Shares of GAIL (India) Ltd. gained nearly 4 percent in intraday trade on Monday as the Petroleum and Natural Gas Regulatory Board (PNGRB) is holding an open house session inviting stakeholder comments on increasing the unified pipeline tariff.

Share Market Live

NSE

The oil sector regulator, PNGRB, on Friday proposed to raise the average tariff across all pipelines for GAIL by 41 percent. PNGRB also announced its plan to hold an open house on March 6 regarding the same.

PNGRB has sought comments from stakeholders on the proposed tariff hike by March 15.

The final tariff is expected to be released soon after the open house session.

Brokerage Jefferies has initiated a Hold rating on GAIL, with a target price at Rs 90 per share, indicating a downside of 17.5 percent, stating that the PNGRB's proposed unified tariff at $60.9/mmBtu is higher that its estimates.

The state-owned natural gas distribution company recently proposed an integrated tariff encompassing most key gas transmission pipelines in its network, which could result in an overall 70 percent increase in pipeline tariffs.

Jefferies believes that the proposed tariff could increase the standalone EBITDA by 15 percent, led by a 30 percent rise in tax EBITDA.

The company’s post-tax return on capital employed (RoCE) is expected to remain at 5 percent, ruling out the large multiple expansions, the brokerage said.

According to Jefferies, the fair value shall rise to Rs 110 if the proposed tariff gets finalised.

CLSA on the other hand has a Buy rating on GAIL, with a target of Rs 125/share indicating a 14.67 percent upside, as the company could model a 40 percent hike, while a 52 percent hike would lead to GAIL’s earnings per share in the next fiscal year boosting by an estimated 7 percent.

The brokerage added that a higher share of stable utilities earnings would also drive a re-rating.

Shares of GAIL ended percent 3.71 percent higher at Rs 109.15 on Monday.

(Edited by : Rukmani Krishna)

First Published:Mar 6, 2023 3:39 PM IST