Citi maintains bullish outlook on Indraprastha Gas as subsidiary Maharashtra Natural Gas prepares to list

Indraprastha Gas was jointly promoted by GAIL and BPCL to set-up city gas distribution network in National Capital Region.

Shares of Indraprastha Gas Ltd (IGL) gained in the morning session on January 7, after the Bharat Petroleum Corporation Ltd (BPCL)'s board of directors gave its nod for the listing of Maharashtra Natural Gas (MNGL). International brokerage Citi Research gave the listing plans a thumbs up, reiterating its bullishness on IGL shares.

Maharashtra Natural Gas, a joint venture between BPCL, GAIL (India), and IGL, is preparing to list through an Initial Public Offering (IPO) of over Rs 1,000 crore, with the board of BPCL having given its in-principle nod for the issue, a company filing by the oil marketing company said on January 6.

BPCL and GAIL hold 22.5 percent stake in MNGL, while IGL holds 50 percent stake, and the Maharashtra Industrial Development Corporation (MIDC) has a 5 percent in the joint venture.

At 9.20 am, IGL shares were trading at Rs 428.95, higher by 1.2 percent, while BPCL and GAIL (India) were both higher by 1.3 percent at Rs 288.6 and Rs 187, respectively.

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Citi Research reiterated its bullish 'buy' call on IGL shares, with a price target of Rs 450 per share. This indicates an upside of around six percent from the previous session's closing price.

The listing could help unlock value for the firm, added the brokerage. Citi Research added that IGL's two joint ventures, MNGL and Central U.P. Gas Limited (CUGL), could together contribute Rs 56 per share to IGL's share price target of Rs 450 each. Of this, MNGL's contribution would be Rs 45 per share.

Citi Research also said that the listing could also help unlock value in GAIL's investments in unlisted city gas distribution players. This listing could also contribute Rs 12 per share in value to GAIL's share price, leading to a price target of Rs 280 apiece.

Earlier, domestic brokerage Emkay Global had noted while the possible listing of Maharashtra Natural Gas could unlock value, more visibility, on MNGL's earnings trajectory following the APM cut is awaited.

Indraprastha Gas was jointly promoted by GAIL and BPCL to set-up city gas distribution network in National Capital Region. Over the past two decades, it has expanded into one of largest CGD companies in India.  Including its 50 percent subsidiaries Maharashtra Natural Gas (MNGL) and Central UP Gas (CUGL), it operates in 19 geographic areas.

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