Petronet LNG shares tank 8.5% on regulatory issues, Citi’s ‘promote’ score

Shares of Petronet LNG plunged 8.5 per cent throughout intra-day buying and selling on Thursday, January 2 following vital remarks by the Petroleum and Pure Gasoline Regulatory Board (PNGRB) over tariff-related practices. The decline was additional exacerbated by a bearish outlook from Citi, which positioned the inventory below a 90-day unfavorable watch.

Regulatory Scrutiny Intensifies

PNGRB accused Petronet LNG of exploiting fuel shoppers by means of extreme tariff hikes at its Dahej terminal regardless of rising capability and utilisation. The regulator argued that the corporate has been “profiting immensely” at the price of shoppers.

A PNGRB dialogue paper acknowledged, “Rising costs whereas capacities have elevated together with over 90 per cent capability utilisation has led to the corporate profiting immensely at the price of fuel shoppers.” The regulator additionally flagged issues that new LNG terminals nationwide are adopting the identical tariff mannequin as Dahej, which it believes wants reconsideration.

PNGRB is advocating for the regulation of regasification actions to make sure truthful pricing and optimise using LNG import infrastructure. Regasification includes changing liquefied pure fuel (LNG) again into its gaseous state for distribution.

Brokerage Downgrade Provides Stress

Including to the regulatory headwinds, Citi reiterated its “promote” score on Petronet LNG with a goal value of ₹310, signalling a possible draw back of over 4 per cent from present ranges. The brokerage agency cited regulatory uncertainties as a major threat to the corporate’s pricing energy and revenue margins.

“PNGRB’s stance introduces vital regulatory uncertainty, threatening the sustainability of Petronet LNG’s traditionally robust pricing energy,” Citi warned. The corporate faces long-term dangers to profitability amid escalating scrutiny, Citi added.

Firm’s Clarification

After a steep decline in its share value, Petronet LNG issued an in depth clarification to the inventory exchanges, addressing regulatory issues raised by the PNGRB. The corporate categorically acknowledged that regulating LNG terminals or their tariffs doesn’t fall below PNGRB’s jurisdiction. Moreover, it famous that any transfer to manage LNG terminals and tariffs would require amendments to the PNGRB Act, 2006.

Petronet LNG emphasised the aggressive nature of its operations, significantly at its Dahej terminal, which presents a few of the lowest regasification costs within the nation. These costs, the corporate defined, are decided by means of agreements between Petronet LNG and numerous customers or capability holders. The corporate additionally highlighted that regasification costs represent solely 5 per cent to six per cent of the delivered fuel value to shoppers, thereby minimising the general impression on finish customers.

The corporate additional clarified that the regasification tariffs within the trade are market-determined and function with no monopoly within the regas terminal enterprise. This, it mentioned, underscores the clear and aggressive framework inside which it operates.

Inventory Worth Traits

Petronet LNG’s inventory tumbled to a low of ₹317.95 through the session, marking an 8.5 per cent drop. This locations it over 17 per cent under its 52-week excessive of ₹384.90, achieved in August 2024. Nevertheless, the inventory stays 41 per cent above its 52-week low of ₹225.05, recorded in January 2024.

Regardless of the present setback, the inventory has gained greater than 53 per cent over the previous yr, reflecting a powerful efficiency previous to the current challenges.

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