The shortage of gas in the domestic market has started affecting many sectors and companies. The impact of gas shortage in the domestic market can be seen in many sectors in the form of increased costs and affected production, due to which there is a possibility of increased pressure on the margins and supply chain of companies.
highlights
- There is a possibility that the shortage of domestic gas will affect the restaurant, ceramic, fertilizer and FMCG sectors.
- Disruption in gas supply may increase the input costs of companies, which will increase pressure on margins.
- Stocks like Jubilant FoodWorks, Kajaria Ceramics, Chambal Fertilizers and Britannia are on the radar of investors.
The shortage of gas in the domestic market has started affecting many sectors and companies. The impact of gas shortage in the domestic market can be seen in many sectors in the form of increased costs and affected production, due to which there is a possibility of increased pressure on the margins and supply chain of companies.
Restaurant and QSR Sector
Its direct impact can be seen on the restaurant and QSR (Quick Service Restaurant) sectors as these companies depend on commercial LPG cylinders for their kitchen operations. This sector includes companies like Restaurants Brand Asia, Specialty Restaurants, Jubilant FoodWorks, Devyani International, Sapphire Foods and Westlife Foodworld. Any interruption in gas supply can increase pressure on the operations and costs of these companies.
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food delivery platform
Apart from this, it may also have an indirect impact on the food delivery platform. The business of platforms like Swiggy and Zomato largely depends on the restaurant industry. If the gas shortage impacts restaurants’ capacity or they are unable to meet customer demand, it could also impact order volumes and delivery business.
Gas also plays an important role in the manufacturing sector. Gas is an important input for glass manufacturing companies and its cost accounts for about 40 percent of the total input cost of the industry. In such a situation, companies like Borosil may face pressure to increase costs.
Keep an eye on the beverage sector
Similarly, in the beverage sector, companies like United Spirits (USL), United Breweries (UBL), Radico Khaitan and Varun Beverages may also have to face fluctuations in input costs. Glass accounts for 40 percent of the input cost of the alcobev industry.
Impact on FMCG sector
The impact of gas prices can also be seen on FMCG and consumer product companies. Companies like Britannia Industries, Hindustan Unilever (HUL) and Colgate-Palmolive use petrochemical derivatives in their production and packaging processes. The cost of plastic packaging may also increase due to increase in the price of propane and butane produced from gas.
Apart from this, ceramic and building material sector is highly dependent on gas. For companies like Cera Sanitaryware, Kajaria Ceramics and Somany Ceramics, gas accounts for 25 to 30 percent of manufacturing costs. Whereas in the wood panel and laminate sector, increase in the price of phenol and other chemicals can become a big risk for companies like Century Plyboards and Greenlam Industries.
Fertilizer and chemical sector
The fertilizer and chemical sector is also largely dependent on gas. Natural gas is the major raw material for urea production for companies like FACT, NFL, RCF and Chambal Fertilizers. Similarly, chemical companies like Aarti Industries and Deepak Nitrite also use gas based derivatives.
In the textile sector, companies like Vardhman Textiles, Gokaldas Exports and Arvind Ltd use gas for dyeing, processing and steam generation.
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