NEW DELHI: Indraprastha Gas LtdIndia’s largest city gas distributor by revenue is heading for its worst day in more than three years after Jefferies and Morgan Stanley slashed share values following a new electric vehicle policy in the national capital.
Delhi accounts for 88% of IGL’s total volumes, but the EV policy could jeopardize about a third of that, Jefferies analysts Bhaskar Chakraborty and Niraj Todi wrote in a note. The broker downgraded the stock to Buy Early, while cutting the price target by 18%. Morgan Stanley also lowered its rating to underweight.
Indraprastha Gas fell as much as 11%, the biggest drop since March 2020. The decline in the gas distributor’s shares rubbed off on peers Mahanagar gas and Gujarat Gas.
The impact on gas sales has been “over-hyped and demand for the fuel will continue to grow on the back of growth in passenger and commercial vehicle sales,” said Kamal Kishore Chatiwal, managing director of Indraprastha Gas. Standards to convert large diesel-fired backup generators to gas will also boost demand, he said.
The EV policy, which is yet to come into effect, calls for a phased conversion of all commercial vehicles, including cabs and vans, by 2030.
The policy will potentially create a “longer-term overhang” for IGL, said Citigroup Inc, which maintained its buy rating on the stock.
“There is still some uncertainty about the timelines to ultimately become law,” analysts Saurabh Handa and Prerna Goenka wrote in a note on the policy, which still requires certain approvals.
Delhi accounts for 88% of IGL’s total volumes, but the EV policy could jeopardize about a third of that, Jefferies analysts Bhaskar Chakraborty and Niraj Todi wrote in a note. The broker downgraded the stock to Buy Early, while cutting the price target by 18%. Morgan Stanley also lowered its rating to underweight.
Indraprastha Gas fell as much as 11%, the biggest drop since March 2020. The decline in the gas distributor’s shares rubbed off on peers Mahanagar gas and Gujarat Gas.
The impact on gas sales has been “over-hyped and demand for the fuel will continue to grow on the back of growth in passenger and commercial vehicle sales,” said Kamal Kishore Chatiwal, managing director of Indraprastha Gas. Standards to convert large diesel-fired backup generators to gas will also boost demand, he said.
The EV policy, which is yet to come into effect, calls for a phased conversion of all commercial vehicles, including cabs and vans, by 2030.
The policy will potentially create a “longer-term overhang” for IGL, said Citigroup Inc, which maintained its buy rating on the stock.
“There is still some uncertainty about the timelines to ultimately become law,” analysts Saurabh Handa and Prerna Goenka wrote in a note on the policy, which still requires certain approvals.
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