Gail shares lose steam, fall over 10% on disappointing tariff revision

The Gail (India) Ltd stock was the top loser among the Nifty 50 stocks on Thursday, declining over 10%. Not without reason. A slew of brokerages have cut the company’s earnings per share (EPS) estimates by 3-4% for 2019-20 and 2020-21. These cuts were prompted mainly by the disappointment in tariff revision for its HVJ or Hazira-Vijaipur-Jagdishpur pipeline and HVJ upgradation of network pipelines.

The Street was factoring in higher tariff revision. Incorporating PNGRB’s tariff orders, Kotak Institutional Equities expects a 6% increase in Gail’s blended tariffs for gas transmission segment to ₹1.57 per standard cubic meter (scm) for 2019-20. This is lower than the broker’s earlier expectation of ₹1.62 per scm. Note that the measure stood at ₹1.47 per scm in 2018-19.