Realignment of domestic gas prices can be a headwind for CNG: Jefferies

Fixing a floor price for domestic natural gas can be a headwind for compressed natural gas (CNG) business and narrow down the margin expansion headroom for the suppliers of this fuel, analysts at Jefferies have said.

“Any potential floor to APM gas cost could hurt the CNG segment but we think economics could be fine as long as APM gas is below $5 per million British thermal units (mBtu) although future margin expansion headroom could narrow,” the brokerage firm said. Companies such as Mahanagar Gas and Indraprastha Gas derive around 75% of their revenue from CNG, while the exposure is lower for Gujarat Gas.