Better to stay away from IGL and MGL, say analysts
Investors would be better off not buying afresh in beaten-down shares of city gas distributors Indraprastha Gas and Mahanagar Gas for now, said analysts.
With the proposed road map by the Delhi government mandating a phased shift of all cab aggregators and delivery vehicles, to electric by 2030 seen impacting Indraprastha Gas (IGL), analysts are expecting its shares to continue underperforming in the near term.
The company derives over 70% of its revenues from compressed natural gas (CNG).
IGL has shed 16% in the past two trading sessions since the announcement of the policy proposal. Concerns over the impact of Delhi's EV policy on the company rubbed off on peer Mahanagar Gas (MGL), whose shares fell 8.3% on Friday, though the company is not impacted by the decision.
Analysts said that the policy will adversely impact CNG growth volumes and investors should stay cautious on IGL.
«The threat of decline in volume growth is expected to result in further erosion of the stock price,» said Swarnendu Bhushan, co-head of research at Prabhudas Lilladher.
«Due to the electrical vehicle policy, the CNG volume growth of the company will be limited,» Bhushan advised investors to sell Indraprastha shares.
Brokerage Jefferies downgraded its rating on the stock to hold from buy and cut its target price to ₹465 from ₹565 in response to the Delhi government's policy. «This could potentially impact 30% of IGL's overall volumes starting FY25,» said analysts Bhaskar Chakraborty and Niraj Todi in a client note.
