Ellenbarrie Industrial Gases Ltd. (Avoid)

Highlights

Ellenbarrie Industrial Gases Limited (EIGL), incorporated in 1973, is one of the oldest and largest wholly owned industrial gases companies in India, with rich legacy of 50 years and has been one of the key suppliers to India’s space and defence program. EIGL is the 1^st company to set up a hydrogen electrolyzer in Eastern India and is the 3^rd highest number of transport tankers, cylinders, and customer installations in India.

They are an important manufacturer of industrial gases in East and South India as well as market leader in West Bengal, Andhra Pradesh and Telangana in terms of installed manufacturing capacity as of FY25.

EIGL manufactures a wide variety of industrial gases including oxygen, nitrogen, argon, hydrogen, carbon dioxide through which its services steel, pharmaceuticals, chemicals, healthcare, infrastructure, railways, beverages, energy, etc. and offer dry ice, firefighting and liquid petroleum gas, medical oxygen, synthetic air, welding mixtures, speciality gases.

They offer turnkey solutions involving medical gas pipeline systems assisting healthcare facilities in designing, installing, commissioning, operation and maintenance of pipeline systems and supply products and medical equipment to healthcare facilities including anaesthesia workstation, spirometers, ventilators, sterilizers, bed-side monitors, and lung diffusion testing machines.

As of FY25, EIGL sold its products to one of the highest number of customers out of any Indian gas company, with limited concentration risk and a highly diversified customer base including (i) bulk customers (account 2/3^rd of the sales) for liquified gases through cryogenic tankers, (ii) package customers for compressed gases in cylinders (iii) onsite customers.

Out of the total proceeds of Rs. 8,525 mn, Rs. 2,100 mn would be utilised for repayment/ prepayment, in full or in part, of certain outstanding borrowings availed by the company, Rs. 1,045 mn would be utilised for setting an air separation unit at Uluberia-II plant with 220 TPD capacity, Rs. 855 mn would be utilised towards general corporate purposes and ~Rs. 4,525 mn would go towards existing selling shareholders of the company.

Key Highlights

• The Indian market size of industrial gases is USD 13.1 mn in FY24 and demand grew at a CAGR of 6.3 pct during FY18-FY24, projected for USD 17.5 mn by FY28 with CAGR of 7.5 pct. In FY24, oxygen, nitrogen, hydrogen, carbon dioxide, argon accounted for 35.9 pct, 23.6 pct, 16.2 pct, 11.2 pct, 10.2 pct market share in India.   
• They operate oxygen plants in India with capacity of 1,250 TPD as of FY25. They have recently undertaken expansion of 170 TPD at the site of a major steel manufacturing company in Kharagpur w.e.f from Jan’25 and propose to undertake capacity expansion through liquid ASU and cylinder filing station commissioned in West Bengal/ North in Oct’25/ Dec’ 2025 with capacity of 250 TPD/ 220 TPD.
• EIGL is one of the few companies with dedicated plants for each type of gas delivery system – pipeline, merchant liquid and cylinder filling with a wide network of 39,560 cylinders and 112 cryogenic tankers in circulation as of FY25.
• EIGL operates 9 facilities across East, South and Central India, 5 in West Bengal, 2 in Andhra Pradesh, 1 in Telangana and 1 in Chhattisgarh as of FY25. These facilities include 3 bulk manufacturing and 2 standalone plants with cylinder filling stations, 2 onsite pipeline facilities in Kharagpur, 1 onsite facility in Kurnool, and 1 onsite facility in Nagarnar.
• They are present across multiple modalities of supply, onsite, bulk and packaged, offering products through combination of pipelines, cryogenic tankers, cylinders with robust distribution network and the 3^rd highest number of transport tankers, cylinders and customer installations in India. In FY25, they catered 1,829 customers.
• EIGL Key strategies includes (i) Expanding product portfolio, particularly speciality gases and targeting additional end-use industries. (ii) Initiate plant manufacturing operations to compliment project engineering capabilities. (iii) Expand manufacturing capacity in North & West India to attain Pan-India presence (iv) Create a healthy mix of Merchant and Onsite business. (iv) To grow through strategic acquisition and alliances.
• Their sales comprise sale of gases and project engineering services. As of FY25, they had 328 bulk customers with average contractual tenure of 5 years. In FY25, they had market share of ~2.85 pct revenue terms and sales rose to Rs. 3,124.83 mn for FY25 from Rs.2,051.07 mn for FY23 at CAGR of 23.43 pct. Sales from repeat customers contributed to 85.68 pct/92.22 pct/90.70 pct in FY25/FY24/FY23.

Key Risk

• The business is vulnerable as demand of products are highly reliant over demand for certain end-use industries such as infra, chemicals, pharma, oil & gas, etc., and is highly capital intensive which may necessitate incurring indebtedness.

• Given the hazardous nature of industrial gases, the company’s manufacturing process involving manufacturing and transportation of these gases is subject to inherent risks.
• Earlier EIGL was voluntarily delisted from Calcutta stock exchange.

Financial Performance

Peer Comparison based on FY25 Financials

Valuation

Ellenbarrie Industrial Gases Ltd (EIGL) is one of India’s oldest industrial gases companies, with over 50 years of legacy. Operating one of India’s largest oxygen plants (1250 TPD), it held a 2.65 pct market share by sales. At the upper end of the price band of Rs. 400 the issue is priced at a PE of ~67.7x its FY25 earnings. The issue looks fully priced. One can avoid this issue.

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