Gujarat Gas shares gain after company announces hike in industrial gas prices

Gujarat Gas share price: Shares of Gujarat Gas jumped more than 2 per cent on Friday after the company raised gas prices for customers in Gujarat’s Morbi. The new rates come into effect starting September 1.

The stock of Gujarat Gas opened higher at Rs 459.95 apiece on the BSE as against its previous close of Rs 449.45. However, the shares pared early gains and were trading 0.81 per cent higher at Rs 453.10 apiece at 11:07 AM.

This is the second time in two weeks that the company has hiked industrial gas prices. The current price of Rs 43.33 per standard cubic metre (scm) is 6 per cent higher than the existing rate of Rs 40.83.

Earlier, Gujarat Gas had raised prices by Rs 2/scm on August 21. In the past two weeks, the company’s rates have surged 12.7 per cent. Prior to hiking its gas price twice, Gujarat Gas had cut rates five times in a row.

Why has Gujarat Gas hiked its prices?

The company hiked the price due to rising global gas prices. Gujarat Gas imports most of its gas, and the firm is striving to hold on to its profit margins in the face of market volatility. The jump in spot LNG prices and propane prices in Saudi Arabia also prompted the company to revise its prices.

Saudi Arabia has fixed the propane contract price at $550/tn as of September. The changed rate will be applicable in India from October. The current price of propane in the country is $470/tn. At the start of August, the Middle Eastern country had raised propane prices from Rs 34.5 to Rs 35 per scm. The jump in prices comes after propane rate cuts in June.

With rising costs, Gujarat Gas has recalculated the volume shift in Morbi and adjusted its rates accordingly.

Gujarat Gas Q1 earnings  

The company reported a year-on-year (YoY) 43.4 per cent decline in net profit for the April-June quarter. Its net profit stood at Rs 215.09 crore. The net profit also dropped sequentially compared to Rs 369.22 crore in the January–March quarter. The firm reported an increase of 10 per cent in its industrial sales volumes, from 5.36 million metric scm per day (mmscmd) to 5.88 mmscmd in the June quarter. The jump in sales was the result of softer spot LNG rates.

The company’s earnings before interest, taxes, depreciation, and amortisation (EBITDA) also declined to Rs 412.71 crore in Q1 FY24, compared to Rs 626.39 crore in the corresponding period last year.