Indraprastha Gas to invest Rs 1.6 billion

Pradeep Rane
15 May 2004

Indraprastha Gas (IGL), the gas supplier in Delhi, plans to make a capital investment of Rs 1.6 billion during this financial year.

A monopoly supplier of compressed natural gas (CNG) for different vehicles and piped natural gas (PNG) for the households, IGL will invest Rs 1.2 billion to lay pipelines for CNG as well as setting up new CNG outlets or upgrading the existing outlets and the remaining will be utilised for laying infrastructure for PNG supplies.

"This capex would either be used through internal accruals or by raising debt if required," according to B&K Research, a leading Mumbai-based securities research firm. In FY04 the company spent Rs1.8 billion as capital expenditure. IGL is currently undertaking a feasibility study for expansion in regions around Delhi like Gurgaon, Noida, Greater Noida and Faridabad where the authorities are keen on converting public utility vehicles to CNG.

"We believe that expansion will result into growth in the volumes from FY06 onwards and would lead to an incremental growth in the range of 15 to 25 per cent," say oil and gas sector analysts at B&K Research.

IGL has also laid a network of 121 CNG stations in the national capital region to cater to the requirements of various vehicles running on CNG. The waiting time at the CNG stations has come down to almost zero as compared to hours three years back as the compression capacity increased to 1.68 million kg per day. The company also plans to increase the total number of CNG stations in the NCR to about 150 by FY05.

However, a case is pending in Supreme Court against the company regarding increase in prices of CNG. Any adverse ruling might result in reduction in selling price of CNG affecting its profitability. Prices of CNG might come under the regulatory purview and increase in prices of natural gas might lead to adverse affect, the analyst said.