igl, 12th february 2013

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Please refer to important disclosures at the end of this report 1

EBITDA 188 150 24.9 207 (9.0)

EBITDA margin (%) 21.6 22.7 (107)bp 24.2 (254)bp

Source: Company, Angel Research

Indraprastha Gas (IGL)s 3QFY2013 top-line grew by 31.1% yoy. However,

EBITDA and PAT grew by only 24.9% yoy and 24.3% yoy on account of higher

RLNG and taxes. We

The companys net sales grew

by 31.1% yoy to `869cr, mainly driven by increases in both, sales as well as

realization. CNG and PNG volumes increased by 7.6% and 17.4% yoy to 194mn

kg and 84mmscm, respectively.

Cost of goods sold increased by 36.1% yoy to

`576cr, mainly on account of higher RLNG costs. Despite higher growth in net

sales, EBITDA grew by only 24.9% yoy to `188cr in 3QFY2013. EBITDA margin

slipped 107bp yoy to 21.6% in 3QFY2013. Hence, net profit grew by only 24.3%

yoy to `86cr.

IGL has hiked CNG prices by 4.0% during January

2013 on account of higher cost of non-APM gas.

IGL has frequently raised prices of CNG and PNG.

However, as the proportion of costly gas is expected to increase, we expect the

companys margin growth to remain muted in the years ahead. Further, the

recent proposal to cap gas marketing margin by PNGRB remains an overhang on

the stock. On the valuation front, at the current level, the stock is trading at 10.1x

and 9.6x FY2013E and FY2014E earnings, respectively.

% chg 62.0 44.2 33.6 9.9

% chg 20.5 18.0 15.7 5.2

OPM (%) 28.3 25.2 22.8 23.4

P/E (x) 13.9 11.7 10.1 9.6

P/BV (x) 3.6 2.9 2.4 2.0

RoE (%) 28.4 27.5 26.0 22.6RoCE (%) 33.6 29.5 28.7 26.5

EV/Sales (x) 2.2 1.5 1.1 1.0

EV/EBITDA (x) 7.7 6.1 5.1 4.4


CMP `257

Target Price -

Investment Period -

Stock Info

Sector

Net Debt (`cr) 357

Bloomberg Code

Shareholding Pattern (%)

Promoters 45.0

MF / Banks / Indian Fls 12.5

FII / NRIs / OCBs 16.8Indian Public / Others 25.7

Abs. (%) 3m 1yr 3yr

Sensex 3.4 9.3 21.5

IGL (3.4) (23.8) 22.8

Oil & Gas

Avg. Daily Volume

Market Cap (` cr)

Beta

52 Week High / Low

Face Value (`)

BSE Sensex

Nifty

Reuters Code

10

19,485

5,904

IGAS.BO

IGL@IN

3,599

0.6

392/170

142,829

Tel: 022 3935 7800 Ext: 6821

[email protected]

Tel: 022- 39357600 Ext: 6841

[email protected]

Performance Highlights

3QFY2013 Result Update | Oil & Gas

February 8, 2013

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IGL | 3QFY2013 Result Update

February 8, 2013 2

Exhibit 1:3QFY2013 performance (Standalone)

COGS 576 423 36.1 547 5.4 1,613 1,082 49.0Total operating expenditure 681 513 32.9 649 5.1 1,911 1,331 43.6

EBITDA Margin (%) 21.6 22.7 24.2 23.1 26.0

Other Income 3 1 76.9 3 (21.4) 9 4 109.6

Depreciation 47 37 28.8 48 (0.6) 138 103 33.8

Interest 14 14 5.0 14 1.2 44 34 28.7

PBT Margin (%) 14.8 15.3 17.3 16.2 18.5

Total Tax 42 32 28.9 49 (14.6) 130 107 21.8

% of PBT 32.4 31.9 33.0 32.5 32.1

PAT Margin (%) 9.9 10.4 11.6 10.9 12.6


The companys net sales grew by 31.1% yoy to `869cr

mainly driven by increases in both, sales as well as realization. CNG and PNG

volumes increased by 7.6% and 17.4% yoy to 194mn kg and 84mmscm,

respectively.

