Feature

City Pipers

Gas distribution utilities are attracting investor attention as they promise safety and growth

In the last one month city gas distribution (CGD) companies such as Indraprastha Gas (IGL) and recently listed Mahanagar Gas (MGL) have seen a 14-26% spike in their stock price. “Unlike power and large industrial users where gas competes with coal or liquid fuel, city distribution enjoys the unique advantage of convenience, competitive cost and regulatory support. Our analysis of comparable metros such as Beijing suggests gas is likely to see more adoption at city level than at country level,” says Ritesh Gupta, analyst, Ambit Capital. MGL, IGL and Gujarat Gas not only are a monopoly in their respective markets but also have a formidable entry barrier. “A new player cannot enter till the five-year exclusivity period ends. But in that period the existing player will ideally juice out everything and there will be very little left for the new player to justify the huge investment and time,” says Harshvardhan Dole, analyst, IIFL.