• Gujarat Gas, GAIL, Petronet LNG shares: 3 cos to benefit if natural gas is included in GST

    Jefferies in its latest note said that the Modi government reviving talks to include natural gas under GST should aid companies such as Gujarat Gas Ltd, GAIL (India) Ltd and Petronet LNG Ltd, adding that three out of four key states that could hold sway are under the ruling NDA. Such an inclusion could lower natural gas cost by $0.8-0.9 per mmBtu and aid faster adoption, helping GAIL’s transmission and trading volumes in the medium term, the foreign brokerage said. GAIL’s consolidated Ebitda could rise 2 per cent assuming it retains the benefit in the LPG segment, it added.

    In the case of Gujarat Gas Ltd, it’s competitiveness to propane is seen improving 6 per cent, aiding volumes or margin. Gujarat Gas would benefit in Morbi, Jefferies said noting that the 6 per cent VAT on natural gas sold in Morbi, if subsumed under GST, would improve Gujarat Gas’ competitiveness to propane by Rs 2.5 per kg at current prices. If passed on, this would improve volumes; if retained, it would improve margins.

    Petronet LNG could also benefit as improved competitiveness of natural gas if GAIL passes on the $0.8-0.9 MMBtu benefit should drive volume growth, aiding PLNG’s LNG volumes. It said such benefits would accrue gradually over the medium term.

    “VAT on CNG in Delhi/Mumbai/Gujarat is 0 per cent/3 per cent/5 per cent. We expect CGD players to pass on the benefit to consumers if CNG is subsumed under GST. This should increase the discount to petrol/diesel and marginally aid volume growth,” Jefferies said.

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