What Makes Motilal Oswal Bullish on Indraprastha Gas After Gujarat Tax Change?
About Indraprastha Gas and the Broker’s Rationale
Indraprastha Gas Limited (IGL), one of India’s key city gas distribution (CGD) companies, has attracted renewed investor interest following a positive update from brokerage firm Motilal Oswal Financial Services. The brokerage has maintained a BUY rating on IGL with a target price of ₹250 per share, indicating an estimated upside potential of approximately 14%.
The upgrade comes amid expectations of a 16–20% increase in EBITDA per standard cubic meter (scm) due to recent changes in taxation on gas sourced from Gujarat. This fiscal adjustment is anticipated to improve cost efficiencies and boost margins for IGL in the near term.
According to Gulshan Khera, CFP®, Indian-Share-Tips.com’s Senior Technical Analyst and SEBI Regd Investment Adviser, “This tax benefit could improve IGL’s operating leverage and allow for better pass-through efficiencies across key regions like Delhi NCR. The positive margin outlook may help the company regain investor confidence following earlier margin compression.”
Impact of the Gujarat Tax Adjustment
The Gujarat government’s move to rationalize local taxes on gas supply is proving beneficial for city gas distributors that source natural gas from the region. Since IGL depends on both domestic and imported LNG, any reduction in sourcing costs can significantly enhance profitability metrics.
✅ Improved sourcing economics will likely reflect in IGL’s financials over the next two quarters. Analysts suggest this tax benefit could translate into a 16–20% EBITDA/scm upside, strengthening the company’s financial resilience amid volatile crude-linked input prices.
Beyond cost benefits, the company is also expected to benefit from steady demand recovery in the commercial and industrial CNG segments. These sectors are seeing an uptick in usage as economic activity stabilizes and urban mobility improves.
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Brokerage Outlook and Valuation Context
💡 Motilal Oswal’s valuation remains centered on a strong volume growth outlook and stable regulatory visibility. The brokerage expects normalized volumes to sustain across Delhi and Noida networks, supported by infrastructure expansion and increased CNG vehicle penetration.
While competition from other CGD players like Mahanagar Gas and Gujarat Gas remains, IGL’s strategic positioning and supply diversity give it a distinct edge in balancing cost and delivery commitments. Moreover, a stable crude environment may keep input-linked volatility in check through FY26.
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Investor Takeaway
📈 The positive stance by Motilal Oswal on Indraprastha Gas underscores confidence in margin expansion and steady demand recovery. The Gujarat tax adjustment has emerged as a key earnings lever for FY26, with potential EBITDA/scm upside of 16–20%. Investors may watch for sustainability of margin gains in the next two quarters to gauge long-term impact.
Explore more insights at Indian-Share-Tips.com, which is a SEBI Registered Advisory Services.
SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
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