Average CNG realization increased 20.0% yoy to `38/kg, whereas average PNG

realization increased by 11.3% yoy to `26/scm.

Exhibit 2:CNG volumes stood at 194mn kg


Exhibit 3:PNG volume stood at 84mmscm


161177 180 180 183

194 194

-

5

10

15

20

25

30

35

40

45

-

50

100

150

200

250

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13 2QFY13 3QFY13

(`perkg)

(mnkg)

CNG volumes Gross realization-RHS

6568

7178 80

81 84

0

5

10

15

20

25

30

0

10

20

30

40

50

60

70

80

90


(`perscm)

(mmscm)

PNG volumes Gross realization-RHS

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February 8, 2013 3

Exhibit 4:Net sales grew by 31.1% yoy


Cost of goods sold increased by 36.1% yoy to `576cr

mainly on account of higher RLNG costs. Hence, despite higher growth in net

sales, EBITDA grew by only 24.9% yoy to `188cr in 3QFY2013. EBITDA margin

slipped 107bp yoy to 21.6% in 3QFY2013. Further, interest expense was flat yoy

at `14cr in 3QFY2013. Hence, net profit grew by only 24.3% yoy to `86cr.

Exhibit 5:Operating performance trend


Exhibit 6:PAT growth trend


537

597663 720

760

855 869

59.8

34.0

45.1

41.0

41.5 43.1

31.1

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

-

100

200

300

400

500

600

700800

900

1,000


(%)

(`cr)

Net sales Net sales growth (RHS)

29.5

26.5

22.723.7

23.624.2

21.7

10.0

15.0

20.0

25.0

30.0

35.0

-

50

100

150

200

250


(%)

(`cr)

Operating Profit Operating Margins (RHS )

39.6

17.8

2.9

18.9

5.7

28.524.3

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

-

20

40

60

80

100

120


(%)

(`cr)

PAT PAT growth (RHS)

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February 8, 2013 4

Investment arguments

IGL has exhibited strong volume growth over the past

few years. We expect the trend to continue going ahead, given that penetration of

CNG vehicles in Delhi is still at lower levels and the launch of newer

CNG-variant cars by automotive companies could keep conversions in the high

growth orbit. The PNG segment is also expected to continue its robust performance

on account of lower penetration in NCR while demand remains high. The

company continues to focus on the fast-growing PNG segment.

After the verdict of Delhi HC, the companysmarketing margin remains outside the purview of PNGRB. However, PNGRB has

indicated that it aims to regulate the marketing margins charged by the utilities.

This could potentially impact IGLs margins adversely in case there is a cap on

network tariff and/or marketing margin.

Outlook and valuation

IGL has frequently raised prices of CNG and PNG. However, as the proportion of

costly gas is expected to increase, we expect the companys margin growth to

remain muted in the years ahead. Further, the recent proposal to cap gas

marketing margin by PNGRB remains an overhang on the stock. On the valuation

front, at the current level, the stock is trading at 10.1x and 9.6x FY2013E and

FY2014E earnings, respectively.

Exhibit 7:Key assumptions

CNG volumes (mmscm) 1,150 1,023

PNG volumes (mmscm) 321 434


Exhibit 8:Angel EPS forecast vs Consensus

25.3 24.7 2.5

26.6 26.2 1.7


Exhibit 9: Recommendation summary

GAIL 336 - Neutral 42,557 - 9.9 9.5 1.7 1.5 5.4 4.3 18.5 16.8 19.8 18.1

GSPL 70 - Neutral 3,936 - 8.0 8.9 1.3 1.2 3.7 4.0 17.8 14.1 19.3 16.0

Guj. Gas 313 - Neutral 3,921 - 13.7 13.3 4.1 3.7 8.2 7.6 33.2 29.2 29.3 27.1

Source: Angel Research

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February 8, 2013 5

Exhibit 10: One-year forward P/E

Company background

Incorporated in 1998, IGL is in the retail gas distribution business of supplying

CNG to transport sector, and PNG to domestic, industrial and commercial sectors

in Delhi and NCR. IGL started its operations in NCT of Delhi in 1999 with only 9

CNG stations and 1000 PNG consumers. Currently, IGL has 280 CNG stations,

310,000 residential consumers, and 730 industrial customers.

0

100

200

300

400

500

600

May-0

7

Sep-0

7

Jan-0

8

May-0

8

Sep-0

8

Jan-0

9

May-0

9

Sep-0

9

Jan-1

0

May-1

0

Sep-1

0

Jan-1

1

May-1

1

Sep-1

1

Jan-1

2

May-1

2

Sep-1

2

Jan-1

3

Shareprice(`)

7x 10x 13x 16x 19x

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February 8, 2013 6

Profit & Loss Statement (Standalone)

Gross sales 962 1,213 1,954 2,794 3,733 4,104

Less: Excise duty 109 135 207 275 367 404Net Sales 853 1,078 1,746 2,519 3,365 3,700

Other operating income - - - - - -

% chg 20.8 26.4 62.0 44.2 33.6 9.9

Total Expenditure 553 697 1,252 1,884 2,598 2,833

Purchase of gas 411 495 984 1,539 2,182 2,402

Staff expenditure 24 31 38 44 68 70

Other operating expenditure 118 172 230 301 348 361

% chg 0.0 26.9 29.8 28.4 21.0 12.9

(% of Net Sales) 35.2 35.3 28.3 25.2 22.8 23.4

Depreciation and amortization 67 77 103 143 191 269

% chg (2.0) 30.4 29.0 25.5 17.4 3.7

(% of Net Sales) 27.3 28.1 22.4 19.5 17.1 16.2

Interest & other Charges - - 13 48 61 48

Other Income 26 21 7 7 13 15

(% of PBT) 10.1 6.5 1.9 1.5 2.4 2.7

Share in profit of Associates - - (1.0) - - -

% chg (0.8) 25.3 18.9 16.7 17.4 7.0

Extraordinary Expense/(Inc.) - - (1) - - -

Tax 86 109 126 144 174 192

(% of PBT) 33.4 33.6 32.6 31.9 32.9 34.0

Add: Share of earnings of asso. - - - - - -

Less: Minority interest (MI) - - - - - -

Prior period items - - - - - -

% chg (1.1) 24.9 20.5 18.0 15.7 5.2

(% of Net Sales) 20.2 20.0 14.9 12.2 10.5 10.1

% chg (1.1) 24.9 20.5 18.0 15.7 5.2

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

previous year numbers

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February 8, 2013 7

Balance Sheet (Standalone)

Equity Share Capital 140 140 140 140 140 140Preference Capital - - - - - -

Reserves& Surplus 543 685 863 1,088 1,365 1,653

Minority Interest - - - - - -

Total Loans 27 55 282 389 370 320

Other Long term liabilities - - 117 193 193 193

Long term Provisions - - 4 5 5 5

Net Deferred Tax Liability 21 24 41 63 63 63

Gross Block 817 1,105 1,716 2,266 2,862 3,362

Less: Acc. Depreciation 378 454 557 688 879 1,148

Capital Work-in-Progress 82 183 327 375 320 300

Goodwill - - - - - -

Long term loans and advances - - 39 5 5 5

Current Assets 259 257 199 264 293 359

Cash 146 121 17 32 (23) 19

Loans & Advances 55 69 57 56 58 59

Other 58 67 124 177 257 281

Current liabilities 154 204 319 444 509 547

Mis. Exp. not written off - - - - - -



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February 8, 2013 8

(Standalone)

