Indraprastha Gas - EV Versus CNG: Reliance Securities

Reliance Securities Report

Indraprastha Gas Ltd.'s volume clocked a robust 11% CAGR over FY15-FY20, driven by a strong 10%, 15% and 14% growth in CNG, domestic PNG and industrial/commercial segments, respectively.

Mandatory CNG conversion of radio/inter-city cabs and LCVs and a strong rise in the number of DTC fleet were the key volume drivers in the past.

Looking ahead, we believe IGL’s volume growth will be driven by:

1. expected ~1.7 mmscmd volume (32% of FY21 total sales volume) from new geographical areas;

2. expected ~0.6 mmscmd volume (11% of FY21 total sales volume) led by pollution control norms to push the growth of PNG industrial in NCR; still a sizeable number of industries to switch to PNG industrial;

3. likely savings of 51%/47% in CNG-fueled vehicles vs. petrol/diesel-driven vehicles, respectively, which will fuel the growth in conversion of cars to CNG; and

4. PNG domestic gas prices are 37% cheaper than the LPG non-subsidised cylinder.

In the near future, we do not see major threat to the conversion of cars to CNG. Based on our preliminary analysis, the total cost of ownership (TCO) of CNG cars is Rs 7/km, compared to Rs 11/km for electric cars.

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