Indraprastha Gas: Tax tweak may deliver margin bonanza; should you buy IGL shares?
Tax tweak: MOFSL said Mahanagar Gas Ltd (MGL) would also record an Rs 0.3 per scm Ebitda margin gain, while Gujarat Gas is unlikely to see any substantial benefits.
- Oct 8, 2025,
- Updated Oct 8, 2025 8:06 AM IST
Shares of Indraprastha Gas Ltd (IGL) are in focus amid reports tax rates on gas sourced from Gujarat, and sold outside the state, have been revised. The earlier value-added tax (VAT) of 15 per cent has been replaced with a 2 per cent central sales tax (CST), effective October 1.
MOFSL in a fresh note said IGL could see a potential Ebitda per scm upside of 16-20 per cent due to a change in the tax rate on gas sourced from Gujarat. It forecast Ebitda margin benefits of Rs 0.7-1.3 per scm from PNGRB’s move on a two-zone tariff regime.
"As per our scenario analysis, we estimate an Rs 0.9/scm Ebitda margin gain for IGL. We currently build in Rs 5.9/6.5/6.5 per scm Ebitda margin for IGL in FY26/27/28. Hence, if this tax change materializes, it would lead to 8 per cent/15 per cent/15 per cent increase in our FY26/27/28 PAT estimates," MOFSL said.
MOFSL said Mahanagar Gas Ltd (MGL) would also record an Rs 0.3 per scm Ebitda margin gain, while Gujarat Gas is unlikely to see any substantial benefits.
To recall, the IGL management in the 1QFY26 earnings call guided for an Rs 0.7-1.3 per scm Ebitda margin gain from PNGRB’s move to a two-zone tariff regime. While IGL could pass on some of the cost decrease to consumers, there is an upside risk to Ebitda margin estimates, MOFSL said.
"We remain bullish on the city gas distribution sector and have been highlighting the scope for margin expansion. We expect that a soft crude price outlook, coupled with a lower pricing slope for natural gas amid the upcoming LNG oversupply, will reduce gas costs. This should also ease concerns around the APM deallocation affecting margins," MOFSL said.
The domestic brokerage said Brent crude prices averaged $69 a barrel in Q2 and it sees Brent to average $65/60 per barrel in FY26/FY27.
"We estimate that every $5 per barrel decline in Brent prices reduces the landed cost of natural gas by Rs 2.5 per scm. Further, according to our discussions with the listed and unlisted India CGD companies, new long-term gas contracts are already being signed for a 1.0-1.3 per cent lower slope given the expected surge in LNG supply in 2HFY26 and beyond. Note that the risks of crude oil prices falling below the $60 mark are mounting as OPEC+ strategy shifts from managing oil prices to protecting market share," MOFSL said.
The brokerge values IGL at 16 times FY27 consolidated P/E and its JVs at Rs 47 per share to arrive at a target of Rs 250 per share. On Tuesday, the IGL stock jumped 5.77 per cent to settle at Rs 220.05.
Shares of Indraprastha Gas Ltd (IGL) are in focus amid reports tax rates on gas sourced from Gujarat, and sold outside the state, have been revised. The earlier value-added tax (VAT) of 15 per cent has been replaced with a 2 per cent central sales tax (CST), effective October 1.
MOFSL in a fresh note said IGL could see a potential Ebitda per scm upside of 16-20 per cent due to a change in the tax rate on gas sourced from Gujarat. It forecast Ebitda margin benefits of Rs 0.7-1.3 per scm from PNGRB’s move on a two-zone tariff regime.
"As per our scenario analysis, we estimate an Rs 0.9/scm Ebitda margin gain for IGL. We currently build in Rs 5.9/6.5/6.5 per scm Ebitda margin for IGL in FY26/27/28. Hence, if this tax change materializes, it would lead to 8 per cent/15 per cent/15 per cent increase in our FY26/27/28 PAT estimates," MOFSL said.
MOFSL said Mahanagar Gas Ltd (MGL) would also record an Rs 0.3 per scm Ebitda margin gain, while Gujarat Gas is unlikely to see any substantial benefits.
To recall, the IGL management in the 1QFY26 earnings call guided for an Rs 0.7-1.3 per scm Ebitda margin gain from PNGRB’s move to a two-zone tariff regime. While IGL could pass on some of the cost decrease to consumers, there is an upside risk to Ebitda margin estimates, MOFSL said.
"We remain bullish on the city gas distribution sector and have been highlighting the scope for margin expansion. We expect that a soft crude price outlook, coupled with a lower pricing slope for natural gas amid the upcoming LNG oversupply, will reduce gas costs. This should also ease concerns around the APM deallocation affecting margins," MOFSL said.
The domestic brokerage said Brent crude prices averaged $69 a barrel in Q2 and it sees Brent to average $65/60 per barrel in FY26/FY27.
"We estimate that every $5 per barrel decline in Brent prices reduces the landed cost of natural gas by Rs 2.5 per scm. Further, according to our discussions with the listed and unlisted India CGD companies, new long-term gas contracts are already being signed for a 1.0-1.3 per cent lower slope given the expected surge in LNG supply in 2HFY26 and beyond. Note that the risks of crude oil prices falling below the $60 mark are mounting as OPEC+ strategy shifts from managing oil prices to protecting market share," MOFSL said.
The brokerge values IGL at 16 times FY27 consolidated P/E and its JVs at Rs 47 per share to arrive at a target of Rs 250 per share. On Tuesday, the IGL stock jumped 5.77 per cent to settle at Rs 220.05.