It is often said in the stock market that if we observe lifestyles and trends around us we might get a hold of future multi-baggers. One such multi-bagger could be the reason yummy foods are being cooked in our kitchens. Yes, you guessed it right-LPG! In this article, we take a look at the top gas distribution stocks in India. Keep reading to find out.
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About the Gas Distribution Industry
Although every investor has been sleeping with one eye open for new-age sectors that could give them multi-bagger returns, an industry like gas distribution also shows tremendous potential. Surprisingly, the city gas distribution market in India is expected to grow at a CAGR of 10%.
This would mean that the market would grow from 9,223 MMSCM (Million Metric Standard Cubic Meter) in 2020 to 25,570 MMSCM by 2030.
The cause of this has been the increased demand for the use of natural gas for automotive, industrial, commercial, and for residential purposes. If we take a look at data from 2019, the City Gas Distribution market was dominated by CNG sales.
This was thanks to the increasingly stringent environmental regulations and adoption of CNG vehicles throughout the country as it is also cheaper apart from being environment friendly.
Like many other sectors, the government has an important role here too. When it comes to Liquified Natural Gas India is the 4th largest importer in the world. The country imported 31.9 BCM (billion cubic meters) during FY22.
The government plans to spend US$ 2.6 billion, which will be used for upstream oil and gas production. The government is also allowing more companies to be authorized and granted licenses in the industry.
This has encouraged both private and public participation in the market. Recently Indian Oil Corp Ltd. and Adani Gas Ltd won the most licenses for the distribution of gas i.e 17 and 15 respectively.
Top Gas Distribution stocks in India
Now let us take a look at the top Gas Distribution stocks in India:
1. Indraprastha Gas Limited (IGL)
| Face Value (₹): 2 | ROE (%): 21.6 |
| Market Cap (Cr): ₹24,871 Cr | Net Profit Margin: 19.5 |
| EPS (₹): 21.5 | Current Ratio: 1.21 |
| Stock P/E: 16.6 | Debt to Equity: 0.01 |
| Dividend Yield (%): 1.02 | Promoter’s Holdings (%): 45% |
Indraprastha Gas Limited is a government gas distribution company that supplies natural gas as cooking and vehicle fuel. The company was formed for the distribution of natural gas in the National Capital Territory of Delhi.
The company was able to achieve this thanks to the support from GAIL (India) Ltd. and Bharat Petroleum Corporation Ltd. (BPCL). The company now plans to provide gas to the entire capital region.
If we take a look at the company’s revenues and profits we observe that IGL has maintained an impressive increasing trend from 2017 to 2020. However, its profits fell in 2021, a trend seen across industries due to covid-19.
Its revenues have increased from Rs. 3,814 cr to Rs. 7,710 cr from 2017 to 2022, falling to Rs. 4950 cr in 2021. Similarly, its profits increased from Rs. 542 cr to Rs. 1,502 cr from 2017 to 2022 before falling to Rs. 1046 cr in 2021.
Another attractive aspect of this company has been its zero debt. The company also has offered a good ROE and ROCE of 21.6% and 27.8% respectively.
2. GAIL India Ltd
| Face Value (₹): 10 | ROE (%): 20. |
| Market Cap (Cr): ₹64,497 Cr | Net Profit Margin: 13.3 |
| EPS (₹): 27.6 | Current Ratio: 1.08 |
| Stock P/E: 5.28 | Debt to Equity: 0.14 |
| Dividend Yield (%): 6.88 | Promoter’s Holdings (%): 51.9% |
GAIL (India) Ltd. is a government-owned entity with Maharatna status, which not only processes natural gas but also distributes it. Its business segments include natural gas, liquid hydrocarbon, liquefied petroleum gas transmission, petrochemical, city gas distribution, renewable Energy including Solar & Wind, exploration, Petrochemicals, etc.
The company currently operates a network with a natural gas pipeline length of 11,884 kms.
If we take a look at the company’s revenues and profits we observe that GAIL’s revenues have been continuously decreasing since 2019.
Its revenues have increased from Rs. 48,551 cr to Rs. 92,770 cr from 2017 to 2022, falling to Rs. 57,371 cr by 2021. However, its profits have continuously increased from Rs. 3,948 cr to Rs. 12,256 cr from 2017 to 2022 before falling to Rs. 4428 cr in 2021.
The company has a low debt with a debt-equity ratio of 0.14. The company offers good ROE and ROCE of 20.9% and 23.3% respectively.
TRENDING TOPIC
3. Mahanagar Gas Limited (MGL)
| Face Value (₹): 10 | ROE (%): 17.5 |
| Market Cap (Cr): ₹7,322 Cr | Net Profit Margin: 16.8 |
| EPS (₹): 60.4 | Current Ratio: 1.39 |
| Stock P/E: 12.3 | Debt to Equity: 0.03 |
| Dividend Yield (%): 1.29 | Promoter’s Holdings (%): 32.5% |
Founded in 1995, Mahanagar Gas Ltd. is an entity of GAIL and the Government of Maharashtra. As of March 2022, the company’s CNG volume reached 2.134 million metric standard cubic meters per day.
