Citi bullish on Indraprastha Gas as MNGL prepares for Rs 1,000-crore IPO

Shares of Indraprastha Gas Ltd (IGL) rose 1.2 per cent on January 7 after Bharat Petroleum Corporation Ltd (BPCL) approved the Rs 1,000 crore initial public offering (IPO) of Maharashtra Natural Gas Limited (MNGL). The listing has been hailed as a value-unlocking opportunity by Citi Research, which reiterated its bullish stance on IGL with a target price of Rs 450 per share, representing a six per cent upside from the previous close.

MNGL’s listing to boost valuations
MNGL, a joint venture between BPCL, GAIL, and IGL, is expected to enhance shareholder value for its stakeholders significantly. Citi Research noted that MNGL and Central U.P. Gas Limited (CUGL), both subsidiaries of IGL, could collectively add Rs 56 per share to IGL’s valuation. MNGL alone could contribute Rs 45 per share to IGL’s target price.

The brokerage also highlighted that the listing could positively impact GAIL’s valuation, adding Rs 12 per share, and setting a price target of Rs 280 for the stock.

Sectoral momentum drives IGL stock
At 9:20 am, IGL shares were trading at Rs 428.95, up by 1.2 per cent, while BPCL and GAIL saw gains of 1.3 per cent, trading at Rs 288.6 and Rs 187, respectively. IGL’s joint ventures and its dominant position in the city gas distribution (CGD) market have been critical in driving investor interest.

Broader implications for the CGD market
Citi Research noted that the IPO could improve visibility on MNGL’s earnings trajectory, especially in light of regulatory changes, including the recent APM gas price cuts. With operations across 19 geographical areas, including its subsidiaries, IGL remains one of India’s largest CGD players.

The planned listing is seen as a catalyst for unlocking value, further solidifying IGL’s position in the CGD space and enhancing its long-term growth potential.