shares of Petronet LNG It fell 8.5 percent during intra-day trading on Thursday, January 2, following comments critical of the Petroleum and Natural Gas Regulatory Board (PNGRB) on tariff-related practices. The decline was further exacerbated by Citi’s bearish outlook, which placed the stock under a 90-day negative watch.
Regulatory scrutiny has intensified
PNGRB accused Petronet LNG of exploiting gas consumers through excessive tariff hikes at its Dahej terminal despite increasing capacity and utilization. The regulator argued that the company was making “excessive profits” at the expense of consumers.
“With over 90 per cent capacity utilization as well as rising charges due to increase in capacity, the company is making huge profits at the expense of gas consumers,” the PNGRB discussion paper said. The regulator also raised concerns that new LNG terminals across the country are adopting tariff models similar to Dahaj, which it believes needs reconsideration.
PNGRB is advocating regulation of regasification activities to ensure fair pricing and optimize the use of LNG import infrastructure. Regasification involves converting liquefied natural gas (LNG) back to its gaseous state for distribution.
Brokerage increases downgrade pressure
Adding to the regulatory headwinds, Citi reiterated its “sell” rating on Petronet LNG with a target price. 310, indicating a potential downside of more than 4 percent from current levels. Brokerage firm cites regulatory uncertainties as a key risk of the company 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. Citi said the company faces long-term risks to profitability amid increased scrutiny.
Company Explanation
Following a sharp fall in its share price, Petronet LNG issued a detailed clarification to the stock exchanges addressing the regulatory concerns raised by PNGRB. The company clearly stated that regulating LNG terminals or their tariffs does not fall within the jurisdiction of PNGRB. Furthermore, it was noted that any steps to regulate lng The terminals and tariffs will require amendments to the PNGRB Act, 2006.
Petronet LNG stressed the competitive nature of its operations, particularly at its Dahej terminal, which offers the lowest regasification tariffs in the country. The company explained that these charges are determined through agreements between Petronet LNG and various users or capacity holders. The company also highlighted that regasification charges are only 5 per cent to 6 per cent of the price of gas delivered to consumers, thereby reducing the overall impact on end users.
The company further clarified that regasification charges in the industry market-Registered and operated without monopoly in the gas terminal business. It outlines the transparent and competitive framework under which it operates, it said.
stock price trends
Petronet LNG store fell to a low of 317.95 during the session, showing a decline of 8.5 percent. This puts it 17 percent below its 52-week high 384.90, achieved in August 2024. However, the stock remains 41 percent above its 52-week low. 225.05, registered in January 2024.
Despite the current setback, the stock is up more than 53 percent over the past year, reflecting strong performance prior to recent challenges.
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