Shares of Indraprastha Gas Limited (IGL) closed nearly 3% higher at Rs 418.70 apiece on January 9 after the firm announced that GAIL (India) Ltd. has decided to increase IGL’s domestic gas allocations in the CNG segment by 31%.
Consequently, IGL will have 51% domestic allocation in the CNG segment, higher than the current 37% level. The change will be effective from January 16 onwards, IGL informed in an exchange filing.
"The Company has also tied-up additional RLNG volumes on Term Basis at competitive prices, with one of the major suppliers (around 1.0 MMSCMD)," IGL said.
"The above revision and signing of additional volumes shall have a positive impact on profitability of the Company," it further added.
After the announcement, the stock had rallied around 7% from previous close to hit an intraday high of Rs 435.85. Later in the day, the stock pared some gains to fall to the closing levels. This coincides with the weak market sentiment, with Sensex closing 528 points lower at 77,620.21.
Notably, the Union Oil Ministry last week had asked GAIL and ONGC to divert 0.6 mmscmd gas to city gas firms. The ministry in its circular had said the new well gas and oil-linked gas will be allocated proportionally to these firms on the basis of volume. IGL was set to get the highest allocation owing to higher market share. The ministry’s move was aimed at reducing City Gas Distribution firms' dependence on gas from spot market.
In November, the central government cut the the Administered Price Mechanism (APM) allocation to CGD players by 20 percent for the second month in a row.
A reduced allocation in the APM means that the Centre has cut the supply of low-priced natural gas from old fields to city gas retailers. As a result, the CGDs will have to look for alternative options to bridge the gap in the input gas, such as New Well Gas or spot LNG, which are more expensive.
Notably, Maharashtra Natural Gas, a joint venture between BPCL, GAIL (India), and IGL, is preparing to list through an Initial Public Offering (IPO) of over Rs 1,000 crore. BPCL on January 6 announced that its board has given in-principle nod for the issue. International brokerage Citi Research said the listing could help unlock value for the firm. It reiterated its bullish 'buy' call on IGL shares, with a price target of Rs 450 per share.
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