Court Bans Luxury Diesel Vehicles in Delhi. IGL Shares Surge
Shares of Indraprastha Gas (IGL) jumped nearly 5 per cent on hopes that the Supreme Court’s crackdown on large diesel vehicles will boost demand for compressed natural gas (CNG). Indraprastha Gas sells natural gas in the national capital region.
The Supreme Court today banned the registration of diesel SUVs and cars above 2000cc in the national capital till March 31. The top court also ordered all taxis in the national capital to switch to CNG by March 31.
The focus on controlling air pollution in Delhi augurs well for the margin and sales volume of Indraprastha Gas, Nomura said in a note to clients.
Indraprastha Gas’ volume growth has been in the range of 1-3 per cent in last two years compared to an average of 20 per cent in the previous five years, the brokerage said.
However, after the government’s crackdown on diesel vehicles, its sales volume may improve to 8-9 per cent in FY2017, it added.
Further, the brokerage says that the government may cut excise duty on CNG in a move to curb pollution, which could be the next catalyst for Indraprastha Gas.
Nomura expects earnings of Indraprastha Gas to rise 22 per cent in FY17 due to revival in volumes and margins. The brokerage maintains a “buy” call on Indraprastha Gas, increasing the target price to Rs 600, from Rs 515 earlier.
As of 12.08 p.m., Indraprastha Gas shares traded 4.58 per cent higher at Rs 490 apiece compared to 0.85 per cent gain in the broader Nifty.