18% in new areas.

The company's growth trajectory is solid, driven by strong underlying demand in the CNG segment and rapid expansion into new geographical territories.

• International Expansion: IGL has qualified for the second stage of a tender in the Middle East to develop CGD networks in four planned industrial cities. The project has a long-term sales potential of 6 MMSCMD, with bid submission scheduled for April 2026.

• Business Diversification: The company is actively pursuing opportunities beyond its core business, with plans to invest in renewables, Compressed Biogas (CBG), and LNG infrastructure.

• Compressed Biogas (CBG): A recent excise duty exemption on CBG provides a financial incentive to increase its blend in the gas network, which could improve margins and support sustainability goals. The goal is to increase the CBG blend from 1% to 5% within a year.

• Inorganic Growth: Management sees a future opportunity for consolidation in the CGD industry, as smaller players may struggle with the complexities of gas sourcing. IGL is positioned to acquire assets, although current regulatory frameworks regarding penalties for underperforming entities present a bottleneck.

IGL is actively pursuing both organic and inorganic growth avenues, including international expansion and diversification into related energy sectors, to secure long-term value.

• Capital Expenditure YTD: In the first nine months of FY26, IGL has spent INR 847 crores on capex, with allocations of INR 190 crores for the steel pipeline network, INR 116 crores for CNG stations, and INR 560 crores for the MDPE network.

• Full Year Capex Plan (FY26): The target for the core business is approximately INR 1,250 crores.

• Future Capex Guidance (FY27 Onwards):

• Core Business: An annual capex of INR 1,200 to INR 1,500 crores is planned.

• Diversification: An additional INR 500 to INR 800 crores will be allocated for new ventures, bringing the total expected annual capex to around INR 2,000 crores.

• Network Expansion Plan: The company aims to add 80-100 new CNG stations annually for the next 3-5 years. An addition of 100 stations is estimated to contribute approximately 0.8 MMSCMD in sales volume.

The company is committed to a significant capex program to expand its core infrastructure and fund diversification, underpinning its future volume growth targets.

• Gas Sourcing Strategy: The company plans to maintain a balanced gas sourcing portfolio, aiming for a 50/50 split between domestic gas (APM, HPHT, New Well Gas) and imported Regasified LNG (RLNG). The RLNG portfolio will be diversified between contracts linked to Henry Hub and Brent crude, with a target landed price of 12% of Brent.

• Energy Self-Sufficiency: A plan to develop a captive power plant in a joint venture with Rajasthan is facing delays. To mitigate this, IGL is independently moving forward with a tender for a 200-megawatt power plant to enhance operational efficiency.

IGL's forward strategy focuses on securing a cost-effective and diversified gas supply while investing in its own energy infrastructure to support operations.

• Current Unit Margin: The EBITDA margin for Q3 FY26 stood at INR 5.4 per standard cubic meter (SCM).

• Margin Guidance: The company maintains its long-term target of achieving an EBITDA margin in the range of INR 7 to INR 8 per SCM.

• Key Margin Levers: Several factors are expected to drive margin expansion:

1. Transmission Tariff Benefit: The tariff rationalization provides a net benefit of approximately INR 0.75 per SCM.

2. VAT Reduction Impact: The full-quarter effect of the Gujarat VAT change will add an estimated INR 0.20-0.25 per SCM.

3. Normalization of Provisions: The non-recurrence of the one-time INR 28 crore Labour Code provision will contribute around INR 0.30 per SCM.

• Potential Uplift: Combined, these factors represent a potential near-term margin uplift of approximately INR 1.25 per SCM, aligning the run-rate margin closer to the company's target.

Margins are poised for a significant recovery, driven by regulatory tailwinds and the normalization of one-time costs, bringing the company closer to its stated guidance.

• Institutional Fleet Transition: The primary headwind is the phase-out of CNG buses by the Delhi Transport Corporation (DTC) and DIMTS as they transition to electric vehicles.

• DTC Impact: DTC's CNG consumption has plummeted from 1.55 lakh kg/day in the base quarter to just 5,000-6,000 kg/day in Q3 FY26 and is expected to be zero by March 2026. This has significantly dragged down headline growth numbers.

• DIMTS Impact: DIMTS volumes have also declined, though more gradually, from 1.85 lakh kg/day to 1.32 lakh kg/day. This trend is expected to continue over the next 2-3 years.

• Input Cost and Forex Volatility: Fluctuations in international gas prices and currency exchange rates remain a key risk, directly impacting procurement costs and profitability. The recent 7-8% devaluation of the rupee has already demonstrated this impact.

• Temporary Demand Shocks: External factors, such as the implementation of pollution control measures (GRAP) in Delhi that led to school closures, can temporarily reduce CNG demand from specific customer segments like school buses.

The most significant risk from the institutional fleet transition is now largely accounted for, but the business remains exposed to macroeconomic factors like currency and commodity price volatility.

• Joint Venture Performance: IGL's associate companies continue to contribute to volume growth.

• MNGL: Reported strong volume growth, increasing from 1.7 MMSCMD to 1.99 MMSCMD year-on-year.

• CUGL: Grew volumes by 3% year-on-year, from 0.33 MMSCMD to 0.34 MMSCMD.

• Underlying Demand Resilience: Despite the significant drag from the DTC fleet transition, the company's core CNG volume grew by over 10% year-on-year, highlighting the robust underlying demand from private vehicles and other commercial operators. This demonstrates that once the base effect from the DTC phase-out normalizes, the company's true growth potential will become more visible.

The performance of IGL's joint ventures and the strong underlying demand in its core business segments underscore the overall health and resilience of its operations.