GSPL up 5%, Citi says LNG imports policy to boost earnings

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26 Aug, 2025 12:21

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Moneycontrol Bureau

Investors continued to buy shares of Gujarat State Petronet despite big fall in equity market on Thursday. The stock rallied 5 percent (9 percent intraday) as brokerage house Citi feels the natural gas transmission company could be the biggest beneficiary from new gas policy given its high operating leverage and connectivity to the Hazira regas terminal which is still running at 50 percent of its around 5 MMTPA capacity.

Benefits for Petronet LNG could be capped by capacity constraints at Dahej (already running at more than 110 percent utilisation) while GAIL's principal benefits would be more material in the non-monsoon months (when Dabhol is operational), said the brokerage.

Citi estimated that for every 5 mmscmd increase in volumes, GSPL's earnings could increase by around 28-30 percent against around 7 percent increase for GAIL's earnings.

The Cabinet Committee on Economic Affairs, on Wednesday evening, cleared a new policy (reverse bidding method) for providing imported LNG to stranded gas-based power plants at a concessional rate. The government will auction gas with each power plant allowed to bid up to 30 percent plant load factor (PLF).

The government believes the policy could lead to revival of 31 stranded gas-based power plants of 14 GW capacity and the incremental volumes of LNG that the government expects to import are 10-18 mmscmd.

The government also proposed to provide support to distribution companies from the Power System Development Fund (PSDF) through a transparent reverse e-bidding process which will make the cost of power affordable.

The government aimed to finalise the framework and technology for this policy in the next one month.

Citi said, "The new policy only relies on imported LNG for meeting the fuel requirements of gas-based power plants, and is not akin to the oft-mentioned gas pooling. The latter was always shrouded in uncertainty as it would have involved pooling of LNG with domestic gas which, however, remains in shortage. The domestic allocation (to sectors such as city gas, fertilisers, etc.) therefore stays untouched."

GAIL and GSPL have reportedly been given the responsibility by the government for importing the LNG and supplying it to the power plants.

“However, the mechanism envisages sacrifices to be made collectively by all stakeholders on the incremental LNG imports, including the central & state governments (through exemptions from certain taxes & levies); gas pipeline transporters, viz. GAIL & GSPL (through lower transportation tariffs & marketing margins); regas terminals, viz. Petronet LNG's Dahej, GAIL's Dabhol, and Shell's Hazira (through lower regas charges); and power developers (by completely foregoing their ROEs),” said Citi in its note.

The scrip of Gujarat State Petronet closed at Rs 123.75, up Rs 5.55, or 4.70 percent. GAIL also closed higher by 0.45 percent at Rs 381.80.

Posted by Sunil Shankar Matkar