BAJAJ BROKING

Notification
No new Notification messages
Inventurus Knowledge Solutions IPO is Open!
Apply for the Inventurus Knowledge Solutions IPO through UPI in just minutes.
Open a Free Demat Account
Pay ZERO maintenance charges for the first year, get free stock picks daily, and more.
Trade Now, Pay Later with up to 4x
Never miss a good trading opportunity due to low funds with our MTF feature.
Track Market Movers Instantly
Stay updated with real-time data. Get insights at your fingertips.

IGL and MGL Share Price Hit After APM Gas Allocation Cut

Listen to our Podcast: Grow your wealth and keep it secure.

0:00 / 0:00

Synopsis:

Indraprastha Gas and Mahanagar Gas have reported a 21% reduction in APM gas allocation, impacting shares of city gas distributors. Potential price hikes could follow as companies explore alternative gas sources to maintain profitability and supply.

IGL and MGL news today

On October 17, city gas distributors Indraprastha Gas (IGL), Mahanagar Gas (MGL), and Gujarat Gas faced a significant hit to their share prices. The drop came after reports confirmed a 21% reduction in the domestic gas allocation through the Administered Price Mechanism (APM). The APM gas is a key resource for supplying domestic Piped Natural Gas (PNG) and Compressed Natural Gas (CNG) for transport, sectors which are given priority by the government.

INDRAPRASTHA GAS LTD

Trade

392.25.10 (1.31 %)

Updated - 13 December 2024
392.85day high
DAY HIGH
378.60day low
DAY LOW
4269375
VOLUME (BSE)

Reduction in gas allocation and its immediate effects

The reduction in APM gas allocation by 21% is expected to severely impact the profitability of city gas distributors. IGL and MGL, two of the largest players in the sector, have announced that the cut became effective from October 16, 2024. This reduction comes as part of a communication from GAIL India, the nodal agency overseeing gas allocation in the country. GAIL has confirmed that IGL and MGL will receive less domestic gas, forcing these companies to rely on more expensive alternatives.

Shares of IGL and MGL both saw selling pressure following the announcement, with investors concerned about the potential impact on profit margins. The reliance on costlier Liquified Natural Gas (LNG) could push prices higher in the near future, adding strain to both companies and their customers.

Alternative gas sourcing and possible price hikes

IGL and MGL have started exploring options to ensure continuity of gas supply. MGL is looking at sourcing domestically produced High Pressure High Temperature (HPHT) gas, as well as long-term benchmark-linked gas contracts, to make up for the shortfall in domestic gas. Similarly, IGL is considering various options but has not confirmed any price adjustments yet.

However, reports indicate that city gas distributors might need to increase prices by as much as ₹6 per kg to counterbalance the financial impact. The spot price for LNG in the open market currently exceeds $11 per million British thermal units (mmbtu), significantly higher than the $6.5 per mmbtu that city gas distributors were previously paying under APM.

The 21% reduction in APM gas allocation is set to hurt the profitability of city gas distributors like IGL and MGL. With rising costs and potential price hikes on the horizon, both companies are looking to secure alternative gas sources to maintain supply and minimise the impact on customers. The next steps by these companies will be closely monitored as they navigate this new challenge.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

Share this article: 

Read More Blogs

Our Secure Trading Platforms

Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading

Bajaj Broking App Download

8 Lacs+ Users

icon-with-text

4.4+ App Rating

icon-with-text

4 Languages

icon-with-text

₹4700+ Cr MTF Book

icon-with-text