Nomura has issued a cautious outlook on India’s oil & gas sector, highlighting multiple global and domestic factors that could weigh on margins for city gas distributors (CGDs), oil marketing companies (OMCs), and select upstream players.
The brokerage noted that middle distillate spreads have softened after hitting two-year highs, while Henry Hub gas prices have surged to a one-year high. This combination, Nomura said, poses a direct margin risk for companies heavily dependent on imported or indexed natural gas contracts.
According to the report, Mahanagar Gas (MGL) appears most exposed, with over 30% of its gas sourcing linked to Henry Hub contracts. Indraprastha Gas (IGL) may also face significant pressure, given that around 18% of its volumes are tied to the same benchmark.
Nomura added that GAIL could see an adverse impact as well. The brokerage explained that only about 80% of GAIL’s 5.8 mtpa Henry Hub–linked US LNG portfolio is contracted on a back-to-back basis, while the remaining 20% is sold via Brent-linked contracts, exposing it to pricing mismatch and volatility.
The report also flagged rising input costs for oil marketing companies and CGDs, noting that Saudi LPG prices have increased 3–5%, while the Indian rupee has seen accelerated depreciation, both of which are negative for downstream players, particularly OMCs and Gujarat Gas.
Disclaimer: This article is based solely on the brokerage note provided and does not constitute investment advice. Investors should consult a certified financial adviser before making any investment decisions.