CARE Ratings has reaffirmed Gujarat Gas Limited’s (GGL) long-term/short-term bank facilities rating at CARE AAA; Stable / CARE A1+. The rating reflects GGL’s leading position in the city gas distribution business, large-scale operations, and satisfactory financial performance. The company’s comfortable leverage and debt coverage indicators also support the rating. GGL reported a profit after tax (PAT) margin of 6.95% in FY25.
Credit Rating Maintained
Gujarat Gas Limited’s bank facilities continue to hold a strong CARE AAA; Stable / CARE A1+ rating, reflecting the company’s financial stability and market position. This rating considers several factors, including GGL’s leadership in the city gas distribution (CGD) sector in India and its well-established operations.
Financial Performance in FY25
Gujarat Gas demonstrated satisfactory financial performance in FY25, with total operating income (TOI) increasing by approximately 5%, driven by a volume growth of around 3%. However, profit before interest, lease rentals, depreciation, and taxation (PBILDT) and profit after tax (PAT) margins moderated to 11.61% and 6.95%, respectively, due to reduced allocation of administered price mechanism (APM) gas.
Q1FY26 Performance
In Q1FY26, the company reported a revenue decline of approximately 13% to ₹3,871 crore, primarily due to decreased volumes from the Morbi industrial cluster. Despite this, the PBILDT margin improved from 12.04% in Q1FY25 to 13.43% in Q1FY26, supported by improved sales realization.
Proposed Scheme of Arrangement
A proposed scheme involves the amalgamation of Gujarat State Petroleum Corporation Limited (GSPCL), Gujarat State Petronet Limited (GSPL), and GSPC Energy Limited (GEL) into GGL, followed by the demerger of the transmission business into GSPL Transmission Limited (GTL). This is expected to streamline the corporate structure and enhance value by eliminating the layered structure. The transaction is anticipated to be completed by Q4FY26.
Factors Influencing the Rating
The rating is susceptible to natural gas demand based on price dynamics of competing fuels, domestic natural gas availability, and regasified liquefied natural gas (RLNG) prices. GGL’s ability to pass on gas price increases to end-users remains a crucial factor. Additionally, the rating considers GGL’s capital expenditure plans for CGD network development and regulatory risks associated with the CGD business.
Liquidity and Debt
The company maintains a robust financial profile with a strong liquidity position and efficient working capital management. The company was debt free as of March 31, 2025.
Source: BSE
