Target: ₹195
CMP: ₹175.45
The regulator PNGRB has finally issued the long-awaited revision order for GAIL transmission tariff (link), declaring a new tariff of ₹65.7/MMbtu vs. current ₹58.6/MMbtu, a 12 per cent increase but lower than the ₹78/MMbtu asked for (implied 33 per cent increase) and also lower than the 20 per cent or so being factored in by the Street. Our base case estimate was about 15 per cent increase from FY27, so the lower about 12 per cent or so tariff increase implies a 2.5-4.8 per cent EPS hit for FY27/28E.
While the tariff is lower than expectations, we note that the regulator has left a window for further revisions, by excluding capex/opex adjustments and stating that the adjustments for them will be made in next tariff order wef FY29. The next tariff revision is due to be decided in FY28 and will be applicable from FY29. Hence, there is a reasonable probability of a further revision in tariffs to the guided tariff of ₹70-72/MMbtu by GAIL from FY29, if even a part of the revisions proposed under these heads is considered by the regulator.
We remain optimistic on further tariff revisions, but near-term EPS cuts and cautious growth prospects across segments drive a downgrade to Add (from Buy). We reduce TP to ₹195 (from ₹215) to factor in the same and also lower DCF assumptions on transmission segment, coupled with lower investment value for other listed holdings.
Published on December 1, 2025
