IndraprasthaGas

September28,2016

Strongvolumetractioncontinues:WemetIGLsmanagementtogetabusiness
update on the company. The management maintains that overall demand
activityhasbeenmaintainedatQ1FY17levels,withCNGgrowthlikelytogrow
at10%forFY17/18EledbyopeningofnewCNGstationsandcontinuedtraction
intaxis/privatecarconversion.Also,likelyadditionof1000newbusesoverFY18
willhelpmaintaindemandtraction.MarginsarelikelytocomeoffQ1FY17levels
ofRs6.6/scm,givencostpressureofnewCNGstations.

Demand momentum remains robust: Management mentioned that CNG

demand growth is likely to be maintained at 10% for FY17/18E led by higher
private cars and taxi conversion. Post Supreme Court order of not renewing
permits of diesel cabs, over 8000 taxis have been converted over the last six
months and management expects full conversion of 50000 taxis over the next
threeyears.PNGdemandremainshealthyledbyincreasedgovernmentthrust
toexpandPNGfootprint,whilecommercial/industrialvolumesgrowthispicking
up.WeincreaseourFY17/18Egassalesvolumesto10%(8.5%earlier).

Margins likely to come off Q1FY17 levels: Management expects spreads to

come off Q1 levels of Rs6.6/scm led by higher cost of commissioning of new
CNGstations;78openedinQ1.However,furthercutsindomesticgaspriceswill
supportmargins;weincreaseourspreadassumptiontoRs6.3/scm(Rs6earlier).

IGLremainsagreenplayonrisingpollution:IGLremainsagreenplayonrising
pollution concerns. Increased cars/taxis conversion and new bus addition in
Delhiwilldrive30%CAGRoverFY1618E.WeincreaseourFY17/18Eearningsby
7%/9%tobuildinhighermarginsandvolumes.WeupgradethestocktoBUY
fromAccumulatewithathreeyearDCFbasedPTofRs1,080(Rs724earlier)as
weincreasethemediumtermgrowthtrajectoryforthecompany.

AvishekDatta
avishekdatta@plindia.com
+912266322254

Rating
Price
TargetPrice
ImpliedUpside
Sensex
Nifty

BUY
Rs778
Rs1,080
38.8%
28,224
8,706

(PricesasonSeptember27,2016)
Tradingdata
MarketCap.(Rsbn)
Shareso/s(m)
3MAvg.Dailyvalue(Rsm)
Majorshareholders
Promoters
Foreign
DomesticInst.
Public&Other
StockPerformance
(%)
1M
6M
Absolute
(0.1)
44.7
Relative
(2.1)
31.2
HowwedifferfromConsensus
EPS(Rs)
PL
Cons.
2017
43.5
39.8
2018
50.3
43.6

108.9
140.0
596.5
45.00%
20.02%
16.10%
18.88%
12M
69.3
58.7
%Diff.
9.3
15.5

PricePerformance(RIC:IGAS.BO,BB:IGLIN)

Keyfinancials(Y/eMarch)

Revenues(Rsm)
Growth(%)

EBITDA(Rsm)

PAT(Rsm)
EPS(Rs)
Growth(%)
NetDPS(Rs)

2015
36,810
(6.1)
7,930

4,377
31.3
21.5
6.4

2016
36,858
0.1
7,717
4,162
29.7
(4.9)
6.4

2017E
41,475
12.5
10,039
6,084
43.5
46.2
10.2

2018E
46,044
11.0
11,144
7,048
50.3
15.8
11.8

2015
21.5
22.7
21.2
2.9
13.6
24.9
5.2
0.8

2016
20.9
18.5
18.1
2.8
13.5
26.2
4.5
0.8

2017E
24.2
23.0
23.0
2.4
9.8
17.9
3.8
1.3

2018E
24.2
22.4
22.4
2.0
8.3
15.4
3.2
1.5

Source:Bloomberg

Jul16

May16

Mar16

Jan16

Nov15

Sep15

(Rs)
900
800
700
600
500
400
300
200
100
0

Profitability&Valuation
EBITDAmargin(%)
RoE(%)
RoCE(%)
EV/sales(x)
EV/EBITDA(x)
PE(x)
P/BV(x)
Netdividendyield(%)
Source:CompanyData;PLResearch

