Shares of Indraprastha Gas were tumbling on Friday after analysts lowered expectations for the stocks in light of a new draft electric vehicle policy for ride-hailing and delivery services by the Delhi government.

What Happened: Jefferies downgraded the stock to “hold” instead of “buy”, and its target price has been reduced to ₹465 from ₹565.

This downgrade was due to Jefferies estimating a potential 30% drop in Indraprastha’s volumes, starting in the fiscal year 2025. The brokerage said new general advisories are unlikely to make up for the slowdown in the National Capital Region (NCR), which accounts for 88% of Indraprastha’s volumes.

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Additionally, Jefferies has lowered earnings per share forecasts for financial years 2025 and 2026 by 7%-9% and has adjusted the valuation multiple because of increasing electric vehicle-related risks.

Why It Matters: Around 30% of IGL’s volumes come from ride-hailing services like Uber, Ola and e-commerce deliveries. Uber, for example, has already ordered 25,000 EVs from Tata Motors in early 2023. Around 15% of Indraprastha’s volumes come from Delhi Transport Corporation (DTC) buses and three-wheelers, which also face EV-related risks because of the purchase of 5,500 EV buses and favourable economics for three-wheel EVs, the brokerage said.

Although the company’s expansion into new areas and possible acquisitions offer growth prospects, they may not fully offset the slowdown in the NCR, according to Jefferies.

The Delhi government’s proposed EV transition policy for ride-hailing platforms, delivery services and e-commerce firms is awaiting approval from the Lieutenant Governor. This policy outlines a gradual shift to electric vehicles, requiring 50% of new purchases to be electric within three years and 100% within five years from the date of notification. By April 1, 2030, all ride-hailing platforms must operate an all-electric fleet if the policy is approved.

Price Action: Indraprastha’s share price plunged 10.12% to ₹411.35 in morning trade on Friday.

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