Shares of Indraprastha Gas and Mahanagar Gas fell by 18 percent, CNG prices may increase!

IGL-MGL Share Crash: Shares of CNG-PNG supplying city gas companies listed in the stock market, Indraprastha Gas, Mahanagar Gas and Gujarat Gas have fallen by 18 percent. The reason is that the government has reduced the gas allotted to these companies on priority basis by 20 percent for the second consecutive month. On the one hand, this is going to increase the costs of these companies drastically, on the other hand, soon these companies will have to pass the burden on their customers. According to brokerage house Citi, city gas companies may have to increase the price of CNG by 10 percent or Rs 7 per kg.

Shares fell by 18 percent

As soon as the market opened on Monday, November 18, 2024, the stock of Indraprastha Gas Limited fell by almost 20 percent to Rs 324.70, which had closed at Rs 405.80 in its first session. Currently the stock is trading at Rs 330.45 with a decline of 18.63 percent. Similarly, the stock of Mahanagar Gas also slipped by 18.08 percent to Rs 1075.25. At present, the share of Mahanagar Gas is trading at Rs 1132.10 with a decline of 13.75 percent. Gujarat Gas shares also fell by 9 percent to Rs 442.50. At present, the share of Gujarat Gas is trading at Rs 455.95 with a decline of 6.18 percent.

Why did IGL and MGL shares fall?

The government has reduced the quantity of gas allotted to city gas distribution companies on priority basis by 20 percent from November 16, 2024. According to the policy guidelines of the Ministry of Petroleum and Natural Gas, there is a provision to allocate domestic natural gas on APM to the priority segments of city gas distribution which include CNG and domestic PNG. In a regulatory filing with the stock exchange, Indraprastha Gas said, with effect from November 16, 2024, the allocation of gas for CNG (Transport) has been reduced by 20 per cent as compared to the earlier APM allocation. The company said that this is a big cut and it can also affect the company’s profits.

Brokerage house reduced targets

JP Morgan has reduced the target price of Mahanagar Gas shares to Rs 1300 and changed its stance from overweight to neutral, while the target price of Indraprastha Gas has been reduced to Rs 343. According to JP Morgan, companies will have to look at other gas options at higher prices, which will reduce their margins. According to City, due to reduction in excise duty after reduction in gas allocation, City Gas companies will have to increase the prices of CNG by Rs 7 per kg, which is a big challenge. Jefferies has reduced the target price of Mahanagar Gas shares to Rs 1130 and that of IGL to Rs 295.

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