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City gas distribution companies, including Indraprastha Gas Ltd, Mahanagar Gas Ltd, and Gujarat Gas Ltd, saw gains of up to 4% on December 24
IGL, MGL, and Gujarat Gas Surge Up to 24% in One Month
City gas distribution (CGD) companies saw strong gains on December 24, rising by as much as 4% and extending their positive momentum from the past month. Indraprastha Gas Ltd (IGL), Mahanagar Gas Ltd (MGL), and Gujarat Gas Ltd all experienced a notable uptick in early trading.
By 11:30 am, the stocks had trimmed some of their earlier gains. IGL shares were trading at Rs 400.5, up 2.7%, while Gujarat Gas was up 2.1% at Rs 509.15. MGL’s stock hovered around Rs 1,260, reflecting a 2.8% increase.
Over the last two months, CGD stocks have been active. In November, the central government reduced the Administered Price Mechanism (APM) allocation to CGD companies by 20% for the second consecutive month. This move cut the supply of low-priced natural gas from old fields to city gas retailers, forcing CGDs to seek alternative, more expensive sources like New Well Gas or spot LNG.
This announcement initially triggered a sharp decline in CGD stocks, with shares plummeting more than 40% from their 52-week highs. However, these stocks have since staged a strong recovery. IGL’s shares have risen by 24% over the past month, while MGL and Gujarat Gas have gained 6% and 10%, respectively.
According to Nuvama Institutional Equities, the market is focusing on the potential for GST implementation on natural gas, which has helped drive the stocks higher, even as the risk of a profit drop remains imminent. The brokerage suggests that the fundamentals may not support the current rally, as investors appear to overlook the likelihood of falling profits.
Currently, natural gas is not subject to the Goods and Services Tax (GST), and instead, it is taxed through various state VATs, central sales tax, and central excise duties. The gas value chain faces multiple taxes, especially due to varying state tax structures.
Despite the lack of progress on including natural gas in the GST framework—an issue that was not discussed at the 55th GST Council meeting on December 21, 2024—CGD stocks have continued to see upward movement.
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