PrabhudasLilladherPvt.Ltd.and/oritsassociates(the'Firm')doesand/orseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresultinvestorsshouldbeawarethat
theFirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthereport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

Pleaserefertoimportantdisclosuresanddisclaimersattheendofthereport

ManagementMeetUpdate

Volumerevivaltodriveearningsgrowth

IndraprasthaGas

IGLmanagementmeetingtakeaways

Demand momentum: Management mentioned that CNG demand growth is

likely to be maintained at 10% for FY17/18E led by higher private vehicle car
(~4000 per month currently) and taxi conversion. Company maintains that
Supreme Court directive not to renew taxi permits for diesel vehicles has
accelerated conversion; last six months over 8000 taxis have been converted
and management expects full conversion of 50000 taxis over the next three
years.PNGdemandhasbeenledbydomesticPNGgrowthof~15%,afunction
of increased government thrust to expand PNG footprint, while
commercial/industrialvolumeshaverecoveredto5%.

1000busadditionlikelythroughFY18E:Managementexpects1000newbuses
over FY1718E, given the state governments focus on improving public
transportation. The government has recently added 100 new buses and more
busesarelikelyovertime.

Rewaridemandlikelyat0.5mmscmd:IGLclarifiedthatRewariisahighgrowth
market and expects demand of 0.5mmscmd over the next 45 years. IGL will
spend Rs4bn towards infrastructure development with Rs500m to be spent in
FY17E.

New bidding delayed: Bidding for the next round of City Gas Distribution has
been delayed and will open in the next six months. IGL is eyeing the lucrative
marketofJaipur,givenitscloseproximitytoexistingmarkets.

EarningsandPTincreased
WeraiseourFY17/18Eearningsestimateby7%/9%,respectively,tofactorinhigher
volumesandmargins.WeexpectIGLtosustainhealthymargintrendledbybenign
domesticgaspriceoutlook.WereviseourratingtoBUYfromAccumulatewitha
threeyearDCFbasedPTofRs1,080.
Exhibit1: IGLearningschange

Sales

FY16

FY17E

FY18E

New

Old

(%)chg

New

Old

(%)chg

36,858

41,475

41,034

1%

46,044

45,143

2%

EBIDTA

7,717

10,039

9,477

6%

11,144

10,339

8%

PAT

4,162

6,084

5,691

7%

7,048

6,466

9%

Source:CompanyData,PLResearch

September28,2016


IncomeStatement(Rsm)
Y/eMarch
2015
NetRevenue
RawMaterialExpenses
GrossProfit
EmployeeCost
OtherExpenses
EBITDA
Depr.&Amortization
NetInterest
OtherIncome
ProfitbeforeTax
TotalTax
ProfitafterTax
ExOditems/Min.Int.
Adj.PAT
Avg.SharesO/S(m)
EPS(Rs.)

36,810
23,408
13,402
660
4,811
7,930
1,487
298
345
6,490
2,113
4,377

4,377
140.0
31.3

2016

2017E

2018E

36,858
22,761
14,097
796
5,584
7,717
1,577
91
299
6,349
2,187
4,162

4,162
140.0
29.7

41,475

22,845
18,630
915
7,676
10,039
1,708

750
9,081
2,997
6,084

6,084
140.0
43.5

46,044
25,205
20,838
1,007
8,687
11,144
1,804

1,179
10,519
3,471
7,048

7,048
140.0
50.3

IndraprasthaGas

BalanceSheetAbstract(Rsm)
Y/eMarch
2015

2016

2017E

2018E

20,981
1,453
1,272
23,706
22,099

2,909
(1,300)
2,315
3,414
7,029

23,707

24,132

1,647
25,779
23,045

2,592
142
4,538
3,487
7,882

25,779

28,795

2,101
30,896
22,389

2,592
5,915
10,715
3,923
8,724

30,896

34,197

2,627
36,824
22,585

2,592
11,647
16,848
4,356
9,556

36,824

QuarterlyFinancials(Rsm)
Y/eMarch
Q3FY16

Q4FY16

Shareholder'sFunds

TotalDebt
OtherLiabilities
TotalLiabilities
NetFixedAssets
Goodwill
Investments
NetCurrentAssets
Cash&Equivalents
OtherCurrentAssets
CurrentLiabilities
OtherAssets
TotalAssets

