IGL Gains as MNGL Prepares for IPO

Shares of Indraprastha Gas Ltd (IGL) rose in early trading on January 7, buoyed by news that Maharashtra Natural Gas (MNGL), a subsidiary, is preparing for an Initial Public Offering (IPO). International brokerage Citi Research reaffirmed its positive stance on IGL, citing the potential value unlocking from the MNGL listing. The listing plan received in-principle approval from Bharat Petroleum Corporation Ltd (BPCL), further fueling investor interest.

Indraprastha Gas, jointly promoted by GAIL and BPCL, has long been a dominant player in the city gas distribution network in the National Capital Region. The company has steadily expanded its footprint over the past two decades, becoming one of India's largest City Gas Distribution (CGD) companies. A pivotal part of its growth strategy includes its significant stakes in subsidiaries like Maharashtra Natural Gas and Central U.P. Gas Limited (CUGL).

The planned IPO of MNGL is expected to raise over Rs 1,000 crore, with BPCL's board already giving the green light. BPCL and GAIL each hold a 22.5% stake in MNGL, while IGL owns a controlling 50% share. The Maharashtra Industrial Development Corporation (MIDC) holds the remaining 5% stake. The listing is anticipated to significantly enhance the valuation of IGL, with Citi Research highlighting that MNGL alone could contribute Rs 45 per share to IGL's target price of Rs 450. This target suggests an upside potential of around 6% from its previous closing price.

At 9:20 am on January 7, IGL share price were trading at Rs 428.95, marking a 1.2% increase. Concurrently, shares of BPCL and GAIL also saw gains of 1.3%, trading at Rs 288.6 and Rs 187, respectively. Citi Research’s bullish sentiment is supported by the expectation that the listing will unlock substantial value not only for IGL but also for GAIL's investments in unlisted CGD ventures. According to Citi, the listing could add Rs 12 per share to GAIL's valuation, bringing its target price to Rs 280 per share.

Citi Research’s optimistic outlook was echoed by domestic brokerage Emkay Global. However, Emkay emphasized the need for greater clarity on MNGL’s earnings trajectory, particularly in the wake of the Administered Price Mechanism (APM) cuts.

Conclusion

The listing of Maharashtra Natural Gas is poised to be a significant milestone for Indraprastha Gas Ltd and its stakeholders. With substantial contributions expected from MNGL and CUGL, IGL’s market position and valuation are likely to strengthen. The move is also set to unlock additional value for GAIL’s investments, marking a strategic win for the city gas distribution network. As the listing process progresses, market participants will be closely watching for further developments and financial disclosures from MNGL.