GSPL plunges as pipeline tariff gets slashed

Gujarat State Petronet (GSPL) slumped 19.28% to Rs 305 following a decision by the Petroleum and Natural Gas Regulatory Board (PNGRB) to significantly reduce the natural gas pipeline tariff for the company's Gujarat pipeline network.

The new tariff, set at Rs 18.1/mmbtu and effective from 1 May 2024, represents a 47% decrease from the existing rate (Rs 34/mmbtu) and falls far short of GSPL's requested range of Rs 51-54/mmbtu.

This regulatory decision has triggered a downgrade from a domestic brokerage, which lowered its rating on GSPL from "buy" to "reduce" and revised its price target to Rs 360. The brokerage anticipates a significant negative impact on GSPL's earnings due to the reduced tariff, with a potential decline in Return on Capital Employed (RoCE) from an average of 24% over FY19-23 to a much lower range of 11-12%.

Gujarat State Petronet's primary business objective is to connect various supply sources and users of natural gas in Gujarat through its gas pipeline network. GSPL is the leader in natural gas transmission business in Gujarat and is the second-largest natural gas transmission player in India.

GSPL reported 53.47% jump in standalone net profit to Rs 262.18 crore on 37.73% increase in net sales to Rs 554.24 crore in Q3 FY24 over Q3 FY23.

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