Aniket PujariA tariff setback and stubborn LNG prices have once again rattled Gail India investors.
Gail (India) Ltd’s shares slipped 5% after the Petroleum and Natural Gas Regulatory Board (PNGRB) set an interim transmission tariff of ₹65.7 per mmBtu (million British thermal units) — 12% higher than current charges but well below Gail’s proposed ₹78 per mmBtu.
The regulator has once again left out certain cost components to prevent steep hikes for customers, echoing the 2023 revision that also undershot the company’s submission.
PNGRB resets tariffs every five years for the domestic gas transmission sector. The lower-than-expected revision has prompted brokerages to trim Gail’s earnings forecasts by 3–7%. JM Financial Institutional Securities, for instance, has cut its FY27–28 profit-after-tax estimates by 3–4.5% and lowered its target price by about 4% to ₹205.
Margin squeeze
Despite crude’s sharp fall, firm liquified natural gas (LNG) prices are hurting Gail’s marketing margins since key contracts are Brent-linked. LNG is up about 20% at Henry Hub so far in 2025 versus an 18% drop in Brent, also dampening domestic gas demand. Gail now expects FY26 transmission volumes to decline ~3% versus 6% growth in FY25.
“The guidance for gas transmission volumes has been repeatedly lowered over the last three quarters by Gail owing to slower-than-expected demand, specifically from power sector, deferred pipeline expansion projects and stronger LNG prices,” according to a 30 November ICICI Securities report.
Recovery bet on FY27
Given the tough market conditions, Gail’s H1FY26 standalone Ebitda fell by 23% to ₹6,400 crore at a time when revenue increased by about 5% to ₹70,000 crore. Outlook for FY27 appears better with JM Financial projecting 18% Ebitda growth, aided by over 7% growth in transmission volumes.
Gail’s shares have fallen by about 8% so far in 2025. The stock trades at an enterprise value of 9.7x FY26 estimated Ebitda, as per Bloomberg, which is higher than its long-term average multiple.
While Gail’s gas transmission network would increase to about 22,000 kilometres by end-FY27 from 16,500 km currently, bringing more consumer centres within its network, a pick-up in demand is essential for the stock to re-rate.
