## GSPL Shares Plunge on Reduced Tariff Order
Shares of Gujarat State Petronet (GSPL) witnessed a significant decline on Monday, dropping by 20% to Rs 302.30 on the BSE. This sharp fall was triggered by the Petroleum and Natural Gas Regulatory Board's (PNGRB) issuance of a revised tariff order for GSPL's HP gas network. The new tariff, effective from May 1, 2024, represents a substantial reduction compared to the previous rate.
capex (Rs 13.7/mmbtu reduction), opex (Rs 8.7/mmbtu reduction), and volume divisor (Rs 11/mmbtu reduction).
GSPL had initially requested an upward tariff revision to Rs 50.77/mmbtu, but the PNGRB's decision fell significantly short of this request. The regulator emphasized that the tariff determination does not automatically grant authorization for the capex, opex, or economic life considered. GSPL will need to obtain separate authorization from PNGRB for these aspects.
Furthermore, PNGRB reserves the right to audit the information provided by GSPL for tariff determination. This audit could lead to further revisions in the tariff based on the findings. Additionally, the tariff will be reviewed in the next financial year if actual volume flows deviate significantly from the expected volume considered by the Board.
Analysts at Motilal Oswal Financial Services (MOFSL) believe that GSPL may appeal the PNGRB's decision, although they do not anticipate any immediate relief. They also highlight the potential impact on GSPL's earnings, estimating a 40-45% reduction in FY25-26 EPS. However, they expect a lower impact on the target price due to the core business's contribution to the overall valuation.