IGL Q1 Results: Profit drops 11% YoY to ?428 crore despite jump in revenue. Details here

Indraprastha Gas Limited (IGL), a leading player in the city gas distribution sector, reported its financial results for the first quarter (Q1) of the fiscal year, showcasing a mixed performance. The company’s net profit declined by 11% year-on-year (YoY) to ₹428 crore, even as its revenue witnessed a notable increase. This juxtaposition highlights the challenges faced by IGL amid rising costs and evolving market dynamics.

Revenue Growth Amidst Challenging Environment

IGL’s total revenue for Q1 stood at ₹2,105 crore, marking a substantial increase of approximately 14% compared to ₹1,845 crore in the same quarter last year. The growth was largely driven by increased sales volumes and a rise in the average selling price of compressed natural gas (CNG) and piped natural gas (PNG), reflecting higher demand in its operating regions of Delhi, Noida, Ghaziabad, and Greater Noida.

The surge in revenue underscores IGL’s continued expansion in the city gas distribution segment, driven by the rising adoption of cleaner fuels in transportation and household consumption. However, this revenue growth has not translated proportionately into profits, hinting at rising costs and margin pressures.

Profit Decline Despite Higher Revenue

Despite the revenue growth, IGL’s net profit contracted to ₹428 crore in Q1FY26 from ₹481 crore in Q1FY25. Analysts attribute this decline primarily to increased operating expenses, including raw material costs, mainly natural gas prices, which have surged globally. Additionally, higher administrative and employee expenses have impacted profitability.

IGL’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margin contracted by 220 basis points to 25.8%, compared to 28% in the year-ago period, highlighting the margin pressure from rising input costs.

Management Commentary

In the earnings call, IGL’s management acknowledged the challenging cost environment but remained optimistic about long-term growth prospects. “While the current quarter saw an impact on profitability due to elevated natural gas prices and operational expenses, our focus remains on expanding our footprint and improving operational efficiencies,” said the CFO. The company also reiterated its commitment to sustainable growth by promoting cleaner energy and enhancing infrastructure.

Market Context and Industry Trends

The energy sector, especially city gas distribution companies like IGL, continues to face volatility due to fluctuating natural gas prices and regulatory changes. Global geopolitical tensions and supply-demand imbalances have kept gas prices elevated, squeezing margins for distributors.

However, the push from government policies promoting cleaner fuels and expanding piped natural gas connectivity provides a robust demand backdrop. IGL, being a market leader in the National Capital Region (NCR), is well-positioned to capitalize on increasing urban fuel demand, including in the transport sector where CNG vehicles are gaining traction.

Analyst Views

Market analysts have given a cautious outlook on IGL’s near-term profitability but remain positive on its medium to long-term potential.

Sonal Mehta, Senior Analyst at Equity Insights, stated, “IGL’s Q1 results reflect margin pressure from commodity inflation, which is a concern. However, the strong volume growth and government support for cleaner fuels could drive sustainable revenue growth. Investors should watch for margin recovery in subsequent quarters as input prices stabilize.”

Another analyst, Rajiv Bhatia of Capital Market Advisors, added, “The dip in profit despite revenue growth is a classic example of margin compression faced by energy distributors. IGL’s expanding customer base and infrastructure investments, however, provide a cushion against near-term challenges.”

Investor Outlook

Investors reacted to the mixed results with cautious optimism. The stock price saw mild volatility post-results announcement but retained underlying support due to the company’s strong market position and growth potential.

For long-term investors, IGL represents a stable play in the clean energy transition story, with its increasing penetration in household PNG and CNG segments expected to fuel steady volume growth. Short-term investors, however, need to be wary of margin risks driven by global commodity prices and potential regulatory shifts.

IGL’s Q1FY26 results present a nuanced picture—revenue growth accompanied by profit contraction highlights the cost pressures the company faces in the current market scenario. While operating expenses and raw material inflation dented margins, the company’s strategic focus on expanding gas distribution infrastructure and capitalizing on the green energy trend remains intact.

Going forward, the key to IGL’s performance will be its ability to manage input costs, improve operational efficiencies, and leverage government policies promoting cleaner fuel adoption. Investors and market watchers will closely track how these factors unfold in the upcoming quarters.