Mon Nov 18 22:59:08 UTC 2024: ## Gas Stock Prices Plunge After Government Cuts Allocation
**Mumbai, India** – Shares of major Indian gas companies plummeted on Monday following a government decision to reduce administered price mechanism (APM) gas allocation by 20%. Indraprastha Gas Ltd. (IGL) suffered the steepest losses, with its share price falling over 20% to close at Rs 325.30 on the National Stock Exchange. Mahanagar Gas Ltd. and Gujarat Gas Ltd. also experienced significant declines, dropping approximately 14% and 7%, respectively. The Nifty oil and gas index mirrored these losses, falling 1.6% (173 points).
The cut in allocation has raised concerns about the profitability of city gas distributors (CGDs). Analysts predict that CGDs may need to increase CNG prices by Rs 2.5-2.8/kg to offset the reduced allocation and maintain profit margins. However, a large price hike could negatively impact sales volume. ICICI Securities suggests that a substantial price increase would be difficult to implement, potentially leading to further margin pressures.
Conversely, the allocation cut could benefit upstream companies like ONGC and Oil India. A larger portion of gas will be priced based on new gas wells, using a pricing formula linked to Indian crude oil prices, potentially boosting their revenues.
First Piper 