01 — At a Glance
The PSU Darling That Got Stuck In Morbi Mud
- 52-Week High / Low₹509 / ₹370
- Q3 FY26 Revenue₹3,658 Cr
- Q3 FY26 PAT₹267 Cr
- Q3 FY26 EPS (₹)3.88
- Annualised EPS (Q3×4)₹15.52
- Book Value₹126
- Price to Book2.96x
- Dividend Yield1.56%
- Debt / Equity0.02x
- Annual EPS (TTM)₹16.88
The Problem In One Chart: Q3 industrial volumes collapsed to 3.93 MMSCMD from 4.35 MMSCMD in Q2 — a ~10% quarter-on-quarter bloodbath. Morbi ceramic cluster, which normally carries the ship, got hammered when natural gas premiums over propane blew out. Management cut rates by ₹4.50/scm in January 2026 to fight back. Early signals: volumes recovering. But margins? That’s the grilling question nobody wants to answer yet.
02 — Introduction
The Government Gas Pipedream That Actually Works (Mostly)
Gujarat Gas Limited is India’s largest city gas distributor by volume, not by flash. No AI announcements. No blockchain pivots. No sudden M&A surprises. Just pipes, gas, and bureaucracy. The company distributes natural gas to 23.83 lakh domestic connections, 4,454 industrial customers, and runs 833 CNG stations. It’s a boring utility that prints cash — until Morbi runs out of money.
The narrative broke in Q3 when industrial volumes, which account for roughly 60% of revenues, contracted sharply because ceramic clusters in Morbi switched to propane. Why? Natural gas had gotten so expensive relative to propane that industrial customers simply flipped the switch. This is not a demand crisis. This is a price crisis. And when the price advantage inverts, the entire value proposition cracks.
Meanwhile, management is in the middle of a mega-merger scheme that will amalgamate Gujarat Gas with GSPC, GSPC Petronet, and GSPC Energy. After the merger, the transmission business (GSPL) will be demerged and listed separately as Gujarat Transmission Ltd. The MCA hearing was February 18, 2026. Target completion: April 2026. Post-completion, everything changes — cost structure, margins, leverage. For now, the old GGL is bleeding.
From the Jan 2026 Concall: “Morbi volumes increased from 1.68 to 2.2 MMSCMD after the ₹4.50/scm rate cut.” — Management. Translation: pricing power got crushed faster than a ceramic pot in a kiln.
03 — The Business: Pipes, Pressure, Propane Wars
How To Sell Invisible Stuff For Slightly Less Invisible Prices
The business model is deceptively simple. Buy natural gas from GSPC (parent company, before merger) or import re-gasified LNG (R-LNG). Transport through 44,540 km of pipeline network across 27 city gas distribution (CGD) authorizations in 6 states + 1 UT. Sell to three segments: domestic (PNG-D), commercial/industrial (PNG-I and CNG). Domestic pays high prices but low volumes. Industrial pays lower prices but massive volumes. CNG is the hero segment — high margins, locked-in customer base of vehicles.
Revenue mix (9M FY26): Industrial dominates at ~52% of total volumes but shrinking fast. CNG is ~30% of volumes and growing double-digits YoY. Domestic is stable at ~8% but offers the best margins. The trapped value: management cannot simply exit industrial and focus on CNG because fixed costs (pipeline maintenance, staff, overheads) don’t move proportionally. Cutting industrial volumes = cutting contribution margin, not fixed costs.
The Morbi Problem: Morbi ceramic cluster consumes ~7.55 MMSCMD of fuel (gas + propane combined). At peak, GGL supplied ~3.2 MMSCMD to Morbi. When propane got cheaper, the cluster shifted. Management response: launch propane supply partnerships to compete on the customer’s fuel choice, not just gas. Smart. Risky. Still unproven.
CNG Growth+11% YoYQ3 FY26 vs Q3 FY25
Industrial Vol-10% QoQQ3 vs Q2
Domestic Adds38,000Q3 connections
Pipeline Net44,540 kmPE + Steel
FDODO Strategy Note: Full Dealer Owned Dealer Operated (FDODO) scheme is launching online CNG stations with minimal capex burden on GGL. First stations commissioned in Morbi and Dwarka. 78 agreements signed. Management expects >10 stations by end FY26, with potential to exceed 1,000 stations in 2–3 years. This is the growth crutch if industrial keeps limping.
💬 Do you think GGL can retain Morbi industrial customers long-term with lower rates and propane offerings, or is it a race to the bottom? Drop your thoughts.
04 — Financials Overview
Q3 FY26: The Numbers Scream, But Not Happily
Result type: Quarterly Results | Q3 FY26 EPS: ₹3.88 | Annualised EPS (Q3×4): ₹15.52 | Full-year TTM EPS: ₹16.88
| Metric (₹ Cr) |
Q3 FY26
Dec 2025 |
Q3 FY25
Dec 2024 |
Q2 FY26
Sep 2025 |
YoY % |
QoQ % |
| Revenue | 3,658 | 4,153 | 3,780 | -11.9% | -3.2% |
| Operating Profit | 447 | 380 | 447 | +17.6% | +0.0% |
| OPM % | 12.2% | 9.1% | 11.8% | +310 bps | +40 bps |
| PAT | 267 | 221 | 280 | +20.8% | -4.6% |
| EPS (₹) | 3.88 | 3.21 | 4.06 | +20.9% | -4.4% |
The Contradiction: Revenue fell 11.9% YoY due to lower industrial volumes and lower gas prices (pass-through to customers). Yet PAT rose 20.8% YoY because the company benefited from lower energy costs and better OPM. OPM expanded 310 bps YoY to 12.2% — the sharpest margin improvement in quarters, partly driven by higher CNG contribution (which has better margins than industrial). The profit beat revenue. That’s unusual. That’s also why the market hasn’t cracked the company yet — raw earnings are still decent, even if the top-line narrative stinks.
05 — Valuation: Fair Value Range
Is ₹373 A Screaming Deal Or A Screaming Trap?
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