Shares of GAIL (India) Ltd crashed 7% on 28 November after the Petroleum and Natural Gas Regulatory Board (PNGRB) authorised a lower-than-expected tariff of Rs 65.69/mmbtu, compared to street estimates of Rs 70/mmbtu. 

The PNGRB approved an increase in the pipeline pricing for GAIL’s integrated network, from Rs 58.60/mmBtu to Rs 65.69/mmBtu. Although the accepted rate is lower than GAIL’s sought Rs 78/mmBtu, it is a significant increase from the prior pricing.

This new rate, which takes effect on 1 January 2026 and is expected to dramatically increase GAIL’s overall earnings, particularly its EBITDA from gas transportation. The next rate review by PNGRB is set for 1 April 2028.

The main reason for the increase to Rs 65.69 was the recalibration of SUG (system-use gas) and the modification in volume divisor, whereas PNGRB kept all other parameters flat, including future capex, opex, and replacement capex.

The final rate of Rs 65.69/mmbtu is much lower than GAIL’s claimed requirement of Rs 78/mmbtu, which was projected to be around Rs 70.  PNGRB’s tariff freeze for ~2 years limits GAIL’s transmission earnings before interest and tax (EBIT) growth.

Given market positioning and the anticipated tariff tailwind, the disappointment could contribute to stock weakness in the next sessions, especially because the Board forcefully rejected most capex/opex expansions, the brokerage firm said.

At 1:50 pm, the shares of GAIL (India) were trading 4.66% lower at Rs 175.23 on NSE. 

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