Petronet LNG shares fell 8.5% during intraday trading on Thursday, January 2, after the Petroleum and Natural Gas Regulatory Board (PNGRB) made unfavourable statements about tariff-related actions. The loss was worsened by Citi’s gloomy forecast, which put the stock on a 90-day negative watch.
Regulatory scrutiny intensifies
PNGRB accused Petronet LNG of abusing gas users by raising tariffs at its Dahej terminal despite increased capacity and utilisation. The regulator claimed that the corporation had been “profiting immensely” at the expense of consumers.
A PNGRB discussion paper stated, “Rising charges while capacities have increased along with over 90 per cent capacity utilisation has led to the company profiting immensely at the cost of gas consumers.” The regulator also flagged concerns that new LNG terminals nationwide are adopting the same tariff model as Dahej, which it believes needs reconsideration.
PNGRB advocates for the regulation of regasification activities in order to ensure fair pricing and the most efficient use of LNG import infrastructure. Regasification is the process of turning liquefied natural gas (LNG) back into a gaseous state for distribution.
Brokerage Downgrade Adds Pressure
Citi restated its “sell” recommendation on Petronet LNG with a target price of ₹310, indicating a potential loss of roughly 4% from current levels. The brokerage firm identified regulatory uncertainties as a key danger to its pricing power and profit margins.
“PNGRB’s stance introduces significant regulatory uncertainty, threatening the sustainability of Petronet LNG’s historically strong pricing power,” Citi warned. The company faces long-term risks to profitability amid escalating scrutiny, Citi added.
Company’s Clarification
After a significant drop in its share price, Petronet LNG released a lengthy statement to the stock markets, addressing regulatory concerns highlighted by the PNGRB. The business unequivocally said that regulating LNG terminals or their rates is not within the PNGRB’s competence. Furthermore, it stated that any effort to control LNG terminals and tariffs would necessitate changes to the PNGRB Act of 2006.
Petronet LNG underlined the competitiveness of its operations, particularly at its Dahej terminal, which has among the lowest regasification charges in the country. These charges, according to the business, are defined by agreements between Petronet LNG and various consumers or capacity holders. The company also stated that regasification prices account for only 5 to 6 per cent of the supplied gas price to consumers, reducing the overall impact on end users.
The company also stated that the industry’s regasification tariffs are established by the market and that there is no monopoly in the regas terminal sector. This, it added, highlights the transparent and competitive environment in which it operates.
Stock Price Trends
Petronet LNG’s stock dropped to ₹317.95 during the session, representing an 8.5% decrease. The current price is more than 17% lower than the 52-week high of ₹384.90 in August 2024. However, the stock is 41% above its 52-week low of ₹225.05, hit in January 2024.
Despite the present loss, the stock had increased more than 53% in the last year, indicating a great performancebeforeo the recent issues.
