Indraprastha Gas Ltd: An investment pick

It is time I picked a company for those investors who are not greedy, and are looking for a conventionally good stock with good fundamentals to keep their money in. For the same purpose, I pick Indraprastha Gas Ltd.

Indraprastha Gas is yet to turn in its Q4 and FY09 results. For those who know nothing about this company, Indraprastha Gas Ltd (IGL) is a joint venture of Bharat Petroleum Corporation Ltd (BPCL) and the Gas Authority of India Ltd (GAIL). It has 170 CNG stations, and supplies cooking gas to more than 1.7 lakh households in the capital.

That said, the company pays good dividends as well; paid Rs. 4 per share last year. The share price had a low of Rs 92 on 27 Oct 08 and a high of 132 on 22 May 08. It currently trades at Rs 118.70 per share. If you look at the current market volatility, this stock is very stable. The EPS has risen steadly YoY. Have a look at this:

EPS over the years:

March '05: Rs. 6.62
March '06: Rs. 7.58
March '07: Rs. 9.85
March '08: Rs. 12.46
March '09: ?

Reserves over the years:

March '05: Rs. 172.4 crores
March '06: Rs. 238.6 crores
March '07: Rs. 327.5 crores
March '08: Rs. 436.4 crores
March '09: ?

With focus shifting from petrol/diesel to CNG and other economical eco-friendly gases, companies like IGL have a lot to win over the table. The company has no debt. And that is good, indeed.

Coming over to the valuations, in 2003, the company offered shares in the band of 40-48 rupees. That's six years ago, and the EPS and the reserves of the company have increased as already discussed above. I would recommend the following:

1) The stock is only slightly expensive at P/E of 12.88. FIIs hold 17% in this company - God forbid if they have to sell out of compulsion!
2) If you think the market is not going to fall big time now, you may buy this stock at the current levels with a long term view.
3) If you're sceptical about the market at the moment, you can wait for the company to declare its results in Jun '09, which would be a good time to buy since you would have a better view at the way the company proceeded in this (past) quarter which is seen to be the worst for many.
(even though this stock is not volatile, you may pick it at Rs. 90 or thereabouts as seen in Oct 08 crash, in case the market crashes)
4) The negative: there is relatively less upside in the short term. This one's a really slow moving stock, with very less volatility - at least that's how it has behaved till now:


So, in either case, keep an eye on this one. It's one of the safer bets in these very difficult times.