GSPL Shares Plummet 20 pc, Locked in Lower Circuit – Here’s The Reasons Behind The Plunge (image source: Today Technology Market ResearchDogital)
GSPL Share Price: Shares of Gujarat State Petronet (GSPL) on Monday, experienced a significant downturn, with prices plummeting by 20 per cent to Rs 302.30 on the BSE. This decline occurred following the issuance of a tariff order by the Petroleum and Natural Gas Regulatory Board (PNGRB) pertaining to GSPL’s HP gas network. The revised tariff, slated to take effect from May 1, 2024, was announced in an order dated April 20, 2024.
Market Reaction
The market response to the PNGRB’s tariff order was stark, with a combined 4.08 million equity shares being exchanged. Additionally, pending sell orders for 4.57 million shares were observed on the NSE and BSE. Meanwhile, the S&P BSE Sensex exhibited a modest increase of 0.5 per cent at 73,423.
Impact of PNGRB’s Tariff Order
The PNGRB’s decision to slash the pressure transmission tariff on GSPL’s Gujarat pipeline network by 47% sent shockwaves through the market. The revised regulated tariff of ₹18.1 per million metric British thermal unit (mmbtu) was a significant departure from GSPL’s anticipated rate of ₹50.8 per mmbtu.
Analysis of Tariff Reduction
The 47 per cent tariff reduction, coupled with a 3-year delay in implementation, is expected to have a substantial impact on GSPL’s financial performance. The company faces challenges stemming from pipeline tariff revision delays and the inherent subjectivity of the tariff model. Despite sectoral tailwinds such as increased gas supplies and rising demand, the outlook for GSPL remains clouded by uncertainties surrounding future tariff estimates.
Outlook and Recommendations
Analysts suggest that the only respite for GSPL lies in undertaking higher capital expenditure and aggressively pursuing capacity expansion initiatives. However, the effective tariff cut, estimated at around 37 per cent compared to the FY19 blended book rate, has led to downward revisions in earnings per share (EPS) projections for FY25E and FY26E.
