The hike in excise duty on petrol and diesel is good news for these two companies

• The rise in the price of petrol and diesel might force many consumers towards Compressed natural gas (CNG), which costs relatively less than petrol and diesel.
  
• Almost, 70% of the Mahanagar Gas (MGL) and Gujarat Gas revenue comes from CNG. The shifting of the user base can boost companies’ market value.
  
• The falling demand for petrol and diesel due to the ongoing coronavirus lockdown and the new taxes hike will end up eroding earnings for oil companies like Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum.
  

With the centre raising excise duties on petrol and diesel might not be good news for oil companies. But, it can turn out to be an advantage for city gas distributors like Mahanagar Gas and Gujarat Gas.



The rise in the price of petrol and diesel might force many consumers towards Compressed natural gas (CNG), which costs relatively less than petrol and diesel.

Almost, 70% of the Mahanagar Gas (MGL) and Gujarat Gas revenue comes from CNG. The shifting of the user base can boost companies’ market value.

MGL share price has declined almost over 9.3% since April 30 and Gujarat Gas share price is down by 9% in the same period.

More pain in store for petrol and diesel retailers

On the other hand, the falling demand for petrol and diesel due to the ongoing coronavirus lockdown and the new taxes hike will end up eroding earnings for oil companies like Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum. With that CLSA, a brokerage firm has also cut earnings and target price for these oil firms.

CLSA added that refining margins might stay subdued as global growth keeps demand uncertain.