IGL, MGL: City gas distribution firms shares in focus for 2nd straight day; check out the reasons
IGL, MGL share price: In the previous session, Mahanagar Gas saw a steep cut of over 15 per cent as Citi downgraded the stock to sell with a target price of Rs 1,405.
IGL, MGL share price: Shares of city gas distribution (CGD) companies in Thursday’s session (March 7) traded mixed as both companies, Mahanagar Gas (MGL) and Indraprastha Gas (IGL) announced a cut in the price of CNG, or compressed natural gas.
On the heels of Mahanagar Gas slashing the CNG rates, Indraprastha Gas also announced on Wednesday a reduction in CNG rates in the Delhi/NCR region by Rs 2.5 per kg, with effect from today.
Mahanagar Gas, at the time of writing the copy, had pared some of the losses and was up by a marginal 0.12 per cent to Rs 1,330.95 per share. In the previous session, the Mumbai-based company saw a steep cut of over 15 per cent as Citi downgraded the stock to sell with a target price of Rs 1,405. The downgrade largely came as the Petroleum Ministry maintained that the CGDs are not transferring the benefits these companies avail of from the centre to consumers.
Citi says this comment could translate into renewed concerns about exclusivity and margins.
JM Financial, in its March 6, 2024 report, stated that the sharp negative reaction in share prices of CGD companies (particularly for MGL) seems to be an overreaction to the oil minister's statement that CGD companies are making far higher returns on capital employed (ROCEs), comments regarding open access regulations for CGD companies and that gas should be made available to customers at affordable prices. Besides, PNGRB’s notification that infrastructure exclusivity for MGL has ended in April 2021 for the Mumbai and Greater Mumbai geographical areas, too, weighed on sentiment.
Further, the brokerage added that it believes the issue of open access was resolved on November 21 when PNGRB notified the open access regulation and disallowed existing outlets of OMCs from competing with CGD companies (to incentivise the creation of additional infrastructure). Hence, this significantly reduced the competitive threat from OMCs for IGL and MGL’s key CNG businesses from open access regulations.
Meanwhile, shares of IGL traded with a cut of over 1 per cent at Rs 425.55 at the time of writing this report. The stock hit the day's low of Rs 411, down over 4 per cent.
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