Could Indraprastha Gas (IGL) be nearing a turning point? The stock has faced pressure in recent months as higher gas costs, a weaker rupee and concerns over Delhi’s electric vehicle policy weighed on investor sentiment.

The brokerage house, Motilal Oswal, in its latest report sees the possibility of a recovery. According to the brokerage report, IGL’s margins may have reached their lowest point, while growth outside Delhi continues to provide support.

The brokerage has retained its ‘Buy’ rating and set a target price of Rs 195 per share. This implies an upside of around 27% from the current levels.

Let’s take a look at the key reason behind this bullish call and the rationale behind it –

IGL’s shares have corrected around 10% over the past four months. The main pressure has come from higher input costs.

According to the Motilal Oswal report, Brent crude averaged about $93 a barrel during the first half of FY27, compared with $69 a barrel in FY26. At the same time, the Indian rupee weakened to around Rs 95 against the US dollar from Rs 88.4 earlier.

This combination squeezed IGL’s margins. But Motilal Oswal believes the worst could be over.

Motilal Oswal noted, “Q1FY27 EBITDA margin of Rs 3.4/scm marks the trough.”

The brokerage expects recent price increases for compressed natural gas (CNG) and piped natural gas (PNG) to support margins from the second quarter of FY27.

A recent Rs 3.9 per kg increase in CNG prices could also provide an estimated Rs 1.4-1.5 per standard cubic metre boost to EBITDA, according to the report.

IGL’s exposure to Delhi remains an important issue. The city’s Electric Vehicle Policy 2.0 and subsequent directions from the Commission for Air Quality Management (CAQM) are expected to gradually reduce the use of CNG vehicles.

From January 2027, new registrations of several categories of petrol, diesel and CNG light goods vehicles in Delhi will be restricted.

As per the brokerage report, “We estimate 0.6% p.a. CNG volume impact from 3-Wheeler electrification.”

Three-wheelers account for around 6% of IGL’s overall CNG volumes, and the brokerage estimates that the transition to electric vehicles could affect volumes gradually rather than cause a sudden decline.

However, the report flags the longer-term policy shift towards electric mobility as a structural risk.

Motilal Oswal in its report noted that CNG volumes outside the Delhi National Capital Region (NCR) have grown more than 20% year-on-year in recent quarters. These markets now account for around 15-20% of IGL’s total volumes and contribute nearly half of incremental sales.

Motilal Oswal report added, “CNG volume growth remains broad-based—ex-Delhi NCR, consistently rising 20%+ YoY.”

Within Delhi too, passenger vehicle demand remains relatively resilient. Excluding buses, CNG volumes grew around 11% year-on-year in the first quarter of FY27.

The stock is trading at around nine times estimated FY28 earnings, excluding the value of its joint ventures, according to Motilal Oswal.

The brokerage expects volumes to grow at a 7% compound annual growth rate between FY26 and FY28, while EBITDA and profit after tax could grow at around 14% annually.

The report noted, “We value IGL at 13x Dec’27E SA P/E and add Rs 44/share as the value of JVs to arrive at our target price of Rs 195/share.”