Comments
An anticipated and much-awaited victory at the Supreme Court propelled the stock of Delhi-based city gas distributor Indraprastha Gas (IGL). It shot up more than 16 per cent early in the day, and despite paring gains finished higher by about 9 per cent.
The Supreme Court today dismissed the special leave petition filed by the downstream regulator Petroleum & Natural Gas Regulatory Board (PNGRB). The petition was against the Delhi High Court order of June 2012 which quashed the regulator’s directions to IGL to slash tariffs and charges. PNGRB had, in April 2012, issued a directive to IGL to slash network tariff and compression charge by about 60 per cent — with retrospective effect from April 2008. The IGL stock had taken a hammering then falling more than 40 per cent over two days.
The proposed cuts would have resulted in IGL potentially facing losses on its operations, and the retrospective effect would have eroded its net worth. IGL sought relief from the Delhi High Court and won it quickly. PNGRB then took the fight to Supreme Court. IGL’s case however seemed strong with the state and central governments backing its contention that PNGRB does not have the authority to fix the company’s tariffs. The market seemed confident about IGL eventually emerging victorious – since its low in April 2012, the stock has nearly doubled. Besides, in a worst-case scenario, IGL would have had the leeway to adjust marketing margins to compensate for lower network tariffs and compression charges.
The case dragged on in the Supreme Court for nearly 3 years but now with the verdict in IGL’s favour, a major overhang on the stock has been removed. The stock’s run-up today signals relief at the culmination of a long-running dispute though the outcome was along expected lines. That may explain why the stock gave up some gains over the day. Now, the focus shifts back solely to the company’s operations which have been under some rough weather of late. Volume growth has been tepid the past few quarters due to competition from cheaper substitutes.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.