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Nomura said a tariff hike could provide a one-time boost to Gail India, with an integrated tariff increase of over 20 percent could potentially surprise investors on the upside.
The acquisition of smaller CGD companies would increase the number of geographical areas (GAs) under IGL, which currently has 11 GAs across 32 districts in the country.
State-run Indraprastha Gas Limited (IGL) and Mahanagar Gas Limited (MGL) said that the reduction in APM gas allocation would have an “adverse impact” on their profitability.
City gas distributors have increased prices of compressed natural gas and piped natural gas in their respective geographical areas by at least Re 1 per kilogram on account of rising input costs.
Spot liquefied natural gas (LNG) prices are currently trading at about $10 per million metric British thermal units due to a milder-than-expected winter and high inventory levels in Europe.
The government has launched the 12th CGD (city gas distribution) bidding round in six states of Arunachal Pradesh, Meghalaya, Manipur, Mizoram, Nagaland and Sikkim along with two Union Territories of Jammu & Kashmir and Ladakh
CNG demand is going to remain in a steady growth phase as a price differential of 40-50% against petrol is too good for consumers to ignore. Further, EV risks are mostly overblown.
The company has high growth potential due to its small size and traction from two GAs that are under development
In the 12th CGD bidding round, the government has offered seven geographical areas (GAs) spread over five states and two union territories, covering 92 districts. The five states include Arunachal Pradesh, Meghalaya, Manipur, Nagaland and Sikkim.
Chairman Sandeep Kumar Gupta said that the city gas distribution company now has a significant footprint in 25 geographical areas across 50 districts and 14 states
The rapidly urbanising Indian landscape will need huge infrastructure, and more energy in coming years. Energy consumption is going to increase in India compared to countries like the US and the UK and this makes him bullish on India, says Ashu Shinghal, Managing Director of Mahanagar Gas Limited.
LNG prices rose to record levels of $45 per mmBtu (million metric British thermal unit) last year. They recently slumped to $10- $12 amid milder temperatures recorded in Europe in the winter.
The city gas distribution company reported a standalone net profit of Rs 329.75 crore in the fourth quarter of FY23.
Steady costs to provide better visibility to margins, while volumes are likely to grow, albeit slowly
They may, however, lose the lower price advantage of a cheaper Henry Hub gas in the medium term, said analysts. Between October 2015 and March 2023, APM gas prices was higher than the new price ceiling of $6.5 just once and was above the floor of $4 on four occasions out of 17 price fixations.
New regulations provide respite to CGD players and consumers alike, however, APM gas shortage would continue to be met via LNG and HPHT gas
The brokerage maintained ‘Buy’ call on the stocks of Indraprastha Gas Ltd and Mahanagar Gas Ltd.
Some gas distributors have indicated that they will pass on any increase in costs to their consumers.
The company will also explore equity opportunities in the electric mobility and hydrogen value chain space, says Ashu Shinghal.
Gujarat Gas has cut prices in Morbi in the past two months and media reports indicate that, from March onwards, demand from Morbi has picked up significantly
While Indraprastha Gas Ltd (IGL) reported a decline in net profit in Q3, Mahanagar Gas Ltd (MGL) and Gujarat Gas Ltd (GGL) missed on volume expectations in the quarter.
Supply issues and declining margin spread are key challenges for the gas PSU
The sharp fall in industrial volume was led by the shutdown of the Morbi-based ceramic plants and the favourable economics of switching to propane.
The CGD sector is heavily dependent on priority sector gas allocation, which has come down to around 90-93 percent, forcing them to use expensive contracted & spot LNG gas to fill the gap
Unlike Europe, India seems to be better able to withstand higher gas prices for now
