Mahanagar Gas (MGL) is one of India's largest players in the city gas distribution (CGD) business, which has concentrated its operations in Mumbai, adjoining areas and Raigad district in Maharashtra. Incorporated in 1995, MGL has become the sole authorised distributor of compressed natural gas (CNG) and piped natural gas (PNG) in Mumbai & its adjoining areas and Raigad district in Maharashtra with volume of 2.4 mmscmd in FY16.

ICICIdirect has recommended 'Subscribe' to IPO of Mahanagar Gas. Commenting on the investment rationale, the stock broker said, ''MGL presents an opportunity to have an exposure to the robust business model and growing CGD space. We believe the company's strong CGD network offers good demand potential due to lower CNG, residential PNG penetration and increased usage of gas for industrial volumes. The strong financial position provides MGL with financial flexibility to expand its network in its existing markets and enter new markets. The proposed issue price band of Rs 380-421 implies a P/E of 11-12.2x (12.1-13.5x on a diluted basis) on FY16 earnings, which is at a discount to its benchmark peers. We recommend that investors SUBSCRIBE to the IPO.''

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