In Monday’s trading session, the share price of a leading City Gas Distribution company in India surged 1.7 percent on BSE to Rs. 478.5, after global investment bank Morgan Stanley assigned an ‘overweight’ rating on the stock, representing a potential upside of 22 percent.
The shares of Indraprastha Gas Limited (IGL) closed in the green at Rs. 475.95, up by 1.12 percent, as against its previous closing price of Rs. 470.7, with a market cap of Rs. 33,316.6 crore.
A leading global financial services firm Morgan Stanley issued an ‘overweight’ rating on IGL with a target price of Rs. 575 apiece, indicating a potential upside of 22% from its closing price, following the decision of IGL to raise Compressed Natural Gas (CNG) prices.
An ‘overweight’ rating on a stock by a brokerage firm indicates that the brokerage analyst believes the stock will outperform the overall market or its competitors over the next 6-12 months.
IGL’s recent CNG Price Fluctuations
Effective from June 22nd, IGL has announced an increase in CNG prices by Re. 1 per kilogram, which has swiftly impacted multiple regions including New Delhi, Uttar Pradesh, Haryana, Rajasthan, and the National Capital Region (NCR).
Earlier on 14th December 2023, IGL had raised CNG prices by Re. 1 per kg, across all its markets. However, in March 2024, the CNG prices were reduced by Rs 2.5 per kg, bringing the price down to Rs 24.09.
Though IGL did not give reasons for the increase, a few sources reported that the hike was warranted because the firm now has to buy more imported gas following a drop in domestic supplies.
Market Impact and Brokerage Outlook
According to a global brokerage firm, the hike is anticipated to help IGL support its margin normalisation amidst the global gas shortages and reduced Administered Price Mechanism (APM) gas allocation, as CNG continues to be a favourable choice compared to alternative fuels.
With the resolution of uncertainties surrounding the EV policy, investor confidence in growth is anticipated to rebound.
Executives of the company noted that IGL’s input costs have risen due to increased reliance on imported and auctioned domestic gas from the market, which is more expensive, to meet growing demand amid insufficient supply of cheaper gas from ONGC’s fields under government price controls.
CNG Price Hike Impact on Delhi-NCR
In Delhi, CNG prices have increased from Rs 74.09 to Rs 75.09 per kg, and In Noida, Greater Noida, and Ghaziabad, prices have risen from Rs 78.70 to Rs 79.70 per kg.
However, in Gurugram, Haryana, CNG prices have remained the same at the previous level despite the hike in neighbouring regions.
Widespread Impact on Commuters and their concerns
This price adjustment is expected to have a significant impact on commuters who rely on CNG-powered vehicles, including auto-rickshaws, taxis, and personal vehicles.
Transportation costs are likely to rise, potentially affecting the daily travel expenses of millions of residents in the affected areas.
These changes have raised concerns among consumers who are already dealing with the economic pressures of inflation and fluctuating fuel costs.
Written by Shivani Singh
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