Daijiworld Media Network – New Delhi

New Delhi, Oct 8: Shares of Indraprastha Gas Ltd (IGL) gained attention after reports that tax rates on gas sourced from Gujarat and sold outside the state were revised. The earlier 15% Value-Added Tax (VAT) has been replaced with a 2% Central Sales Tax (CST), effective October 1, sparking optimism about margin expansion.

In a note, MOFSL highlighted that IGL could see a potential EBITDA per standard cubic meter (scm) upside of 16-20% due to the tax revision. The brokerage forecast EBITDA margin gains of Rs 0.7-1.3 per scm following the Petroleum and Natural Gas Regulatory Board’s (PNGRB) move to a two-zone tariff regime.

MOFSL’s analysis suggests an Rs 0.9/scm EBITDA margin gain for IGL. Based on their projections, the change could lead to 8%, 15%, and 15% increases in FY26, FY27, and FY28 PAT estimates, respectively. Mahanagar Gas Ltd (MGL) may also benefit with a Rs 0.3 per scm margin gain, while Gujarat Gas is unlikely to see significant improvement.

IGL management had previously indicated in their 1QFY26 earnings call that EBITDA margin could improve by Rs 0.7-1.3 per scm from the two-zone tariff move. While some benefits may be passed to consumers, MOFSL noted an upside risk to EBITDA estimates.

The brokerage remains bullish on the city gas distribution (CGD) sector, citing lower crude prices and LNG oversupply as factors likely to reduce gas costs. Brent crude averaged $69 per barrel in Q2, with MOFSL forecasting $65 and $60 per barrel in FY26 and FY27, respectively. They estimate that every $5 decline in Brent reduces landed gas costs by Rs 2.5 per scm.

MOFSL values IGL at 16x FY27 consolidated P/E, adding Rs 47 per share from joint ventures, arriving at a target price of Rs 250 per share. On Tuesday, IGL shares jumped 5.77%, closing at Rs 220.05.

This development underscores growing investor optimism in margin expansion and favorable regulatory changes in the CGD sector.