Citi has maintained its sell rating on Petronet LNG with a target price of ₹260 per share, citing rising regulatory and competitive risks that could materially alter bargaining power across India’s gas value chain.
The brokerage referred to a recent PNGRB paper analysing costs across upstream production, transmission, marketing, regasification, and taxation, which proposed several reforms, including changes to APM gas allocation, tax rationalisation, and, critically, regulation of regasification tariffs.
Citi underscored that the proposed regulation of regasification tariffs is particularly significant, as it reinforces the regulator’s long-standing view that LNG terminals should fall under a formal regulatory framework. Such a move could materially weaken Petronet LNG’s pricing power, especially at its flagship Dahej terminal.
The brokerage warned that regulatory intervention could shift negotiating leverage in favour of LNG offtakers, increasing the risk of tariff renegotiations, particularly for volumes tied to renewed long-term Qatar LNG contracts. This, in turn, could pressure profitability and returns over the medium term.
Given these evolving dynamics, Citi reiterated its cautious stance, arguing that downside risks from regulation and competition continue to outweigh upside potential in the stock.
Disclaimer: The views and recommendations above are those of Citi. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
