Tue Nov 19 06:28:15 UTC 2024: ## City Gas Distribution Companies Face Major Losses After Government Cuts Gas Allocation

**MUMBAI, INDIA – November 18** – Shares of city gas distribution (CGD) companies plummeted after the Indian government announced a second consecutive 20 percent cut in Administered Price Mechanism (APM) gas allocation. Indraprastha Gas Limited (IGL) saw its shares crash by 20 percent, Mahanagar Gas Limited (MGL) by 12 percent, and Gujarat Gas by over 5.8 percent.

The reduction in APM allocation means CGD companies will have less access to cheaper natural gas from older fields, forcing them to rely on more expensive alternatives like New Well Gas or spot LNG. This significantly impacts profitability, with IGL reporting an approximately 20 percent decrease in allocation and acknowledging the adverse effect on its earnings. The company is exploring options to address the issue, including potential price hikes for consumers.

Brokerages have reacted negatively to the news, citing the steep and unexpected cuts as a major concern. Emkay Global highlighted that replacing the lost low-cost gas will significantly increase the blended cost, requiring substantial price increases to maintain margins. Nuvama Institutional Equities predicts a potential 43-63 percent hit to EBITDA in FY26 for IGL and MGL without price adjustments. Several brokerages have downgraded the stocks, with Jefferies issuing ‘underperform’ ratings for IGL and MGL and lowering their target prices.

The situation follows a similar cut in October, and the lack of clear government communication on future allocations has fueled negative sentiment among investors. While CGD companies have suggested price hikes post-festive season, these haven’t yet materialized, worsening the margin outlook. The consensus among analysts is that the government’s actions suggest the complete phase-out of cheap domestic gas for CGD companies is imminent.

The impact on the crypto market, mentioned briefly in the original text, is not discussed in detail and will require further investigation for inclusion in the article. Information on the Traders Gurukul summit is also unrelated to the core news and omitted.

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