City Gas Distribution Players Feel The Heat After Reduction In Priority Gas Allocation, MGL, IGL Shares Plummet

The development followed the authorities slashing the Administered Price Mechanism (APM) allocation to CGD companies by 20 per cent, cutting it down for the second consecutive month

IGL confirmed that the allocation cut will have an adverse impact on profitability.

Source : X/@IGLSocial

The shares of city gas distribution firms plummeted 20 per cent as markets began trading on November 18. The development followed the authorities slashing the Administered Price Mechanism (APM) allocation to CGD companies by 20 per cent. This reduction in the allocation was done for the second consecutive month.

As such, shares of IGL and MGL plunged on Monday morning. The shares of IGL declined 20 per cent, while MGL shares slipped 12 per cent in the first hour of trading. Around 2 PM, the shares of Indraprastha Gas Ltd (IGL) traded at Rs 329.20 on the BSE, falling almost 19 per cent. At the same time, Mahanagar Gas Ltd (MGL) shares traded near Rs 1,134 apiece, plunging more than 13 per cent.

IGL confirmed that the allocation cut will have an adverse impact on profitability. “The revised domestic gas allocation to Company is approximately 20 percent lesser than previous allocation which will have an adverse impact on profitability of the Company,” the firm said. It noted that it is looking into other options to resolve the issue.

In addition to the allocation cut, both IGL and MGL have announced additional cuts from their end of 20 per cent and 18 per cent respectively. Meanwhile, Adani Total Gas also said that it will levy a 13 per cent cut.

Earlier in October, when officials introduced the first APM cut, IGL and MGL shares took a heavy beating in the stock market as selling pressure increased. Experts now anticipate the negative sentiment to continue after the firms expressed that their margins will be impacted by the move, reported Moneycontrol.

The report cited brokerages and stated that the sharp pace of the cuts along with the no policy communication points out a major red flag for the city gas distribution companies.