Indraprastha Gas Says Acquisition Of Gurugram Operations To Boost Margin

Indraprastha Gas Ltd. said the acquisition of Haryana City Gas Distribution Ltd.’s supply of natural gas in Gurugram district will boost its margin that has been declining for two straight quarters.

“The acquisition will aid margin more than the revenue,” Managing Director ES Ranganathan told BloombergQuint over phone.

Haryana City Gas Distribution, he said, sells nearly 0.4 million metric standard cubic meter per day of natural gas in Gurugram, of which more than three-fifth is procured from Indraprastha Gas. Also, the company’s growth potential in residential and commercial units in the district is higher because of lower penetration of Haryana City Gas Distribution, Ranganathan said.

The cost of acquisition of the operation, depending on its valuation, could be less than Rs 800 crore, according to BloombergQuint’s calculation. Indraprastha Gas will use the entire cash balance to acquire the Gurugram operations.

The two companies have agreed to appoint Deloitte Haskins and Sells LLP as an independent valuer of the business, according to a Supreme Court order uploaded on the bourses by Indraprastha Gas.

Net profit of Indraprastha Gas, which supplies compressed and piped natural gas, rose 11 percent year-on-year to Rs 187.28 crore in the September quarter. And that may be due to higher gas volume.

The company’s gas volume rose in double digits for at least 10 straight quarters and the trend is expected to continue even in the next financial year, the management said. The Delhi government’s push for cleaner fuel has also aided the growth in volume, but lowered its unit margin, or Ebitda per standard cubic meter.

Gas sales for industrial and commercial purpose attract less margin, which in turn led to a decline in unit margin. The company, however, expects to sustain the current margin on account of higher volume from the industrial segment.

Earnings Highlights

• Revenue rose 26 percent on a yearly basis to Rs 1,422 crore.
• Earnings before interest, tax, depreciation and amortisation increased 9 percent year-on-year to Rs 308 crore.
• Ebitda margin stood at 21.7 percent against 25 percent.
• Total volume rose 13.5 percent to 5.9 million metric standard cubic meter per day.
• Unit margin down 3 percent to Rs 5.7 per standard cubic meter.

Watch the interaction with the management here: