Indraprastha Gas looks to expand its physical reach to other cities

Being in a monopoly position in the National Capital Region, Indraprastha Gas Ltd (IGL), the country’s largest city gas distribution company, has seen a spurt in its business and is now looking at expanding to other cities as well.

“The city gas distribution (CGD) segment will be fuelling growth in the natural gas sector, with its reach doubling in the next three years,” says E S Ranganathan, managing director, IGL. The company — a joint venture of GAIL (India), Bharat Petroleum and the Delhi government — is planning to add 100 more compressed natural gas (CNG) outlets in the current financial year and increase its base in the industrial and commercial segments in geographical areas beyond NCR. At present, it has 5.9 million piped natural gas (PNG) connections and 1,989 CNG stations across the country. The company has earmarked Rs 1,100 crore for capital expenditure in FY20.’

During the last financial year, IGL provided 210,000 new PNG connections, taking the total to 1.1 million households. Another 850 new commercial and industrial users were added, taking their total number to 4,276. The company added 54 CNG stations, with the total number of gas stations crossing 500, which catered to nearly 1.1 million vehicles. 

IGL’s net profit grew 16.7 per cent year on year (YoY) in FY19 on revenue growth of 27 per cent. Nearly three-quarters of its revenues come from sales of CNG, with the remainder coming from PNG sales to residential and industrial/commercial segments and sales to other CGD networks. During the year, volumes grew 14 per cent overall.

IGL expanded its pipeline infrastructure to 13,028 km in FY19, from 11,673 km in the previous year. IGL has now expanded beyond the Delhi region and has started building infrastructure in the geographical areas of Meerut (except area already authorised), Muzaffarnagar and Shamli districts in Uttar Pradesh. The company has also started supply of CNG and domestic PNG in earmarked areas of Gurugram and Karnal districts.

According to Ranganathan, IGL’s customer base will increase to 2 million in three years and will cross 2.5 million in eight years. 

In order to increase the average consumption from the current 0.34 standard cubic metres per day (scmd) to 0.5 scmd, IGL is promoting gas appliances such as geysers and rice cookers through its channel partners. Besides, diesel gensets will be another area of growth. “A diesel genset generates power at Rs 19 a unit, but with gas it can be done at Rs 14,” says Ranganathan.

While IGL faces the challenge of its markets being opened up to other plays, it is looking to expand its physical reach to other cities by bagging more geographic areas in the CGD bidding round. “We have 16 districts in three states of Uttar Pradesh, Haryana and Rajasthan with us. These areas will start contributing to our growth in five years,” he says. 

IGL had earlier bought a 50 per cent stake in Central UP Gas, which supplies PNG to Kanpur, Bareilly, Jhansi and Unnao. It has now received authorisation from the Petroleum and Natural Gas Regulatory Board for development of CGD networks in the geographical areas of Kaithal (Haryana), Ajmer, Pali, Rajsamand (Rajasthan), parts of Kanpur, Fatehpur (Uttar Pradesh) and Hamirpur (Haryana) districts. The company is also looking for inorganic growth by acquiring stakes in other CGD companies.

In addition to this, it has also acquired a 50 per cent share for Rs 190 crore in Maharashtra Natural Gas, which is engaged in city gas distribution activities in Pune and nearby areas. These acquisitions have not just provided geographical diversification but also helped in improving its consolidated earnings by approximately 10 per cent.

The Centre’s National Infrastructure Plan (NIP) aims to invest Rs 1.95 trillion in the petroleum and natural gas industry in the coming five years. Of this, CGD is expected to have a major share. Indraprastha Gas should be a key beneficiary.