GAIL shares in focus after lower than expected transmission tariff revision by PNGRB

Shares of GAIL will be in focus on Friday, November 28, after the long-awaited transmission tariff revision orders were issued by the PNGRB late last evening.

As per the revised tariffs, the new transmission tariff levy will be ₹65.7 per Million Metric British Thermal Unit (MMBtu), compared to the current ₹58.6 per MMBtu. This implies a 12% increase in tariffs from the current levels.

However, the revision in tariff is lower than the ₹78 per MMBTU that the company had sought.

Additionally, the order also stated that the truing up of other factors such as Actual and future capex and operating expenditure, transmission loss, working days, revenue sharing adjustments, along with other amendments will be considered in the next tariff review exercise, which will be done in financial year 2028, and take effect from April 1, 2028.

According to brokerage firm ICICI Securities, the 12% increase is also lower than the 20% increase that the street was factoring in.

"Our base case estimates were at a ~15% increase from financial year 2027, so the 12% increase implies a 2.5% to 4.7% hit to GAIL's Earnings Per Share (EPS) for financial year 2027 and 2028," the brokerage wrote in its note.

ICICI Securities also wrote about the adjustments for actual and future capex and opex not being considered in the current tariff revision, stating that the regulator intends to limit the impact on the customer at one go.

"Therefore, while the impact on FY27 and maybe FY28 may be negative vs street and indeed I-Sec estimates, the window of further revision in the next review in FY28 creates an upside risk for GAIL," the note stated.

ICICI Securities maintained its "buy" recommendation on GAIL with a price target of ₹215, which implies a potential upside of 17% from current levels.

Shares of GAIL had ended 0.6% lower on Thursday at ₹184.1. The stock has risen 4% in the last one month, but is down 3.7% so far in 2025.