MGL and IGL Share Price in Focus Amid Reports of APM Gas Allocation Cut

On April 11, 2025, shares of Mahanagar Gas Limited (MGL) and Indraprastha Gas Ltd (IGL) exhibited notable intraday volatility. According to a news report, this turbulence was triggered by concerns surrounding a potential reduction in the allocation of Administered Pricing Mechanism (APM) gas to City Gas Distribution (CGD) companies.

MGL’s stock opened the session at ₹1,286, which also turned out to be the intraday high, and slid to a low of ₹1,238 as the session progressed. Similarly, IGL shares touched an intraday high of ₹180.55 before settling lower at ₹175 by 3:05 PM. Both counters reflected a swift pullback from their highs, driven by investor caution.

Understanding APM Gas and Its Importance for CGD Players

APM gas is domestically produced natural gas sold at regulated prices significantly lower than international or market-linked rates. For CGD companies such as MGL and IGL, APM gas plays a critical role in ensuring cost-effective supply, particularly for domestic piped natural gas (PNG) and compressed natural gas (CNG) used in vehicles.

The current allocation policy provides up to 50% of their requirements from cheaper APM gas sources. Any reduction in this quota may directly impact the cost structure of these firms, especially if the shortfall is substituted by costlier gas from new fields or imports.

Impact on Margins and Investor Sentiment

According to the news report, the government may reduce the APM gas allocation from 50% to 40%, forcing CGD firms to procure a greater share of their requirements from higher-priced alternatives. Such a shift is expected to increase the overall input costs, putting pressure on operating margins.

The immediate response in the stock market reflected this concern. MGL, in particular, saw its intraday gains fade as traders digested the potential impact of higher procurement costs on future earnings. A similar sentiment was observed in IGL, which also pulled back from session highs.

Broader Implications for the CGD Sector

If the reported reduction in APM gas allocation materialises, it could mark a turning point for the cost dynamics of the CGD industry. While companies may attempt to pass on some of the additional costs to end consumers, there are regulatory constraints and demand sensitivities that could limit their pricing power.

Moreover, rising input costs without a proportionate increase in selling prices may compress profit margins, particularly in high-volume, price-sensitive segments like public transport and residential users.

Conclusion

The reported potential cut in APM gas allocation has brought cost concerns to the forefront for CGD companies. As of now, no official confirmation has been issued, but the market reaction underscores the sensitivity of CGD players to input cost fluctuations, especially those tied to government-controlled resources. Investors and industry observers alike are likely to monitor further developments closely.

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