Petronet LNG shares slump over 6%: Here's why

Shares of Petronet LNG slumped by over 6 per cent in Thursday's session to the day's low price of Rs 325.50 per share on the BSE. At around 10:09 am, shares traded weak by 5.86 per cent or Rs 20.35 at Rs 327 apiece.

The sharp losses in the energy stock are triggered after global brokerage Citi has continued with its earlier 'Sell' call on the stock with a target of Rs 310, implying a potential downside of nearly 11 per cent from the previous close.

On the stock, the brokerage has initiated a 90-day negative catalyst watch. Also, it highlighted in its note pointed that the company was called out by the regulator- Petroleum and Natural Gas Regulatory Board (PNGRB).

Citi added that the leading gas supplier realised huge profits at the expense of gas consumers.  

The regulator's paper, on the other hand, emphasised that despite Dahej's plan to expand capacity to 22.5 MMTPA, its re-gas charges have increased 5 per cent annually and now are at a very high level for the entire capacity.

And these high re-gas charges have led to the company's increased profitability. Also, the brokerage added that the dual benefits of capacity expansion as well as increasing plant consumption  have not been passed on to consumers.

So, as this latest step by the regulator introduces a substantial regulatory risk, the brokerage in its note added, "Together with increasing competition, we believe this adds to the uncertainty on the sustainability of Petronet LNG's historically strong pricing power".

Petronet LNG share price performance 

The stock in the last one year is up over 44 per cent, with its 52-week low and 52-week high prices at Rs 223.6 and Rs 384.2 per share, respectively.

 Strong pricing power may be lost due to regulatory risks in the future