Shares of GAIL (India) Ltd declined 6% to Rs 172 apiece, their lowest level since October 14, on smaller-than-expected tariff hike by regulator Petroleum and Natural Gas Regulatory Board.
GAIL is set for its worst session since August 5, 2024 if the trend holds.
The company's transmission tariff has been revised up by 12% to Rs 65.7 per mmbtu by PNGRB.
The tariff hike is lower than the 20% hike to Rs 78 that the company had sought, said global brokerage Jefferies.
The regulator will consider actual capex, opex and transmission loss in the next tariff revision effective FY29, said Jefferies.
The brokerage said the tariff hike is broadly in line with its expectation.
Transmission volume will recover in FY27, normalisation of summer should aid natural gas demand benefiting GAIL, added Jefferies.
So far in 2025, GAIL stock fell 9%.
Meanwhile, UBS gave a target price of Rs 215 per share and a 'Buy' rating. The next tariff review by PNGRB is scheduled for April 1, 2028, UBS said in a note.
"Tariff hike disappoints and increase in realised tariffs could be even lower. 12% hike in announced tariffs does not mean equal increase in realised tariffs," said UBS.
Current hike in tariffs reflects revision in only two parameters: increase of Rs 5.16/mmbtu on account of higher system-use-gas (SUG); increase of Rs 1.92/mmbtu on account of lower volume divisor as per latest capacity determination, said UBS.
The regulator deferred review of other parameters to FY28, flagging that a true-up of all parameters at this stage would lead to a material increase in tariff and can place unexpected financial pressure on customers, added UBS.
"After several months of delay, PNGRB has announced a 12% hike in tariffs for GAIL’s integrated natural gas pipeline (INGPL) w.e.f. January 2026. This is below 15% that had built into forecasts and well below 33% hike that GAIL was seeking," said global brokerage CITI.
PNGRB has, however, clarified that in order to smoothen out tariff hike and to avoid a sudden increase, it has decided to provide only interim relief to GAIL for now and will fully reflect adjustments to all other parameters in next tariff review in FY28, added CITI while giving a 'Buy' rating and target price of Rs 215 per share.
On balance, we believe stock should react positively to tariff hike. This should also now set into motion implementation of new unified tariff regime, which is a material positive for IGL, said CITI.
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