Summary
GAIL (India) Limited - Q3 FY26 Earnings Call Summary Monday, February 02, 2026
Event Participants
Executives 2 Shri Rakesh Kumar Jain (Director - Finance), Shri Satish Kumar Sinha (Executive)
Analysts 9 Amit (Axis Capital), Bineet (Nomura), Mayank Maheshwari (Morgan Stanley), Nitin Tiwari (PhillipCapital), Pratyush (InCred Equities), Puneet (HSBC), Sabri Hazarika (Emkay Global), Somaiah (Avendus Spark), Vivekanand (Ambit)
Financials & KPIs (Standalone)
| Metric | Reported | Commentary |
|---|---|---|
| Turnover | ₹34,030 crores | -2.7% QoQ; impacted by global energy market volatility and HH price spikes. |
| Profit Before Tax | ₹2,030 crores | -28.1% QoQ; sharp decline due to petchem losses and lower marketing margins. |
| Profit After Tax | ₹1,603 crores | -27.7% QoQ; YoY comparison distorted by last year’s ₹2,440 cr arbitration gain. |
| Gas Transmission Vol | 125.45 MMSCMD | +1.5% QoQ; recovery driven by fertilizer, refinery, and CGD consumption. |
| Gas Marketing Vol | 103.98 MMSCMD | -1.4% QoQ; slight dip amid price-sensitive demand shifts. |
| Polymer Production | 219 TMT | Flat QoQ; segment suffered ₹483 cr loss due to high input gas ($11.2/MMBTU). |
| LHC Production | 199 TMT | -10% QoQ; hit by reduction in APM gas allocation from 0.3 to 0.2 MMSCMD. |
| Pipeline Utilization | 56% | Stable; expected to rise as major corridors (MNJPL, JHBDPL) fully commission. |
| Capital Expenditure | ₹2,186 crores | Quarterly spend; ₹804 cr on pipelines and ₹455 cr on petchem. |
Geographic & Segment Commentary
- Natural Gas Transmission: Volume recovered to 125.45 MMSCMD with December exit at 128.65 MMSCMD. Management expects 134-135 MMSCMD in FY27, supported by 4 MMSCMD growth in CGD and recovery in power/refinery loads.
- Petrochemicals: Reported loss of ₹483 crores this quarter. High input costs (feedstock at $11.2/MMBTU) and rupee depreciation were key headwinds, though polymer prices rose by ₹3,500/MT in early Q4.
- City Gas Distribution (CGD): GAIL Gas Ltd (subsidiary) saw volumes of 7.8 MMSCMD. Direct GAIL CGD operations added 15,990 new DPNG connections; targets 1.5 lakh connections over next two years.
Company-Specific & Strategic Commentary
- Tariff Revision: Received interim unified tariff hike to ₹65.69/MMBTU (+12.1%) from Jan 1, 2026. GAIL has filed a review petition seeking an additional ₹15/MMBTU to account for OPEX and transmission losses.
- Petrochemical Integration: Investing in a C2-C3 pipeline from Vijaypur to Pata (1.5-year timeline) to reduce energy loss by 10%. Evaluating dedicated ethane import infrastructure at Dabhol or Hazira to replace costly LNG feedstock.
- Fertilizer Foray: Board gave in-principle approval for two fertilizer plants on the MNJPL corridor with ₹21,000 crore investment. Projects offer an assured 12% equity IRR and serve as anchor loads for pipelines.
- Project Sanchay 2: Advanced data analytics initiative completed Phase-I; identified 30 use cases with an expected NPV benefit of >₹600 crores over five years.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Transmission Volume | 124-125 MMSCMD (FY26) | Recovery phase confirmed; FY27 target set at 134-135 MMSCMD. |
| Marketing PBT | ₹4,000 crores+ (FY26) | Maintained despite HH price spikes/FX volatility; same run-rate expected for FY27. |
| Annual CAPEX | ₹9,000-10,000 crores (FY27) | Major focus on pipelines (₹5,400 cr shift) and Net Zero/Renewables. |
| LNG Portfolio | 22-23 MMTPA by 2030 | Plan to add 6-7 MMTPA to current 16.5 MMT; currently negotiating for 12 cargos/year. |
Risks & Constraints
| Risk | Context |
|---|---|
| Feedstock Volatility | Henry Hub (HH) price for Feb settled at $7.46/MMBTU (vs $4.69 in Jan), threatening Petchem margins in Q4. |
| Regulatory Uncertainty | PNGRB’s interim tariff order excluded key OPEX/CAPEX truing-up; delay in review petition could defer ₹1,200 cr+ annual revenue. |
| FX/Currency Risk | Exchange rates touching ₹92/USD impact both LNG sourcing costs and petrochemical profitability. |
Q&A Highlights
Transmission & Tariffs
- Question: What is the status of the tariff appeal and the timeline for the next review? (Puneet, HSBC)
- Answer: Current tariff of ₹65.69 is interim; GAIL seeks ₹80+ through review. If not settled, “truing up” in April 2028 will result in a higher catch-up (₹17/MMBTU impact) due to DCF mechanics (Rakesh Jain).
Sourcing Strategy
- Question: Will new LNG contracts be Brent or Henry Hub linked? (Vivekanand, Ambit)
- Answer: Currently favoring Brent-linked as they are more competitive than HH in the current market. Goal is a balanced portfolio to mitigate index-specific spikes (Rakesh Jain).
Petrochemical Losses
- Question: Why continue running the Pata plant if EBITDA is negative due to high gas costs? (Bineet, Nomura)
- Answer: Shutting down hurts energy efficiency and risks losing long-term customers to competitors. Management expects polymer price recovery and feedstock softening in FY27 (Rakesh Jain).
Key Takeaway
GAIL (India) Limited reported a subdued Q3 FY26, with PAT falling 27.7% QoQ to ₹1,603 crores, primarily dragged by a ₹483 crore loss in the petrochemical segment due to high feedstock costs ($11.2/MMBTU). Despite these headwinds, the core transmission business showed resilience, with volumes recovering to 125.45 MMSCMD and a 12% tariff hike effective January 2026 expected to add ₹1,200 crores to the annual top line. Strategically, the company is pivoting toward ethane sourcing to de-risk its petrochemical business and has committed ₹21,000 crores to fertilizer plants to secure anchor demand for its 18,000 km pipeline network. While Q4 margins face pressure from a Henry Hub price spike to $7.46/MMBTU, management maintains a steady FY26 marketing PBT guidance of ₹4,000 crores. The long-term outlook remains tethered to a significant portfolio expansion to 23 MMTPA by 2030 and a healthy FY27 transmission volume target of 135 MMSCMD.
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