Indraprastha Gas Limited

There has been a very good discussion about IGL on Safal Niveshak forum. I personally have seen this company grow in Delhi NCR region in last 10 years, and strongly believe in the future of the business. Yes, it might be my bias, but then I'm trying to be rational and trying to wait until the price comes down below my fair price as i calculate.

Here's my IV calculation for IGL:

1. Graham's Hidden bond value of Rs 132 per share

2. Historical P/E based value of Rs 190

3. Graham's modified number based value of Rs 261

4. Earning Power Value of Rs 230 taking Rs 30 per share of 3 year average FCFF and 2% perpetual growth rate

5. Half PEG bargain value of Rs 200 a share taking 18% growth rate from past 5 years

Let's take a margin of safety of 30%. Then, if we take into account all the above valuations, fair price comes at Rs 142. However, considering that IGL is a fast growing company with huge prospects, I'd not give much weight-age to Graham's Hidden Bond value. Then, the fair price rises up to Rs 155

Now, IGL stock has formed a very strong base at about Rs 230 after dipping sharply to Rs 200 on news of pricing regulations. Considering new changes in LPG subsidy, etc, I believe that the stock will trade higher from here on, and possibly again revert back to Rs 350+ prices.

Yes it might be my bias again, but I've started buying in small quantities at current price of Rs 260 or so. Yes, small quantities, and I'm trying hard to wait for this rally to collapse and general prices to come down and IGL trade again at sub Rs 240 levels.

Here's my purchase so far. Yes, I "traded" IGL in the past. I really wished I bought major quantities at Rs 100 in 2008 :-(