Petronet LNG may face regulatory risk, Citi warns; Here's what it means for the company

Petronet LNG Ltd. could face regulatory risks as regulatory and competitive dynamics could shift the bargaining power in favour of the company's offtakers, brokerage firm Citi wrote in its note on Tuesday, January 6.

Citi maintained its "sell" rating on Petronet LNG, with a price target of ₹260, which implies a potential downside of 10% from current levels.

The brokerage wrote in its note that the Petroleum and Natural Gas Regulatory Board (PNGRB), in a recently published paper, analysed various costs along the gas value chain — upstream, transmission, marketing, regasification, taxation.

It said the regulator has made some recommendations that primarily entail modifications to the administered price mechanism (APM) allocation, rationalisation of taxes and regulation of regasification.

All of this once again clearly underscores the PNGRB's belief that

regasification terminals need to be brought under the regulatory framework via regulation of regas tariffs, Citi's note said.

This could also pose a potential renegotiation risks to the Dahej regas tariffs for the recently renewed Qatar contract, according to Citi.

Of the 33 analysts that have coverage on the stock, 14 have a "buy" rating, 10 have a "hold" rating and nine have a "sell" rating.

Shares of Petronet LNG were up 1.8% at ₹293.6 apiece around 1.30 PM on Tuesday. The stock has declined 11.6% in the past year.

Also Read: NALCO shares hit record high after Aluminum prices continue to surge