Shares of gas distribution companies such as Indraprastha Gas, Mahanagar Gas, and Gujarat Gas fell sharply in early trade on Monday following the reduction of Administered Price Mechanism (APM) allocation for the second straight month. “Not only does this deal a severe blow, but now market is likely to build in more cuts,” Nuvama Institutional Equities analysts said.
They added that the recent APM de-allocation will affect 9–11 per cent of overall volumes due to replacement of cheap gas by costlier LNG, HPHT and new-well gas. Shares of city gas companies have been downgraded by analysts.
Global brokerages such as Jefferies and JP Morgan have also downgraded city gas stocks at a slashed target price. Jefferies has downgraded MGL and IGL to underperform, while JP Morgan has devalued MGL to neutral from overweight and IGL underweight.
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Nuvama has downgraded IGL, MGL to reduce rating after lowering near-term long-term margin and volume forecasts due to twin APM de-allocation. The brokerage has also downgraded GGL to ‘hold’ as it is least hurt by APM de-allocation due to lower priority sector volumes.
Indraprastha Gas (IGL) shares plunged 18.73 per cent to ₹329.80 on the NSE as at 10 am. Mahanagar Gas (MGL) stock fell 13.35 per cent to ₹1,137.40. Gujarat Gas (GGL) stock slumped 6.44 per cent on the NSE to trade at ₹454.70 as at 9.59 am.
Adani Total Gas (ATGL) shares declined 3.28 per cent to ₹661.45. ONGC shares were down 1.08 per cent to trade at ₹248.10.
GAIL shares declined 1.21 per cent to ₹186.60.