State-run GAIL is expected to report better sales in the March quarter of FY23, compared to the December quarter, aided by softening prices of liquefied natural gas (LNG).

Analysts projected that the country’s largest gas utility is likely to post better transmission and trading volumes quarter-on-quarter (Q-o-Q) due to softening gas prices.

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However, earnings on an annual basis are likely to remain impacted by weak demand and lower trading margins.

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City gas distribution companies should benefit from the reduction in the domestic gas price, with the implementation of the new pricing mechanism.

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The company operates city gas distribution (CGD) networks across 31 districts in 11 geographical areas across Delhi, Uttar Pradesh, Haryana and Rajasthan.

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ICICI Securities had, in a report, pointed out that a combination of weak gas demand and shortage of supply caused by geopolitical issues (Gazprom force majeure) is likely to lead to another weak quarter for GAIL.

However, the softening of spot LNG prices from February 2023 is expected to drive stronger utilisation of the Dahej terminal, leading to strong earnings in the January-March period.

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During Q3 FY23, the maharatna company’s natural gas transmission volume fell to 103.74 million standard cubic metres per day (MSCMD) from 107.71 MSCMD in Q2 FY23. Gas marketing volumes, too, fell to 89.89 MSCMD from 92.54 MSCMD in the previous quarter.

The company suffered an inventory loss of around Rs 1,100 crore due to volatility in LNG prices. However, liquid hydrocarbon (LHC) sales were higher at 248,000 tonnes in Q3 FY23 against 231,000 tonnes in Q2 FY23, while polymer sales fell to 65,000 tonnes against 108,000 tonnes in the previous quarter.

Going ahead, a combination of new gas pricing norms, higher domestic supplies, and moderation in spot LNG prices (in the range of $12 per mBtu) will help drive improvement in sales and earnings.