Shares of GAIL India fell nearly 12 percent on Thursday after global brokerage firm CLSA downgraded the stock to 'underperform' from 'buy'. The brokerage also reduced its target price to Rs 365 from Rs 420 per share earlier.

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The stock declined as much as 12.1 percent in intra-day deals to Rs 315 per share on BSE. The stock ended 11.7 percent lower at Rs 316.30 per share as compared to 1.4 percent (554 points) fall in BSE Sensex at 39,530.

According to CLSA, the much-awaited tariff revision for Gail’s HVJ and HVJ upgradation pipeline proved to be a big disappointment versus their expectation of a 15 percent hike.

"This drives a 4-7 percent cut in our EPS (earnings per share) estimates, a reduction of our target price from Rs 420 to Rs 365 and sees us downgrade GAIL from 'buy' to 'underperform'," it added.

The Petroleum & Natural Gas Regulatory Board (PNGRB) approved an integrated tariff rate for two of the key pipelines managed by the GAIL.

The increase of the integrated tariff for HVJ and HVJ upgradation pipeline for Gail to Rs 41.11/mmbtu from Rs 39.55/mmbtu implies a mere 3 percent hike. However, Gail had applied for a more than 100 percent raise to Rs 97.04/mmBtu for both pipelines which could have converted into an 81 percent EPS increase.

Analysts had conservatively estimated a 15-40 percent increase as compared to the raise asked for by GAIL. However, the raise is still way below the street estimates. The two pipelines are important as they account for 60 percent of total transmission volumes for the company.

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First Published:Jun 6, 2019 11:27 AM IST