Mahanagar IPO at reasonable valuation, see vol growth: Jal Irani

Mahanagar Gas' IPO has opened for subscription today, with price band at Rs 380-421. Jal Irani, Oil and Gas Analyst, Edelweiss Financial Services feels that the company's issue is at reasonable valuation.

In an interview to CNBC-TV18, he says the issue is offered at a 30 percent discount compared to Indraprastha Gas on a PE basis and is too steep compared to the latter.Irani adds that the company's business gives high-returns with entire city gas distribution looking very attractive.

According to Irani, Mahanagar witnessed a revival in its margins in FY15. He says that the margins will remain almost flat going forward but expects a healthy volume growth. Mahanagar has a monopoly in Mumbai for gas distribution for cars, domestic and industrial gas.

Below is the verbatim transcript of Jal Irani’s interview with Ekta Batra & Reema Tendulkar on CNBC-TV18.Ekta: What is your sense on Mahanagar Gas? Is it subscribed or not?A: We like the entire city gas industry from more a structural revival perspective and also because these are very high franchise cosy monopoly businesses earnings very high return, in fact the valuations overall are very reasonable and the two high franchise companies in this industry are Mahanagar Gas and Indraprastha Gas, so not only Mahanagar Gas but the entire industry is looking attractive.