3 reasons why Mahanagar Gas shares plunged 17% today

Shares of Mahanagar Gas Ltd (MGL) bled 17 per cent lower in Wednesday's trade amid fears of regulatory pressure, a downgrade of the stock by Citi to 'sell' and city gas distributor's announcement of cut in CNG prices. The stock also fell amid a PNGRB notification that suggested end of MGL's exclusivity period for Mumbai & Greater Mumbai area.

The stock was down as Citi downgraded the stock to 'Sell' from 'Buy' and suggested a target price of Rs 1,405 from 1,480 earlier, citing oil minister's statement (reportedly) where he mentioned end consumers have failed to benefit from government's gas reforms.

Concerns mount as MGL decided to "promptly passing reduction in gas costs to its consumers to promote usage of natural gas" and said due to reduction in gas input cost, it cut CNG price by Rs 2.5 per kg in and around Mumbai. The revised MRP of CNG will be Rs 73.50 per kg effective from midnight of March 5.

"MGL’s CNG price now offers attractive savings of 53 per cent compared to petrol and 22% compared to diesel at current price levels in Mumbai while delivering unmatched convenience, safety, reliability and environmental friendliness to consumers. This reduction in CNG price would help to increase the consumption of natural gas in transportation segment, which is a step towards making India cleaner and greener," it said.

Besides, Petroleum and Natural Gas Regulatory Board (PNGRB), which authorises entities for the development of the City Gas Distribution (CGD) networks in various geographical areas (GA) in accordance with the PNGRB Act & relevant regulations, had on March 4 said the infrastructure exclusivity period for the laying, building or expansion of the CGD network has expired for the Mumbai & Greater Mumbai area, whose authorised entity was Mahanagar Gas. While the exclusivity period expired in 2021, the March 4 notification was a public notice by PNGRB.

The stock plunged 17 per cent to hit a low of Rs 1,305 on BSE, trimming its year-to-date fall to 9.51 per cent.

Under Regulation 12 of the PNGRB CGD Authorization Regulations, the authorised entities are granted an exclusivity period for laying, building, operating, or expanding city or local natural gas distribution networks at different times. As on the date, the infrastructure exclusivity period for the laying, building or expansion of the CGD network has expired for Mahanagar Gas, PNGRB said.