Jefferies Downgrades Indraprastha Gas After Delhi EV Policy, Citing Potential Volume Impact

In response to the recent approval of the electric vehicle policy by the Delhi government, Jefferies India has downgraded Indraprastha Gas Ltd (IGL) from ‘buy’ to ‘hold’ and lowered its target price. The move comes as Jefferies estimates a potential 30 percent reduction in IGL volumes from FY25 onwards, with the majority of the slowdown affecting the NCR region, which constitutes 88 percent of IGL’s volumes. Cab aggregators and delivery services, which make up about 30 percent of IGL’s volumes, face significant electric vehicle (EV) related risks.

Jefferies has cut its target price to Rs 465 per share, down 3 percent from its earlier target price of Rs 565 per share. In addition to the volume impact, the report cites increasing EV-related risks and notes that IGL’s expansion into new areas and potential acquisitions may not fully offset the slowdown in the NCR region. The Delhi government’s proposed EV transition policy for cab aggregators, delivery services, and e-commerce companies awaits approval and requires a gradual shift to electric vehicles, with 100 percent of new purchases being electric within five years from the notification date.

Jefferies warns of a bearish scenario where the target price could decrease by 21 percent to Rs 380 per share if electric vehicle adoption is successful by 2024-25, reducing CNG volume growth starting from FY24E, and other factors such as the removal of cost advantages for domestic CNG gas and competition from a third-party marketer in Delhi/NCR impacting profit margins due to gas sales in a regulated environment.