Shares of Mahanagar Gas fell 2% as investors profited from a recent rally. Shares of the company were trading at Rs 982.10 on the BSE at 10:07 am, down 1.5%.

Mahanagar Gas has announced the acquisition of city gas distribution company Unison Enviro for Rs 531 crore. The stock rallied more than 9% on March 6, hitting a 52-week high of Rs 990 after the acquisition announcement. Since then, the stock has surged from Rs 906.60 to Rs 996.65.

While the acquisition bolsters Mahanagar Gas’s long-term growth prospects, some analysts are cautious about the acquisition’s impact on earnings in the short term.

Citi has a “buy” rating on Mahanagar Gas shares, believing the acquisition can improve the long-term growth prospects of the gas distribution company, which is now the brokerage’s preferred city gas distribution company, followed by Indraprastha Gas Ltd.

The firm has raised its target price on the stock to Rs 1,140.

Meanwhile, Jefferies said that while the volume potential of the Unison Enviro acquisition appears strong, it believes it will drag earnings in FY24-25.

The foreign brokerage maintained its “hold” call on the stock with a target price of Rs 930.

According to Nomura, the deal could alleviate a key pain point of slow Mahanagar Gas sales growth, although execution will be key to making the most of the opportunity.

Nomura said it is a “buy” on Mahanagar Gas shares while raising its target price to Rs 1,150 from Rs 1,035.