Adani Total Gas Share Price Declines: Here’s Why

Adani Total Gas: A Snapshot

Adani Total Gas Limited (ATGL), incorporated in 2005, operates in the City Gas Distribution (CGD) business, marketing piped and compressed natural gas. It stands as one of India’s largest CGD players, with a footprint in 33 Geographical Areas (GAs), including 14 awarded in the eleventh bidding round. Additionally, ATGL has a 50:50 joint venture with Indian Oil Corporation Limited (IOAGPL), which implements CGD networks across 19 GAs in India.

Share Price Declines Amid Challenges

The share price of Adani Total Gas witnessed a decline of nearly 3% on November 18, 2024. This drop caused the share price to fill an upside gap formed in November last year. With the stock trading below its key moving averages, it signals bearish momentum. On a year-to-date (YTD) basis, the share price has plummeted by 33%, and it has already dropped 8% in October.

Key Reason Behind the Decline

A significant factor contributing to the decline is the reduction in APM-priced domestic gas allocation. As per the press release on November 15, 2024, ATGL was notified by GAIL (India) Ltd about a 13% cut in gas allocation effective November 16, 2024. This reduction affects the entire CGD industry and is expected to adversely impact the company’s profitability.

The company is actively engaging with stakeholders to address this challenge. Meanwhile, ATGL plans to recalibrate retail gas prices to mitigate the financial impact while ensuring uninterrupted supply to its customers.

What This Means for Investors

The decline in share price underscores the current challenges ATGL faces. While the company’s strategy to adjust prices may offset some losses, the overall impact on profitability remains a concern. Investors should closely monitor developments, particularly the outcome of stakeholder discussions and future gas price adjustments.

Conclusion

The gas allocation cut has added to the bearish sentiment surrounding Adani Total Gas. Despite its strong market presence, the stock faces headwinds due to industry-wide issues and declining profitability. As the company navigates these challenges, investors need to assess its long-term prospects amidst short-term volatility.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.