Now let us go through the financials of the company. If we take a look at the company’s revenues and profits we observe that MGL has maintained an impressive increasing trend from 2017 to 2022.
However, its profits fell in 2021, a trend seen across industries due to Covid-19. Its revenues have increased from Rs. 2,033 cr to Rs. 3,560 cr from 2017 to 2022, falling to Rs. 2,152 cr in 2021.
Similarly, its profits increased from Rs. 393 cr to Rs. 597 cr from 2017 to 2022 before falling to Rs. 619 cr in 2021. Another attractive aspect of this company has been its zero debt.
The company also has offered a good ROE and ROCE of 17.5% and 23.2% respectively.
4. Gujarat Gas Ltd
| Face Value (₹): 2 | ROE (%): 25.6 |
| Market Cap (Cr): ₹30,809 Cr | Net Profit Margin: 7.88% |
| EPS (₹): 18.7 | Current Ratio: 0.55 |
| Stock P/E: 23.8 | Debt to Equity: 0.11 |
| Dividend Yield (%): 0.45 | Promoter’s Holdings (%): 60.9% |
Founded in 1980, Gujarat Gas Company Ltd. (GGCL) was incorporated by Gujarat State Petroleum Corporation for the procurement and distribution of natural gas. The company operates primarily in Gujarat but is still the largest city gas distribution company in India.
Now let us take a look at the financials of Gujarat Gas. Its revenues and profits show a very impressive picture to start with.
Its revenues have continuously increased from Rs. 5092 cr. in 2017 to Rs. 16,456 cr. in 2022 but suffered a fall in 2021 to Rs. 9,854 cr. in 2021.
Its profits, however, are beyond impressive as they increased almost 6 times from Rs. 219 cr. in 2017 to Rs. 1,287 cr. in 2022.
During this period the company has also been able to successfully reduce its revenue and currently has minimal debt with a debt-equity ratio of 0.11.
The prospects of the company get even better when we take a look at its ROE and ROCE which stand at 25.6% and 30.4% respectively. Its shares currently trade at a PE of 23.8.
5. Adani Total Gas Ltd
| Face Value (₹): 1 | ROE (%): 23.0 |
| Market Cap (Cr): ₹322,090 Cr | Net Profit Margin: 16.6% |
| EPS (₹): 5 | Current Ratio: 0.25 |
| Stock P/E: 638 | Debt to Equity: 0.43 |
| Dividend Yield (%): 0.01 | Promoter’s Holdings (%): 74.8% |
Founded in 2004, Adani Total Gas Ltd. is engaged in city gas distribution and is part of the famed Adani Group. The company supplies Piped Natural Gas(PNG) to industrial, Commercial, Domestic (residential), and Compressed Natural Gas (CNG) to the transport sector.
The company operates in the cities of Ahmedabad and Vadodara in Gujarat, Faridabad in Haryana and Khurja in Uttar Pradesh.
Adani Total won gas distribution rights for the cities of Allahabad, Chandigarh, Ernakulam, Panipat, Daman, Dharwad, and Udhamsingh Nagar along with Indian Oil Corporation.
The profits of Adani Total Gas have impressively increased from Rs. 164 cr in 2018 to Rs. 505 cr in 2022. This was despite the company’s revenues growing from Rs. 1,373 cr in 2018 to Rs. 3,038 in 2022 before suffering a fall to Rs. 1,695 cr in 2021.
The company has minimal debt with a debt-equity of 0.25. It has given a good ROE and ROCE of 23% and 24.6% respectively. The company also has a high promoter holding of 74.8%. Its stock however has a very high PE of 638.
ALSO READ
Here is a list of all Gas Distribution Stocks in India
| Name of the Company | MCAP (Rs. crores) |
|---|---|
| Adani Total Gas | 322,090 |
| GAIL (India) | 64,830 |
| Petronet LNG | 33,488 |
| Indraprastha Gas | 24,882 |
| Gujarat State Petronet | 12,858 |
| Mahanagar Gas | 7339 |
| Deep Industries | 632 |
| Deep Energy | 306 |
In Closing
Although the industry has a lot of potential, investors must be wary of the word i.e. electric. When it comes to CNG vehicles, electric vehicles are expected to be its closest competitors in the coming years.
We can already see electric appliances taking over the kitchen in various forms and even replacing the traditional gas stove. Also, let us know what you think about the top gas distribution stocks in India. That’s all for this post, let us know what you think about this industry in the comments below. Happy Investing!
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Aron, Bachelors in Commerce from Mangalore University, entered the world of Equity research to explore his interests in financial markets. Outside of work, you can catch him binging on a show, supporting RCB, and dreaming of visiting Kasol soon. He also believes that eating kid’s ice-cream is the best way to teach them taxes.
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