On March 6, Mahanagar Gas Ltd witnessed a sharp decline of over 13% in its share price. This downturn followed a decision by brokerage firm Citi to downgrade the stock from ‘Buy’ to ‘Sell’ and reduce its target price.
By 10 am, Mahanagar Gas Ltd’s stock was trading at Rs 1,363 on the BSE, marking a significant 13 percent decrease from its previous closing price. Meanwhile, on Wednesday, India’s benchmark Sensex experienced a modest decline of 0.25 percent, closing at 73,491 points.
The brokerage’s decision to downgrade the stock came as Oil Minister Hardeep Puri highlighted that the anticipated benefits of reforms in the natural gas sector have yet to reach end customers. Puri reiterated the government’s dedication to ensuring that city gas companies comply with regulations to maintain affordable rates. He expressed concerns about monopolies in licensed areas, which have led to substantial profits for city gas firms, stressing the necessity for regulatory enforcement.
In addition to these developments, Mahanagar Gas Ltd announced a reduction in the price of compressed natural gas (CNG) to Rs 73.50/kg, effective from midnight on March 5, 2024, or the morning of March 6, 2024.
Citi lowered its target price for the stock from Rs 1480 to Rs 1405, expressing concerns about exclusivity and margins. The brokerage is closely watching potential downside catalysts over the next 90 days.
Despite legal challenges, efforts to end monopolies by the Petroleum and Natural Gas Regulatory Board are ongoing. Puri also highlighted the need for better price stability and long-term visibility of supplies in the gas sector, with expectations of India’s natural gas consumption rising to 500 mmscmd by 2030. The latest city gas licensing round covers 103 districts, requiring an investment of Rs 41,000 crore for infrastructure development, the ET report said.
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