Gujarat Gas, MGL best positioned amid city gas sector's uncertainty: Probal Sen
«So, pretty steep price hike that is required to sort of restore the margins to what they were, let us say, from an FY24 benchmark perspective,» says Probal Sen, ICICI Securities.
Firstly, this is the second cut that we have seen when it comes to the APM gas allocation. So, cumulatively, how much has been the APM gas allocation reduced for the city gas distribution companies? And to mitigate this impact, what is the kind of price hike that they need to take now?
Probal Sen: So, a couple of quarters ago, the blended allocation, as you would know the cut has primarily come in the CNG segment, so the domestic PNG segment still continues to get close to what is required to supply from what our understanding is.
So, on a blended basis, this allocation was close to about 70%. It came down to just about 57% after the October cut. And assuming this 20% percent cut is again on that base, it means that the net blended allocation would be closer to about 38% to 40% now, so that is the cut. If we look at from a price increase perspective, the previous cut itself, assuming everything else remained the same would have entailed Rs 4.5 to Rs 6 per kg kind of increase in the CNG prices. This will add on another Rs 2.5 odd on top of that.
So, pretty steep price hike that is required to sort of restore the margins to what they were, let us say, from an FY24 benchmark perspective.
So, clearly, there is a conundrum now between either they want to increase their margins or they want to increase the volume. And how do you think city
