Gujarat Gas shares have declined nearly 17% so far in 2026 and more than 21% over the past year, as the ongoing conflict in the Middle East disrupted the Strait of Hormuz—a critical global trade route—triggering a gas supply crunch. The company was forced to invoke the force majeure clause on some of its gas supply agreements, sending the stock into a tailspin along with the broader market.
However, bulls have staged a recovery on Dalal Street so far in April, as rising hopes of an early resolution to the Middle East conflict have boosted investor sentiment after a prolonged selloff. Oil and gas stocks, among the worst-hit in March, have been at the forefront of this rebound.
Gujarat Gas shares had tumbled more than 23% in March. The company is India’s largest city gas distribution (CGD) player, primarily engaged in supplying natural gas to domestic, commercial, and industrial customers.
Nomura, citing media reports, noted that Middle Eastern countries together supplied approximately 80–90% of India’s LPG requirements in FY25. “LPG infrastructure in the Middle East, such as Qatar’s Ras Laffan, and some refineries in the region have been attacked, impacting supplies in the medium term,” it said.
Despite Indian refiners increasing LPG production by 40%, Nomura estimates that India may still face nearly a 50% LPG supply shortage. “With the government prioritising LPG supply to households, industrial customers have been significantly impacted,” it added.
Ceramic producers in Morbi may shift to natural gas
Ceramic producers in Gujarat’s Morbi region, who largely use propane as fuel, are in discussions with Gujarat Gas to shift to natural gas as they look to resume production, which has been suspended since March 17 due to propane shortages, The Indian Express reported.
“We believe this development significantly alters Gujarat Gas’ outlook in the Morbi region, offering opportunities for strong volume growth. Producers are also planning price hikes of 15–25% to pass on higher gas costs, while the propane shortage could allow GGL to earn healthy margins,” Nomura said.
The brokerage added that the Iran-US conflict has sharply driven up crude oil prices, resulting in losses for fuel retailers in India despite excise duty cuts. “We see a strong likelihood of petrol and diesel price hikes after state elections conclude on April 29. This could improve the cost competitiveness of CNG vehicles and give Gujarat Gas greater pricing flexibility,” it said.
A long-term structural tailwind
The recent LPG crisis has prompted the government to propose a new piped gas framework, mandating a shift to PNG where pipeline infrastructure is available. Nomura believes this could act as a long-term structural tailwind for PNG adoption, supporting volume growth.
“We cut FY27F EBITDA by 8% to reflect near-term margin pressures due to high spot LNG prices. However, we raise FY28F EBITDA by 14% on expectations of improved industrial margins and slightly higher volumes. We upgrade Gujarat Gas to ‘Buy’ with an unchanged DCF-based target price of Rs 390,” Nomura said.
The target price implies an upside potential of over 16% from the previous closing price.
Why caution is warranted
Elara Securities, however, remains cautious. It said the LPG supply disruption during the conflict was largely logistics-driven, with no significant damage to refining infrastructure. As a result, LPG availability is likely to normalise quickly once shipping constraints ease.
In contrast, LNG disruptions stem from both logistics and production-side issues. Elara noted that LNG supply could remain tight for several years, even if geopolitical tensions ease, keeping LNG costlier than propane in the medium term.
“For LNG-linked industrial consumers, this creates unfavourable fuel economics, which could weigh on Gujarat Gas and Gujarat State Petronet,” it said.
It added that Gujarat Gas’ core industrial demand, especially in the Morbi cluster, is highly sensitive to LNG versus propane price dynamics. With LNG prices expected to remain elevated, a recovery in industrial volumes may be gradual, limiting near-term earnings visibility.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)