Gas distribution stocks rally after PNGRB simplifies gas pipeline tariff

Gujarat Gas soared 19%, Indraprastha Gas hit 10% upper circuit, while Mahangar Gas, Adani Gas and GSPL were up between 9% and 18% on the BSE

Shares of gas transmission companies rallied up to 19 per cent on the BSE in the early morning trade on Friday after oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB) notified regulations for unified gas transmission tariff structure. The tariffs will be applicable based on two zone structure related to distance from source of gas.

Among individual stocks, Gujarat Gas soared 19 per cent to Rs 411 on the BSE on the back of heavy volumes. Indraprastha Gas, on the other hand, was locked in the 10 per cent upper circuit at Rs 492. Meanwhile, Mahangar Gas surged 10 per cent to Rs 1,023, Adani Gas gained 9 per cent to Rs 345, Gujarat State Petronet (GSPL) added 18 per cent to Rs 243, and Gail was up 4 per cent to Rs 107 in the intra-day trade today. In comparison, the S&P BSE Sensex was trading flat at 44,259 at 09:26 am.

Oil regulator PNGRB has simplified the country's gas pipeline tariff structure to make fuel more affordable for distant users and to attract investment for building gas infrastructure. The PNGRB has notified regulations for a 'unified' tariff structure for over a dozen pipelines that form the National Gas Grid which will lead to a 20-30 per cent rise in transportation charges paid by users near the source but a reduction for consumers in the hinterland, a PTI report said.

"Unified tariffs will encourage gas transmission companies to set up new pipelines and will result in long term volume growth. Companies like Gail and GSPL will benefit in terms of higher tariffs and profitability," Analysts at ICICI Securities said in a note.

Those at Emkay Global said that PNGRB has sweetened CGD open access by not considering the incumbent's existing OMC/dealer CNG stations as shipper for allowing access. own. PNGRB has also removed draft provisions challenging infra exclusivity such as allowing shipper to set up compressor facilities, cascade supplies and even pipelines in the event incumbent is not able to do so.

"Protection from the existing OMC CNG volume threat is a relief and near-term positive for CNG-heavy CGD players, though incoming competition would weigh on long-term growth and pricing power. Infra exclusivity protection is positive but technical disputes may crop up ahead. The unified tariff is mostly neutral," they said in a report.