Nomura initiates 'Buy' on GAIL India stock; sees 29% upside; here's why

Global brokerage Nomura has assumed coverage on GAIL India with a 'Buy, citing potential upside from regulated tariff hikes and long-term recovery in the petrochemicals segment; check target price

Global brokerage Nomura has assumed coverage on GAIL India stock with a ‘Buy’, setting the target price at ₹225, citing potential upside from regulated tariff hikes and long-term recovery in the petrochemicals segment. The target price implies an upside of up to 29.3 per cent from Wednesday’s close at ₹173.95 per share. 

 

On Wednesday, GAIL India's share price was trading 0.43 per cent higher at ₹173.95 per share. In comparison, BSE Sensex was up 0.40 per cent at 81,425.15. 

 

In a year, GAIL India shares have lost 21 per cent as compared to the Sensex’s decline of 1 per cent.

 

Why is Nomura bullish on GAIL India? 

Regulatory tariff hike a key trigger

The Petroleum and Natural Gas Regulatory Board (PNGRB) revises tariffs every three years; the last revision to ₹58.6/mmbtu took effect on April 1, 2023. GAIL has now sought approval for a 33 per cent hike to ₹78/mmbtu to offset higher compressor gas costs (as APM allocation reduced to zero) and lower pipeline capacity determination, Nomura noted.

 

Analysts expect tariff approval at ₹70/mmbtu (up 19 per cent) from April 2026, potentially driving a 42 per cent year-on-year (Y-o-Y) jump in gas transmission Earnings before interest and tax (EBIT) and a 24 per cent rise in consolidated EBIT in FY27.

Petchem pressure may ease from FY27F

GAIL’s petrochemicals business has struggled for three years due to Chinese oversupply and weak pricing, with Q1FY26 impacted by a planned plant shutdown. Input costs also rose as Henry Hub prices jumped 54 per cent Y-o-Y. However, GAIL is investing ₹1,730 crore in new petchem capacity over the next two years, years, which could bring meaningful earnings contribution once the petchem cycle turns, according to the brokerage.

 

China’s “anti-involution” policy could reduce Asian capacity by 10–11 per cent, easing oversupply and improving margins from FY27 onwards.

Gail India Stock Outlook

GAIL is projected to deliver a 9.2 per cent Earnings before interest, tax, depreciation and amortisation (Ebitda) compound annual growth rate (CAGR) in FY25–28, with stronger free cash flows, healthier return ratios, and benefits from the government’s strategy to lift natural gas’s share in the energy mix from 6.5 per cent to 15 per cent by 2030.