City gas cos' stocks in the red as govt cuts APM quotas
city gas distributors Indraprastha Gas (IGL) and Mahanagar Gas (MGL) were among the top losers in Monday's trading after the government cut their gas allocations under the cheaper APM (administered price mechanism) over the weekend. The move triggered a spate of rating downgrades by analysts, who are mostly advising investors to sell the stocks for now.
IGL plunged 19.8% to ₹325, its lowest closing since March 2020. MGL tumbled 13.8% to ₹1,130.55, the lowest closing since June 2023. Gujarat Gas, which already derives most of its supplies at market rate, fell 6.8% to ₹452.5 on Monday.
Brokerages Jefferies, Nuvama, JM, Emkay and Nomura slashed their ratings and price targets on these stocks as the government's decision would squeeze the sector's profitability.
«Under APM (administered price mechanism), city gas distributors get their gas supply from the government at a rate significantly lower than the market price,» said Sumit Pokharna, vice president at Kotak Securities, who has sell ratings on both the stocks.
The move caught investors by surprise as the government had already cut supply through this mechanism once in October.
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