Indraprastha Gas IGL Maintains Earnings Resilience Amid INR Depreciation and Lower LNG Costs

Indraprastha Gas Limited is navigating the current weak rupee phase with limited damage to profitability. Despite the Indian rupee hovering near its record low against the US dollar, lower global LNG prices are cushioning margins. Analysts at HDFC Securities believe only modest gas price adjustments may be needed, keeping earnings risk contained even if INR depreciation continues.

HDFC Securities has reiterated a positive stance on Indraprastha Gas, maintaining a BUY rating with a revised target price of Rs 248. The view is supported by steady volume growth expectations, stable gas allocation to priority sectors, and additional demand from new geographical areas. The brokerage expects these factors to underpin earnings resilience over the medium term.

"We have analyzed the potential impact of the INR reaching its lowest level against the USD on Indraprastha Gas (IGL) and the price hike needed to offset any further depreciation. IGL's blended gas cost during the current quarter has come off on the back of reduced RLNG price in the international markets. Reduction in cost should offset the impact of current INR depreciation, leading to a negligible impact on IGL's per unit gross profit," commented the research analysts of HDFC Securities Limited (HSL).

"However, if the blended gas cost remains at the current levels, every two-rupee depreciation of INR against USD will necessitate a price hike of INR 1.38/kg for the CNG segment and INR 0.52/scm for the DPNG segment, which in our opinion should not be a challenge for IGL. We maintain our BUY recommendation on IGL with a target price of INR 248, given (1) volume growth at ~7% CAGR over FY25-33E; (2) robust margins supported by higher gas allocation from the high-pressure, high-temperature (HPHT) fields to the priority sector; and (3) a strong portfolio of new geographical areas (GAs) ensuring volume growth visibility," they further added.

One key factor behind the stable outlook is the limited effect of the weaker rupee on the CNG business. Indraprastha Gas sources about 40% of CNG gas requirements from RLNG. Quarter-to-date, average JKM LNG prices have eased to USD 11.15/mmbtu, compared with USD 11.79/mmbtu in the previous quarter, a decline of around 5%.

This fall in international LNG benchmarks has reduced the blended CNG input cost for Indraprastha Gas by about 2% quarter-on-quarter, according to HDFC Securities estimates. The cost moved from roughly USD 12.2/mmbtu to about USD 11.9/mmbtu. This saving is largely balancing the impact of INR depreciation from 87 in Q2FY26 to 89 in Q3FY26 to date, resulting in minimal hit to earnings.

The DPNG segment shows a different cost structure but remains manageable for the company. DPNG accounts for roughly 8% of Indraprastha Gas’ total volumes and relies entirely on APM gas. With APM prices flat sequentially, the sole driver of higher cost is the near 2% INR depreciation, translating into a gas cost increase of about INR 0.5/scm.

Given the relatively small share of DPNG within the portfolio, HDFC Securities does not see this cost uptick as a major concern. Even with this rise, the overall impact on blended margins is low. Analysts therefore assess the company’s exposure to INR-linked volatility as manageable across both CNG and DPNG segments under current price conditions.

Looking ahead, the brokerage has modelled the price adjustments needed if the rupee weakens further against the dollar while raw material costs stay unchanged. Under this scenario, every additional depreciation of two rupees per USD would require Indraprastha Gas to raise CNG prices by INR 1.38 per kg. For DPNG, the necessary increase is estimated at INR 0.52 per scm.

HDFC Securities expects these potential hikes to be operationally feasible without significant demand disruption. The analysts highlight that anticipated volume growth of about 7% CAGR during FY25-33E, combined with higher gas allocation from HPHT fields to priority sectors and expansion into new geographical areas, should sustain revenue visibility and margin support even with calibrated consumer price adjustments.

Indraprastha Gas IGL valuation, target price and earnings estimates

"Factoring in the YTD performance, we tweak our FY26/27 estimates marginally, resulting in a FY26/27E EPS cut of 3.0/3.1%. We have revised the TP to INR 248/sh (previously INR 249/sh; WACC 10.5%, terminal growth rate 1.5%). The stock is trading at 12.9x Dec-26E EPS," recommended the research analysts of HDFC Securities Limited (HSL).

These revised forecasts reflect a cautious but stable view on earnings against the backdrop of currency volatility. The valuation multiple of 12.9 times Dec-26E EPS suggests expectations of steady, though not aggressive, profit growth. The slight cut in EPS estimates also incorporates year-to-date operational trends, including the interplay between LNG prices, gas allocation, and exchange rate movements.

The interaction between LNG prices and INR depreciation remains a pivotal driver for margins at Indraprastha Gas. Lower JKM-linked RLNG prices in the present quarter are helping offset the weaker rupee. This dynamic has allowed the company to protect per-unit gross profit without immediate sharp adjustments in end-customer tariffs, while also preserving competitiveness against alternative fuels.

Key operating and pricing details mentioned by HDFC Securities can be summarised as follows:

Parameter	Value / Change
JKM LNG price (current QTD)	USD 11.15/mmbtu
JKM LNG price (previous quarter)	USD 11.79/mmbtu
Change in JKM price QoQ	-5%
Blended CNG gas cost QoQ	USD 12.2 to ~USD 11.9/mmbtu
INR movement (Q2FY26 to Q3FY26 QTD)	87 to 89 per USD
DPNG share of total volumes	~8%
Cost increase for DPNG segment	~INR 0.5/scm
Required hike per 2 INR depreciation – CNG	INR 1.38/kg
Required hike per 2 INR depreciation – DPNG	INR 0.52/scm
Target price for Indraprastha Gas	INR 248/share
Expected volume growth FY25-33E	~7% CAGR

Overall, HDFC Securities’ research suggests that Indraprastha Gas remains relatively insulated from currency swings due to lower RLNG prices, regulated APM sourcing, and scope for moderate price hikes. The combination of volume growth prospects, supportive gas allocation policies, and expanded geographical presence is expected to underpin the company’s financial performance, even with periodic INR volatility.

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