Profit before tax 259 324 386 450 534 565

Depreciation 67 77 103 143 191 269Dep. accepted during the year 20 29 62 107 (19) (50)

Change in Working Capital (18) 25 (9) 69 51 82

Less: Other income (26) (21) (6) (7) (13) (15)

Direct taxes paid (89) (106) (114) (150) (163) (162)

(Inc.)/ Dec. in Fixed Assets (172) (389) (771) (599) (541) (480)

(Inc.)/ Dec. in Investments 5 87 - - - -

Other income 26 21 (6) 7 13 15

Issue of Equity - - - - - -

Inc./(Dec.) in loans - - 345 107 (19) (50)

Dividend Paid (Incl. Tax) (66) (73) (73) (84) (84) (84)

Others 0 1 - (131) 3 17

Inc./(Dec.) in Cash 6 (25) (79) 71 (111) 42



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February 8, 2013 9

Key Ratios

P/E (on FDEPS) 20.9 16.7 13.9 11.7 10.1 9.6P/CEPS 15.0 12.3 9.9 8.0 6.6 5.6

P/BV 5.3 4.4 3.6 2.9 2.4 2.0

Dividend yield (%) 1.6 1.9 1.9 2.3 2.3 2.3

EV/Sales 4.0 3.3 2.2 1.5 1.1 1.0

EV/EBITDA 11.2 9.2 7.7 6.1 5.1 4.4

EV/Total Assets 4.6 3.9 2.6 2.1 1.8 1.6

EPS (Basic) 12.3 15.4 18.6 21.9 25.3 26.6

EPS (fully diluted) 12.3 15.4 18.6 21.9 25.3 26.6

Cash EPS 17.1 20.9 25.9 32.1 39.0 45.8

DPS 4.0 5.0 5.0 6.0 6.0 6.0

Book Value 48.8 59.0 71.7 87.7 107.5 128.1

EBIT margin 27.3 28.1 22.4 19.5 17.1 16.2

Tax retention ratio 66.6 66.4 67.3 67.0 67.0 66.0

Asset turnover (x) 2.1 1.8 1.6 1.6 1.7 1.7

ROIC (Post-tax) 39.0 33.5 24.7 21.0 20.0 17.8

Cost of Debt (Post Tax) - - - - - -

Leverage (x) - - - - - -

Operating ROE 39.0 33.5 24.7 21.0 20.0 17.8

ROCE (Pre-tax) 36.0 38.1 33.6 29.5 28.7 26.5

Angel ROIC (Pre-tax) 71.2 64.7 48.3 40.4 36.4 31.4

ROE 27.4 28.6 28.4 27.5 26.0 22.6

Asset Turnover (Gross Block) 1.1 1.1 1.2 1.3 1.3 1.2

Inventory / Sales (days) 10 9 7 5 9 13

Receivables (days) 12 11 11 15 14 12

Payables (days) 54 56 53 58 55 58

WC cycle (ex-cash) (days) (21) (18) (21) (25) (22) (20)

Net debt to equity (0.3) (0.1) 0.2 0.2 0.2 0.1

Net debt to EBITDA (0.7) (0.2) 0.5 0.4 0.5 0.3

Interest Coverage (EBIT/Int.) - - 29.7 10.3 9.4 12.5

Note: Some of the figures from FY2011 onwards are reclassified; hence some ratios may not be

comparable with previous year ratios

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February 8, 2013 10

Disclosure of Interest Statement IGL

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Note: We have not considered any Exposure below `1 lakh for Angel, its Group companies and Directors.

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Research Team Tel: 022 - 3935 7800 E-mail: [email protected] Website: www.angelbroking.com

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investmentdecision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any wayresponsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,

redistributed or passed on, directly or indirectly.

Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or

other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in

the past.

Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, pleaserefer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited andits affiliates may have investment positions in the stocks recommended in this report.

igl, 12th february 2013

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