Shares of city gas distribution (CGDs) companies have gained over six percent in an otherwise subdued market on the BSE intraday during Tuesday's trading session after the government-appointed panel for gas pricing sought for more time for the submission of the report.

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The government had set up a committee to review the formula for the pricing of domestically produced natural gas. “It can for all practical reasons not revise prices on October 1, citing the pendency of issues before the committee," a source told PTI. The committee, under former planning commission member Kirit S Parikh, has been asked to suggest a "fair price to the end-consumer", according to an order of the oil ministry.

The government sets the price of gas every six months, on April 1 and October 1, each year based on rates prevalent in gas surplus nations such as the US, Canada and Russia in one year with a lag of one quarter.

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The panel, which includes representatives of the gas producers’ association as also producers ONGC and OIL, was asked to submit its report by the month-end but the same is likely to be delayed, sources said. It also has a member from private city gas operators, state gas utility GAIL, a representative of Indian Oil Corporation (IOC) and a member from the fertiliser ministry, the order said.

At 1:41 pm, shares of Mahanagar Gas (MGL) were trading at Rs 846, up by 6.06 percent while Indraprastha Gas (IGL) is up by 6.1 percent and Gujarat Gas Company is up by 4.1 percent. In comparison, the S&P BSE Sensex is up 0.3 percent at 57,355 points.

During the past three months, these stocks have gained between 8 and 18 percent, compared to an 8 percent gain for the S&P BSE Sensex. Earlier in the year, the stock prices corrected sharply since the start of the Russia-Ukraine war as international gas prices shot up due to fears of supply disruption.

Recently global brokerage firm UBS gave a positive outlook to City Gas Distributors stocks. UBS noted that the gas companies have delivered gas costs for the second half of the July to September quarter 30 percent lower than the first half of the three-month period.

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UBS gave the shares of Indraprastha Gas a ‘buy’ rating with a target price of Rs 630 per share, meaning it expects the gas stock to jump over 48 percent from Tuesday’s closing price.

For Mahanagar Gas, UBS expects the stock to scale 48 percent from Tuesday’s closing price of Rs 868.30 to Rs 1,280. According to the brokerage both IGL and MGL have been trading at attractive valuations compared to their past 5-year average.

It, however, has a ‘sell’ call on Gujarat Gas shares and expects the stock of the gas distributor to fall to Rs 400 per share. This implies a 20 percent downside from the last closing price.

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First Published:Sept 27, 2022 4:48 PM IST