GAIL dips 7% on huge volumes; why gas transmission stock under pressure?

Gail stock crash: The Petroleum and Natural Gas Regulatory Board (PNGRB) approved a lower-than-expected tariff of Rs 65.69/mmbtu, versus street expectation of Rs 70/mmbtu.

Don't want to miss the best from Business Standard?

GAIL (India) share price today

 

Shares of GAIL (India) slipped 7 per cent to ₹171.80 on the BSE in Friday’s intra-day trade amid heavy volume. The sell-off at the counter came after the Petroleum and Natural Gas Regulatory Board (PNGRB) approved a lower-than-expected tariff of ₹65.69/mmbtu, versus street expectations of ₹70/mmbtu, limiting near-term upside for the stock, said analysts.

 

The stock price of the gas transmission & marketing company hit an over two-month low and was trading at its lowest level since September 26, 2025. It had touched a 52-week low of ₹150.60 on March 4, 2025.

 

At 09:59 AM; GAIL was quoting 5 per cent lower at ₹174.15, as compared to 0.16 per cent rise in the BSE Sensex. As many as 20.18 million equity shares changed hands in the first 44 minutes of trading on the NSE and BSE.

 

Why is GAIL's stock price under pressure?

 

The PNGRB has approved an increase in the pipeline tariff for GAIL's integrated network, raising it from ₹58.60/mmBtu to ₹65.69/mmBtu. 

 

Although this approved rate is lower than GAIL's requested ₹78/mmBtu, it represents a substantial hike from the previous tariff.

 

This new rate, effective January 1, 2026, is expected to significantly boost GAIL's overall earnings, particularly its gas transmission EBITDA. The next tariff review by PNGRB is scheduled for April 1, 2028, ICICI Securities said in a note.

 

The PNGRB’s final tariff determination for GAIL’s Integrated Natural Gas Pipeline (INGPL) has come in at ₹65.69/mmbtu (effective January 1, 2026), well below the ₹70/mmbtu expected by the street and also below GAIL’s own submission of ₹77.98/mmbtu for this cycle. This compares to the previous tariff of ₹58.61/mmbtu (FY23 order), said analysts at InCred Equities. 

 

The key driver of the increase to ₹65.69 was the recalibration of SUG (system-use gas) and the revision in volume divisor, while PNGRB kept all other parameters flat – including future capex, opex, and replacement capex.

 

The final tariff of ₹65.69/mmbtu is meaningfully below the ₹70/mmbtu expected and significantly below GAIL’s own claimed requirement (~₹78/mmbtu). By freezing the tariff for ~2 years, PNGRB has effectively capped upside to GAIL’s transmission earnings before interest and tax (EBIT).

 

Given market positioning and the anticipated tariff tailwind, the disappointment could lead to stock weakness in the immediate sessions, especially as the Board firmly rejected most capex/opex additions, the brokerage firm said.

 

Analysts at YES Securities had expected the finalization of pipeline tariff revision at ₹72–73/mmbtu.

 

Meanwhile, on a one year view, the brokerage firm in the Q2FY26 result update said that GAIL is positioned to deliver a decline in earnings in FY26, underpinned by a decline in gas transmission volumes and margin stability. Transmission volumes grew by 6 per cent year-on-year (YoY) to 127 mmscmd in FY25, and further is projected to decline to 124 mmscmd in FY26, despite some drive in volumes by CGD expansion and offtake from IOCL refineries (Barauni, Paradip, Haldia).  

 

Dabhol’s all-weather breakwater commissioning and increased cargo traffic (34-36 in FY26) will further support storage and regas margins. On the petrochem side, margin tailwinds from PP/PDH/PDTA projects, along with lower Henry Hub-linked feedstock costs for PATA, should improve earnings. City gas distribution (GAIL Gas + GAs) is expected to deliver consistent volume-led EBITDA growth. Overall, GAIL is set for 1 per cent compound annual growth rate (CAGR) FY25-27e EBITDA growth, with low leverage and a balanced capex cycle.  Those at Emkay Global, too, have downgraded GAIl stock to 'Add' from 'Buy' following the development.  "The order came as a dampener, though the management and PNGRB insisted that it would provide interim relief to GAIL apart from protecting consumers in the near term. We had built in ~20 per cent tariff hike from H2FY26; hence, our FY26/27/28E EPS are cut by 6-7 per cent each. Consequently, we lower our Sep-26 target price by 7 per cent to ₹195 (from ₹210), with a slight adjustment in the transmission segment multiple, given uncertainty around tariff hikes and their back-ended nature," it said.