GAIL's tariff revision weighs on sentiment but CLSA sees correction as a 'strong buying' opportunity

Shares of GAIL are expected to be in focus on Monday, December 1, after multiple brokerages released fresh views and ratings in the wake of the long-awaited transmission tariff revision issued by the PNGRB.

Under the new structure, GAIL's transmission tariff has been set at ₹65.7 per MMBtu, up from the current ₹58.6 per MMBtu. The 12% increase is well below the ₹78 per MMBtu the company had originally proposed.

CLSA has maintained its 'Outperform' rating with a target price of ₹200 per share.

The brokerage sad that the regulator approved a 12% hike against GAIL's request for 33%, conceding on several parameters within its own framework to limit the burden on consumers.

According to CLSA, this effectively pushes a larger hike to April 2028. The brokerage also flagged the possibility of legal challenges or a review of the order.

CLSA had built in a 20% increase in its estimates; the lower revision now poses downside risks of about 7% to FY27CL EPS and 8% to fair value. While calling this a one-time hit and a negative for sentiment, CLSA said any correction would present an attractive buying opportunity.

HSBC, which has a 'Buy' rating and a target price of ₹235, said the PNGRB's interim order lifts tariffs by 12% versus GAIL's demand for 33%, with the final review pushed out to 2028.

Although the outcome disappointed the market in the near term, HSBC believes a smoother transition will support both volume and value growth. The brokerage flagged risks from a sharp drop in marketing margins or a steep rise in LNG prices that could dent domestic demand.

Nomura also remains positive on the stock with a 'Buy' call and a ₹214 price target. It highlighted the lower-than-expected tariff hike but still expects around 18% y-y EBITDA growth in FY27F on the back of the 12% tariff increase and 9% volume growth.

Nomura said gas marketing earnings could hold strong despite higher Henry Hub prices. It has trimmed FY27/28F EBITDA estimates by 7% and 6% to factor in the lower tariff outcome and weak realisations in the LPG production segment.

Speaking to CNBC-TV18, GAIL's management said the tariff revision will add about ₹1,200 crore to transmission EBITDA this year and roughly ₹1,350 crore in the next.

Director of Finance Rajesh Kumar Jain added that the gap between the company's expectations and the PNGRB order is around ₹5 per MMBtu, and GAIL will review the decision to determine if a relook is required.

GAIL shares closed 4.09% lower on Friday at ₹176.28 and are down 8% so far in 2025.

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