Indraprastha Gas, Mahanagar Gas Share Prices Lowest Since June As GAIL Cuts Domestic Gas Allocation

Indraprastha Gas Ltd. and Mahanagar Gas Ltd.'s share prices fell sharply on Friday, after they informed the exchanges that there had been a major reduction in domestic gas allocation to the companies, effective Oct. 16, 2024.

"The revised domestic gas allocation to company is approximately 21% lesser than previous allocation," an exchange filing by Indraprastha Gas said, adding that the company is in discussion with key stakeholders to minimise the impact.

Mahanagar Gas' exchange filing also said allocation to the company for CNG (Transport) has been reduced by 20%, effective Oct. 16, 2024, compared to previous average quarterly APM allocation.

Both the companies said this will have an adverse impact on the profitability of them.

"To bridge this shortfall, the company is exploring options of sourcing gas through domestically produced High Pressure High Temperature gas, New Well/Well Intervention gas from ONGC and benchmark-linked long-term gas contracts, so as to continue to provide gas to its customers with price stability," MGL said.

In its recent report, Citi Research had said that due to the move Indraprastha Gas and Mahanagar Gas may be particularly vulnerable, given their heavy reliance on CNG.

This reliance on higher-priced gas puts pressure on margins and could prompt a CNG price hike, potentially affecting sentiment around volume growth in the CNG segment, it said.

Indraprastha Gas' share price fell as much as 12.92% to Rs 439.35 apiece, the lowest level since June 5. It was trading 10.5% lower at Rs 451.15 apiece, as of 11:35 a.m., compared to a flat NSE Nifty 50.

The stock has risen 7.8% on a year-to-date basis and 17.98% in the last 12 months. Total traded volume so far in the day stood at 5.89 times its 30-day average. The relative strength index was at 21.45, indicating that the stock may be overbought.

Out of the 36 analysts tracking the company, 13 maintain a 'buy' rating, 10 recommend a 'hold' and 13 suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 18.6%.

MGL scrip fell as much as 14.7%, the lowest level since June 27, before paring loss to trade 12.12% lower at Rs 1,538 apiece, as of 11:40 a.m. This compares to a flat NSE Nifty 50.

It has fallen 12.2% on a year-to-date basis, but risen 29% in the last 12 months. Total traded volume so far in the day stood at 5.12 times its 30-day average. The relative strength index was at 25.57, indicating that the stock may be overbought.

Out of 33 analysts tracking the company, 17 maintain a 'buy' rating, six recommend a 'hold' and 10 suggest 'sell', according to Bloomberg data. The average 12-month analysts' consensus price target implies an upside of 21.6%.