Indraprastha Gas Ltd (IGL) grapples with over 6% slump in its shares following the city gas distributor’s decision to slash Compressed Natural Gas (CNG) prices by Rs 2.5 in Delhi and the National Capital Region (NCR).
Previously priced at Rs 76.59 per kg, the new rates reflect a reduction to Rs 78.70 per kg in Noida, Greater Noida, and Ghaziabad, while in Gurugram, CNG prices are adjusted to Rs 80.12 per kg from the earlier Rs 82.62 per kg.
This move by IGL follows the announcement by state-run Mahanagar Gas (MGL), which slashed CNG prices by Rs 2.5 per kg to Rs 73.50 per kg. MGL witnessed a 15% decline in its stock on Wednesday.
In response to the price reduction, MGL stated that the adjustment is due to a decrease in gas input costs and that CNG prices now offer savings of 53% compared to petrol and 22% compared to diesel in the financial capital.
Addressing the market reaction, JM Financial’s March 6, 2024 report suggested that the sharp negative response in the share prices of City Gas Distribution (CGD) companies, particularly MGL, may be an overreaction to recent statements by the Oil Minister, Hardeep Singh Puri,
The report highlighted the Minister’s comments on CGD companies’ Return on Capital Employed (ROCE), open access regulations and the affordability of gas prices for consumers.
JM Financial added that it believes the open access issue was resolved in November 2021 when the Petroleum and Natural Gas Regulatory Board (PNGRB) notified regulations, disallowing existing outlets of Oil Marketing Companies (OMCs) from competing with CGD companies.
This move aimed to incentivise the creation of additional infrastructure, significantly reducing the competitive threat from OMCs to IGL and MGL’s key CNG business.
As of the latest update, shares of IGL were trading with a decrease of over 1% at Rs 425.55, reaching a low of Rs 411 during the day, representing a decline of over 4%.