Share Market Update: Shares of many companies including Adani Total Gas surged, prices of CNG may increase, know which ones have declined…

Share Market Update: There is a huge fall in the shares of city gas distribution companies Indraprastha Gas Limited, Mahanagar Gas Limited and Adani Total Gas Limited today i.e. on Monday (November 18).

A decline of up to 15 percent was seen in IGL and MGL in early trade. At the same time, a decline of about 4 percent was seen in Adani Total Gas.

Reason for decline in IGL and MGL

GAIL has announced that it has reduced the gas allocation for city gas distribution companies by 13 to 20 percent. This is likely to have a negative impact on the margins of companies like Adani Total Gas as well as IGL and MGL.

City gas companies are allotted domestic gas at a fixed price of $6.5/MMBTU (million metric British thermal units) for their CNG sales volume requirements. If domestic gas allocation decreases, it will have a direct impact on their profits.

How much was the gas allocation cut?

GAIL has reduced the allocation of Indraprastha Gas, Mahanagar Gas and Adani Total Gas by 20, 18 and 13 percent respectively. Earlier in October 2024, Oil and Natural Gas Corporation (ONGC) had also cut the allocation in the range of 16-20 percent.

After the recent cuts, the APM allocation to City Gas Distribution (CGD) companies is now around 30-35 per cent. Brokerage firm Jefferies believes that domestic gas allocation of city gas companies will become zero by mid-2025.

Share Market Update: What will be the effect of the cut?

When ONGC had announced its first cut, MK Research had estimated a negative impact of Rs 1.4-1.5/scm on the margins of Indraprastha Gas and Mahanagar Gas. Now it has increased to Rs 2.7-3/scm.

According to brokerage firm Jefferies, in the next financial year i.e. 2026-27, there may be a huge decline in the EBITDA margin per unit of Indraprastha Gas, Mahanagar Gas and Gujarat Gas by Rs 2.5, Rs 1.5 and Rs 1 per SCM.

Share Market Update: Expectation of increase in CNG prices

IIFL Securities, MK Research and Jefferies say that gas companies will have to increase CNG prices to maintain their margins. According to Jefferies, retail prices of CNG may increase by 10 percent.

At the same time, Systematics estimates that it will increase by Rs 6-8 per kg and MK Research estimates that it will increase by Rs 6.3-6.4 per kg. However, the brokerage believes that due to assembly elections in important states like Maharashtra and Delhi, prices will not increase soon. This may put pressure on the margins of companies in the near future.