MGL, IGL, Gujarat Energy shares: CGD to benefit most amid additional APM gas incentive

Foreign brokerage Nomura believes the new incentive scheme for city gas distributors (CGDs) to increase domestic PNG adoption in the country may benefit Mahanagar Gas Ltd (MGL) the most, given it benefits from a low customer addition base during April-June. Gujarat Energy Ltd is expected to benefit the least.

The policy provides CGDs such as Indraprastha Gas (IGL), MGL and Gujarat Energy Ltd (erstwhile Gujarat Gas) with additional 200scm of low-cost domestic Administered Price Mechanism (APM) gas on every incremental billed domestic connection, above a threshold level.

As per the government, this would decrease the payback period for PNG-related capex from 10 years to 3 years for CGDs.

Nomura noted that Gujarat Energy has the highest per household gas consumption at 131scm per annum, assuming 94 per cent active customers as a percentage of total connection. This implies the lowest excess APM allocation per new household added for Gujarat Energy, Nomura said.

IGL added 28,800 households per month during April-June 2026, in line with its usual run-rate over the past few years. Mahanagar Gas, on the other hand, has the lowest gas consumption per household among the CGDs at 108scm per annum, assuming 62 per cent billed customers out of the total connections, as per the Q4 analyst briefing, implying the highest excess APM allocation per new household added.

Nomura suggested a target of Rs 379 on Gujarat Energy, Rs 155 on IGL and Rs 1,465 on MGL.

According to PNGRB data as of March 2026, out of 16.9mn connected households only 10.7mn (63 per cent) were billed customers. This gives additional headroom for CGDs to convert those already connected customers and get higher APM allocation from the government. The scheme starts from 1 Sep 2026 and the threshold household addition is average monthly additions during April-June, raised by 10 per cent.

"MGL benefits from low per-household gas consumption, while the government has announced 200scm additional APM gas per additional paying household added. This implies the highest surplus APM gas allocation for MGL which can be used to reduce the proportion of higher-cost non-APM gas for non-domestic customers, thus reducing gas costs further," Nomura said.