IGL share price jumps 6% after Nomura upgrade; targets for MGL, Gujarat Gas

Shares of Indraprastha Gas Ltd (IGL) climbed 6 per cent in Wednesday's trade after Nomura said the risk-reward for the oil PSU has turned favourable following a sharp correction in the stock. The foreign brokerage noted that the IGL share price declined 14 per cent over the past month compared with a 1 per cent gain in the Nifty 50, thanks to concerns over rupee depreciation and higher gas costs driven by a sharp rise in Henry Hub prices.

Nomura upgraded the IGL stock to 'Buy' and raised its target price to Rs 230 from Rs 215 earlier, following which the stock rose 5.54 per cent to hit a high of Rs 193.35 on Wednesday. Nomura retained its 'Buy' rating on Mahanagar Gas (MGL) with a target of Rs 1,510, and maintained a 'Reduce' rating on Gujarat Gas with a target price of Rs 390.

Nomura said the correction appeared overdone, as it expected the negatives to be more than offset by upcoming cost and tax benefits. These included a reduction in tax on domestically sourced gas in Gujarat to 2 per cent from 15 per cent, effective October 1, and lower transmission costs on priority-sector volumes such as CNG and domestic PNG following the implementation of zonal tariffs, which the brokerage expected to come into effect in January 2026.

The brokerage also expected Henry Hub gas prices to cool from seasonally high levels, providing further margin support from the June quarter of FY27 onwards.

For the December quarter of FY26, Nomura estimated that Ebitda margins would improve sequentially by about 3 per cent, as the adverse impact of rupee depreciation and higher Henry Hub prices was likely to be more than offset by softer domestic and Brent-linked gas prices, along with the lower Gujarat tax.

"We think that both MGL and IGL are trading at attractive valuation, and imported gas costs could trend lower post-winter (Dec-Feb), while domestic gas prices being linked to Brent will likely remain muted. We upgraded IGL to Buy from Neutral today given attractive valuations after a sharp correction over the past one month, and multiple margin tailwinds," it said. Shares of MGL were trading 0.75 per cent higher at Rs 1,120.60.

Nomura said softening HH prices are positive for MGL and IGL due to lower cost of imported gas. MGL has 30 per cent of its gas sourcing from HH-linked contract. IGL's sourcing from HH-linked contracts stands at 18 per cent.

Meanwhile, Nomura said integrated margins for OMCs are inversely related to crude oil price, given stable retail prices for petrol and diesel over the past two years. It estimates healthy current integrated margins of $25 a barrel, $21 per dollar, and $20 a barrel for HPCL, BPCL, and IOCL, respectively.