GAIL, Other Gas Distributors' Shares Rise As Regulator Extend Marketing Exclusivity

Shares of gas distribution companies surged on Thursday after the Petroleum and Natural Gas Regulatory Board withdrew its September 2021 notice that declared the term-end of marketing exclusivity in different geographical areas.

The regulator has now introduced a new set of guidelines that will take into consideration each geographical area on a case-by-case basis, and the marketing exclusivity of the area will be decided accordingly.

Marketing exclusivity gives a particular company the sole right to sell natural gas to customers within a specific geographic area.

According to Citi, the new development reaffirms the brokerage's view that regulatory pressures could, over time, lead to industry consolidation. This would be done by pushing smaller CGD players who are unable to meet their expansion targets to exit, thereby creating potential acquisition opportunities for the larger players.

GAIL (India) Ltd. surged over 7% to lead the rally in the space, followed by gas companies, such as Petronet LNG Ltd. and Mahanagar Gas Ltd. Shares of Oil & Gas Corp. and Gujarat Gas Ltd. were also trading over 3% higher, compared to a 0.6% advance in the benchmark Nifty 50 as of 10:10 a.m.