IGL Q1 FY26: Revenue Up, Profit Margins Under Pressure

Indraprastha Gas Limited (IGL), India’s leading city gas distribution (CGD) company, announced its Q1 FY26 results on 30 July 2025. The quarter reflected a mixed performance, where revenue growth remained strong, but profitability came under pressure due to rising gas costs and a sharp decline in liquefied natural gas (LNG) sales.

IGL’s consolidated revenue for the quarter stood at ₹4,326.75 crore, marking an 11.3% year-on-year (YoY) increase from ₹3,887.52 crore in Q1 FY25. However, Profit After Tax (PAT) came in at ₹429.05 crore, showing a 10.84% YoY decline from ₹481.20 crore a year earlier.

Standalone performance mirrored this trend. The standalone revenue rose 11.29% YoY to ₹4,326.60 crore, while the standalone PAT fell 11.34% YoY to ₹355.94 crore. The decline in profitability highlights margin compression amid higher input costs.

Financial Performance in Detail

The detailed quarterly numbers present a story of volume growth overshadowed by cost pressures.

Consolidated Q1 FY26 vs Q1 FY25

• Revenue from Operations: ₹4,326.75 crore vs ₹3,887.52 crore

• Profit Before Tax (PBT): ₹600.01 crore vs ₹652.67 crore

• Profit After Tax (PAT): ₹429.05 crore vs ₹481.20 crore

Standalone Q1 FY26 vs Q1 FY25

• Revenue from Operations: ₹4,326.60 crore vs ₹3,887.52 crore

• Profit Before Tax (PBT): ₹601.82 crore vs ₹654.52 crore

• Profit After Tax (PAT): ₹355.94 crore vs ₹401.45 crore

While revenue growth crossed 11%, the double-digit drop in PAT demonstrates that IGL’s cost base increased faster than its sales growth, primarily due to higher gas procurement expenses and lower high-margin LNG volumes.

Key Highlights of Q1 FY26

1. Revenue Growth:
   IGL recorded ₹4,326.75 crore in consolidated revenue, reflecting 11.3% YoY growth driven by consistent CNG and PNG demand in the Delhi NCR region.

2. Profitability Decline:
   PAT dropped 10.84% YoY, primarily due to rising gas costs, operational expenses, and a sharp 56% decline in LNG volumes, which carry higher margins than regular CNG and PNG sales.

3. Cost Pressures:
   Gas procurement costs rose significantly, squeezing margins. EBITDA per SCM fell compared to last year, while EBITDA margins dropped to around 13% from 17% a year ago.

4. Standalone and Consolidated Trends:
   Both standalone and consolidated figures reflect the same pattern—healthy revenue growth but weaker profits, underscoring that cost escalation impacted the entire operation.

Operating Performance: Demand Growth vs Cost Inflation

IGL’s Q1 FY26 operating performance showcased healthy demand trends but was overshadowed by margin compression:

• Gas Sales Volumes:
  Volumes grew approximately 6% YoY, reaching around 830.87 million standard cubic meters (SCM).

• CNG and PNG Growth:
  Strong CNG and PNG volumes helped maintain top-line growth, particularly from the NCR region where urban adoption is high.

• LNG Volumes:
  LNG sales declined 56% YoY, significantly impacting profitability since LNG typically contributes higher margins.

• Cost Dynamics:
  The company faced higher procurement costs due to reduced allocation of cheaper domestic gas (APM gas) and higher reliance on costlier new well gas (NWG). This increased the per-unit cost of sales, resulting in PBT and PAT erosion.

Share Market Performance

IGL’s share price reaction reflected the market’s cautious stance on the earnings:

• On 31 July 2025, IGL opened at ₹206.09 per share.

• Shares later traded at ₹205.05 per share, slipping below the opening price.

• Despite near-term volatility, IGL has delivered 26.11% returns in the last 1 year.

• Over a 5-year horizon, returns stand at 1.26%, while long-term investors since listing have enjoyed 1,014.40% gains.

This reflects strong historical performance, but the latest earnings have injected short-term caution into investor sentiment.

Sectoral Context

IGL’s Q1 FY26 results reflect broader trends in the Indian city gas distribution sector:

1. Gas Allocation Changes:
   Domestic APM gas allocation for CGD companies has reduced, forcing higher reliance on costlier imported gas or new well gas, impacting margins.

2. Peer Performance:
   Many CGD peers also reported weaker profits in recent quarters due to rising input costs and lower LNG offtake.

3. Rising Costs & Volatility:
   Fluctuating global LNG prices and dependency on imports create earnings volatility for city gas distributors like IGL.

Business Model and Expansion

IGL remains a dominant player in India’s CGD sector:

• Operates in Delhi, Noida, Greater Noida, Ghaziabad, and NCR.

• Services over 1.5 million CNG vehicles and 1.2 million PNG households.

• Maintains a robust pipeline network and extensive CNG station infrastructure.

The company is also exploring renewable energy initiatives, including solar projects, to diversify its energy mix and align with India’s clean energy transition goals.

Financial Analysis and Margins

Q1 FY26 shows clear margin compression:

• EBITDA Margin: Fell to ~13% from ~17% in Q1 FY25.

• EBITDA per SCM: Declined due to costlier gas sourcing and lower LNG share.

• Operating Expenses: Increased around 15% YoY, outpacing revenue growth.

Analysts expect margins to normalize if either:

1. Cheaper gas allocations are restored, or

2. IGL is allowed to implement price hikes to offset cost pressures.

Investment Perspective: Risks and Rewards

For long-term investors, IGL remains a structurally strong player in the clean fuel segment. Its urban penetration, pipeline infrastructure, and regulatory support offer significant advantages.

Key Risks:

• Volatility in global gas prices.

• Reduced domestic gas allocations.

• Margin sensitivity to LNG volume fluctuations.

Potential Rewards:

• Consistent demand growth for CNG and PNG in urban India.

• Opportunity for margin recovery with price adjustments.

• Strong brand presence and long-term government push for cleaner energy.

Summary of Q1 FY26 vs Q1 FY25

Conclusion

IGL’s Q1 FY26 results reflect robust top-line growth but profitability challenges stemming from higher gas procurement costs and lower LNG volumes. Revenue grew 11.3% YoY, but PAT declined 10.84%, highlighting margin pressures in the current market environment.

Despite short-term challenges, IGL’s dominant CGD market position, consistent demand growth, and alignment with India’s clean energy goals support its long-term investment potential. Margin recovery will depend on cost stabilization, regulatory approvals, and operational efficiency improvements.

Long-term investors focusing on clean energy infrastructure and urban gas adoption may find IGL a resilient play, albeit with the need for patience during margin recovery.

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