Shares of Mahanagar Gas Ltd experienced a significant decline of approximately 10 percent on March 6, following a downgrade by brokerage firm Citi from ‘Buy’ to ‘Sell’, coupled with a reduction in its target price.
As of 10 am, the stock was trading at Rs 1,363 on the BSE, marking a 13 percent decrease from its previous closing price. Meanwhile, India’s benchmark Sensex registered a 0.25 percent decline, reaching 73,491 points on Wednesday.
Citi’s downgrade came in light of Oil Minister Hardeep Puri’s remarks underscoring the incomplete transmission of natural gas sector reforms’ benefits to end customers. Puri reiterated the government’s commitment to ensuring affordability by city gas companies and emphasized the necessity for enforcement to curb monopolistic practices in licensed areas, which have resulted in robust profits for city gas firms.
Moreover, Mahanagar Gas Ltd (MGL) announced a reduction in the price of compressed natural gas (CNG) to Rs 73.50/kg, effective midnight of March 5, 2024, as communicated by the company on Tuesday. Expressing concerns about exclusivity and margins, Citi revised down its target price for the stock from Rs 1480 to Rs 1405, while also highlighting potential downside catalysts to monitor over the next 90 days.
Efforts to dismantle monopolies by the Petroleum and Natural Gas Regulatory Board are ongoing despite facing legal challenges, with Puri emphasizing the importance of price stability and long-term supply visibility in the gas sector. With expectations of India’s natural gas consumption rising to 500 mmscmd by 2030, the recent city gas licensing round covering 103 districts entails an infrastructure investment of Rs 41,000 crore, according to an ET report.
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