IGL Shares Dip on Policy Shock: What Happened and What It Means

Indraprastha Gas Ltd (IGL), one of India’s top city gas distribution companies, witnessed a sharp 5% drop in its share price on Tuesday, following a major policy proposal by the Delhi government. The proposed change involves phasing out CNG-powered autorickshaws, which form a large part of the public transport fleet in the city. This move is part of the draft EV policy aimed at accelerating the adoption of electric vehicles in the National Capital Region (NCR).

This potential regulatory shift is raising concerns among investors, who worry about how such a change could affect IGL's revenue streams, especially in Delhi, where a significant portion of its business comes from supplying Compressed Natural Gas (CNG) to the transport segment.

Background: IGL’s Business Footprint

Established in 1998, Indraprastha Gas Limited (IGL) is a major player in India's natural gas market, with its core operations centered around the National Capital Territory of Delhi and extending into adjoining areas like Noida, Greater Noida, Ghaziabad, Gurugram, Karnal, Rewari, and Kanpur.

IGL is a joint venture between GAIL (India) Limited and Bharat Petroleum Corporation Ltd (BPCL), with the Delhi Government holding a 5% equity stake.

Key Segments Include:

• Compressed Natural Gas (CNG) for vehicles

• Piped Natural Gas (PNG) for residential use

• Natural Gas for industrial and commercial applications

As of FY23, IGL operated:

• 819 CNG stations

• Supplied gas to over 17 lakh vehicles

• Had 25.60 lakh residential PNG connections

• Served ~10,000 industrial and commercial clients

Delhi’s Draft EV Policy: What Does It Say?

The Delhi government, under its new draft Electric Vehicle (EV) Policy, has recommended a phased discontinuation of CNG-powered autorickshaws. The policy aims to replace the existing fleet with electric three-wheelers, supported by incentives, battery swapping stations, and infrastructure upgrades.

Delhi has been pushing for a cleaner transport system due to alarming pollution levels. While the transition from petrol and diesel to CNG was once seen as a green initiative, EVs are now the next big step toward achieving zero emissions.

However, this move may create direct headwinds for IGL, which heavily depends on the autorickshaw segment for its CNG sales volume.

Market Reaction: Why Did IGL Shares Fall?

The market reacted swiftly to the policy proposal, leading to a 5% fall in IGL’s share price in intraday trading. Investors fear that if this draft policy turns into law, IGL could see a long-term decline in CNG volume growth in the NCR.

The autorickshaw segment contributes a sizable chunk to IGL's daily CNG sales. Even a gradual transition to electric three-wheelers could dent future revenue and profitability, especially considering the infrastructure investments IGL has made in setting up its CNG station network.

Why This Matters: IGL’s Strategic Position

Despite the policy shock, IGL remains a critical infrastructure player in India's urban energy ecosystem. With over:

• 1,868 km of steel pipelines

• 20,632 km of MDPE pipelines

• Continuous expansion in Tier-2 and Tier-3 cities

The company has been diversifying its geographic footprint, but Delhi and the NCR still account for a large percentage of its sales.

Its commercial and industrial segments are growing, with a 30% YoY rise in commercial volumes and an increase in industrial clients. However, this growth might not fully offset the hit from transport-sector losses in the near term.

Opportunities and Challenges Going Forward

IGL could potentially pivot into EV infrastructure, such as:

• Setting up battery charging or swapping stations

• Collaborating with EV makers

• Partnering with the government for green mobility solutions

But such transitions require capex, regulatory clarity, and time.

On the other hand, short-to-medium-term earnings visibility may remain clouded if the policy leads to a quicker shift away from CNG vehicles.

Investor Outlook

The current dip in IGL’s share price reflects immediate concern but also offers an opportunity for long-term investors if the company adapts quickly to the evolving regulatory landscape.

Brokerages may revise their earnings estimates and target prices for IGL once the draft policy becomes clearer and timelines are confirmed.

The Delhi government's proposal to phase out CNG autorickshaws is a major policy development that could impact IGL's future sales in its key market. While the company remains strong fundamentally, it faces the dual challenge of regulatory pressure and market perception.

Investors will need to monitor:

• Final approval of the EV policy

• Rollout timeline

• IGL’s strategic response

In the meantime, the 5% drop in share price reflects market jitters, but also sets the stage for potential policy-driven transformation in the Indian city gas distribution sector.

The Upcoming IPOs in this week and coming weeks are Aten Papers & Foam.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.