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City gas distributors likely to see limited upside in the near-term

Some analysts believe the new APM formula provides only short-term respite and demand may not revive very much

Devangshu Datta

Premium

4 min read Last Updated : May 16 2023 | 9:26 PM IST

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The new administered pricing mechanism (or APM) gas-pricing formula caps the potential upside on gas costs and offers pricing stability for two years. This has meant price cuts and if passed onto consumers by city gas distributors (CGD) could boost demand slightly.

While share prices for the CGD players have responded favourably on the whole to change in policy, analysts have flagged the potential threat of EV (electric vehicle) penetration. This is more likely to impact Indraprastha Gas (IGL) in the short to medium term, given the relatively rapid adoption of EVs in Delhi, which is India’s largest vehicle market. The industrial segment will probably see a revival in volumes, however, going by the example of Gujarat.

In terms of financials, Mahanagar Gas (MGL) reported a strong January-March quarter performance for the 2022-23 financial year (Q4FY23) with Ebitda (earnings before interest, tax, depreciation and amortization) an