Shares of IGL, MGl rise by 11% as Delhi declares new legislation on EV

Indraprastha Gas (IGL) and Mahanagar Gas (MGL), two City Gas Distribution (CGD) businesses, saw their shares plunge up to 11% on Friday after the Delhi government approved an

EV

In intraday trade, IGL dropped as much as 10.7% to ₹408.25. MGL, on the other hand, dropped 8% to ₹1,032.75, the day's low. The global brokerage company Jefferies downgraded IGL and lowered its target price, which further soured the mood.

An EV transition strategy for cab aggregators, delivery services, and e-commerce businesses has been proposed by the Delhi government. The Lieutenant Governor has not yet given his or her consent. Within the next six months, it hopes to boost the number of EVs in fleets run by businesses like

Ola

This policy mandates a phased transition to electric vehicles: within three years of the notification date, 50% of new purchases must be electric, and within five years, 100% must be electric. All aggregators must have an all-electric fleet by April 1, 2030. Given that the distribution of CNG accounts for 75% of IGL's sales, the company is expected to be significantly impacted by this new regulation.

With a 14 per cent upside, Jefferies has reduced the company to a "hold" rating and lowered its target price to ₹465. According to Jefferies, this may have an effect on 30% of IGL's total sales volumes beginning in FY25. Additionally, it reduced FY25/26 EPS by 7/9 per cent, noting that the increased EV risk will be taken into account by the lower valuation multiple.

About 30% of these volumes come from cab aggregators, the biggest contributors being e-commerce delivery services, Uber, and Ola. Early in 2023, Uber placed an order with Tata Motors for 25,000 electric vehicles. Furthermore, DTC buses and three-wheelers account for around 15% of IGL's volumes. The company also faces EV-related risks since 5,500 EV buses have been purchased and three-wheel EVs have favourable economics. Growth prospects are presented by the company's development into other regions and possible acquisitions, although the NCR region's decline may not be entirely offset by these, the statement said.