CashFlowAbstract(Rsm)
Y/eMarch
C/FfromOperations
C/FfromInvesting
C/FfromFinancing
Inc./Dec.inCash
OpeningCash
ClosingCash
FCFF
FCFE

2015

2016

2017E

2018E

6,322
(3,746)
(2,776)
(200)

3,995
2,236

6,609
(2,206)
(2,179)
2,224

3,978
2,525

8,197
(1,052)
(968)
6,178

6,197
6,197

9,253
(2,000)
(1,120)
6,133

7,253
7,253

Revenue(%)
EBITDA(%)
PAT(%)
EPS(%)

Profitability
EBITDAMargin(%)
PATMargin(%)
RoCE(%)
RoE(%)

BalanceSheet
NetDebt:Equity
NetWrkngCap.(days)

Valuation
PER(x)
P/B(x)
EV/EBITDA(x)
EV/Sales(x)

EarningsQuality

9,292
1,873
20.2
399
18
112
1,569
517
1,051
1,051

8,856
1,969
22.2
398
10
66
1,627
551
1,076
1,076

Q1FY17 Q2FY17E
8,997
2,596
28.9
466

80
2,211
731
1,480
1,480

9,331
2,688
28.8
470

80
2,298
770
1,528
1,528

KeyFinancialMetrics
Y/eMarch
Growth

NetRevenue
EBITDA
%ofrevenue
Depr.&Amortization
NetInterest
OtherIncome
ProfitbeforeTax
TotalTax
ProfitafterTax
Adj.PAT

2015

2016

2017E

(6.1)
1.4
21.5
21.5

0.1
(2.7)
(4.9)
(4.9)

12.5
30.1
46.2
46.2

11.0
11.0
15.8
15.8

24.2
14.7
23.0
23.0

24.2
15.3
22.4
22.4

(0.4)

(0.5)

17.9
3.8
9.8
2.4

15.4
3.2
8.3
2.0

33.0
8.3
4.7
101.8

33.0
11.2
4.7
102.9

21.5
11.9
21.2
22.7

20.9
11.3
18.1
18.5

(0.2)

24.9
5.2
13.6
2.9

26.2
4.5
13.5
2.8

Eff.TaxRate
32.6
OtherInc/PBT
5.3
Eff.Depr.Rate(%)
4.7
FCFE/PAT
51.1
Source:CompanyData,PLResearch.

34.4
4.7
4.6
60.7

2018E

KeyOperatingMetrics
Y/eMarch

2015

2016

2017E

2018E

Totalsalesvolumes(mscm)
1,403.6
CNGsalesvolumes(mscm)
1,073.1
PNGsalesvolumes(mscm)
330.5
CNGretailprice(Rs/kg)
37.3
PNGretailprice(Rs/scm)
31.7
Source:CompanyData,PLResearch.

1,465.5
1,123.0
342.5
36.9
28.4

1,601.6
1,222.1
379.5
36.9
30.8

1,763.2
1,344.2
419.0
36.9
31.8

September28,2016

IndraprasthaGas

PrabhudasLilladherPvt.Ltd.
3rdFloor,SadhanaHouse,570,P.B.Marg,Worli,Mumbai400018,India

Tel:(9122)66322222Fax:(9122)66322209
RatingDistributionofResearchCoverage

PLsRecommendationNomenclature

56.9%

60%
%ofTotalCoverage

50%
40%
30%

28.4%
14.7%

20%
10%

0.0%

0%
BUY

Accumulate

Reduce

BUY

Over15%OutperformancetoSensexover12months

Accumulate

OutperformancetoSensexover12months

Reduce

UnderperformancetoSensexover12months

Sell

Over15%underperformancetoSensexover12months

TradingBuy

Over10%absoluteupsidein1month

TradingSell

Over10%absolutedeclinein1month

NotRated(NR)

Nospecificcallonthestock

UnderReview(UR) :

Sell

Ratinglikelytochangeshortly

DISCLAIMER/DISCLOSURES
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September28,2016

RADHAKRISHNA
N SREESANKAR

Digitally signed by RADHAKRISHNAN SREESANKAR

DN: c=IN, o=Personal, cn=RADHAKRISHNAN
SREESANKAR,
serialNumber=8859da2df03122989b585ad520865a4f59
be69fbc1b7ba2c5315941f987f41de, postalCode=400104,
st=MAHARASHTRA
Date: 2016.09.28 15:03:57 +05'30'