Mahanagar Gas, IRM Energy Share Prices Fall After Regulator Mulls Exclusivity Removal

Shares of Adani Total Gas Ltd., Mahanagar Gas Ltd., IRM Energy Ltd. and other city gas distribution companies tumbled in early trade on Friday after the sector regulator proposed to remove exclusivity to existing operators in 73 networks across India.

The proposed notice from the Petroleum and Natural Gas Regulatory Board of India implies no exclusivity to existing operators. The open access could allow other entities to enter and provide CNG services in the named regions.

The Board has announced meetings from Nov. 4 to Nov. 20, 2024, inviting stakeholders to discuss competition in the Indian CGD sector. The outcomes may lead to CGD networks being classified as common or contract carriers.

The notice and the potential declaration stands negative for gas companies like Gujarat Gas Ltd., Mahanagar Gas and Indraprastha Gas Ltd. Declaring networks as common carriers would lead to higher competition in the space and could reduce profits of the companies. It could also potentially increase regulatory burden on operators and cause delays in network expansion. However, any regulatory action can take significant time to materialise.

On the other hand, higher competition could also lead to lower prices for consumers, and easier infrastructure access to other gas suppliers could lead to higher gas penetration in the country. The declaration could also provide equal opportunities to all entities in the space

Shares of Adani Total Gas and Mahanagar Gas dropped over 3%, while IRM Energy lost 2%. Indraprastha Gas, GAIL Ltd. and Gujarat Gas share prices fell over 1%.

Meanwhile, the benchmark Nifty 50 was trading 0.8% lower. A broader gauge of oil and gas companies represented in the BSE Oil & Gas index declined by 1.3%.

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