Investors may keep shares of city gas distributor IGL on radar after the company announced that the board will consider the proposal of bonus share issue on December 10.
"This is to inform that meeting of the Board of Directors is scheduled to be held on December 10, 2024, inter-alia to consider the proposal for issue of Bonus Shares to the equity shareholders of the Company in the ratio, as may be fixed, subject to the Shareholders' approval," a statement by the company said on December 4.
The gas distribution company had given an interim dividend of Rs 5 per share in November, and a final dividend in September.
The shares of both MGL and IGL have taken a significant hit of from the highs of the year to fall by more than a third, more so after Centre announced the decision to cut priority gas allocation to city gas distributors.
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.
Confirming the 'adverse' hit on profitability, IGL has informed investors that it is exploring all options to address the issue. It recently said that it is in 'strong discussions' for an increase in the price of gas. Mahanagar Gas (MGL) has already hiked CNG prices by Rs 2/kg to Rs 77/kg effective from Nov 22.
In a recent note, BoB Capital had maintained a Hold in the shares, advising the company to prioritise growth and not hamper current momentum by compromising on margins. It sees the risk of margin contraction as well as growth slowdown higher in IGL compared to MGL after the recent 20% deallocation of APM gas.
IGL has attempted to reassure investors about the procurement of gas from diversified basket of sources. The company said in October that it is in discussions for a price increase and passing on to the customers. "..that is not going to impact our expansions or the volumetric growth because still, vis-a-vis alternate fuels, we have a good elbow room," IGL added during its earnings call in October.
IGL's latest shareholding pattern shows BPCL and Gail India as promoters with 22.5% stake each in the company.
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