GAIL shares jump over 5% as tariff hike hopes fuel investor sentiment

Shares of GAIL (India) Ltd. surged over 5 per cent on April 21 after the Petroleum and Natural Gas Regulatory Board (PNGRB) released a consultation paper reviewing tariffs for 10 of the company’s gas pipelines. The move has sparked investor optimism over a potential upward revision in transmission charges an event analysts say could significantly boost GAIL’s earnings.

At around 11:30 AM, GAIL shares were trading at Rs 195.05, up 4.33 per cent intraday. The stock has gained over 2 per cent so far this year.

The PNGRB’s consultation paper comes after GAIL last year proposed a levelised tariff of Rs 78.72 per MMBtu, up from the current Rs 59 per MMBtu. The revised tariffs, once approved, will be applicable from January 1, 2025, through March 31, 2049. According to analysts tracking the sector, even a partial hike say to Rs 70 per MMBtu would be a strong positive for GAIL, given its extensive pipeline network and scale.

Global brokerage house CLSA upgraded the stock from ‘Hold’ to ‘Outperform’ and raised its price target from Rs 175 to Rs 210 per share. The firm also revised its earnings per share (EPS) forecast for GAIL upwards by 9 to 19 per cent, anticipating a potential 20 to 25 per cent tariff hike by June.

“The start of the review process by the PNGRB has improved visibility on tariff changes, which could directly impact the company’s profitability,” CLSA said in a recent note.

Tariff revisions are critical for GAIL, as its pipeline transmission segment contributes significantly to the firm’s revenue. With rising natural gas demand and growing infrastructure, higher tariffs will enhance return on invested capital across key routes.

Market watchers believe the timely revision of pipeline tariffs could be a turning point for the stock, especially amid a broader focus on boosting natural gas usage in India's energy mix.

Investors will be closely tracking further regulatory developments in the coming weeks.