A sharp surge in US gas and Asian LNG prices could weigh on near-term earnings for India's major gas companies, according to a latest note by Citigroup. While the impact may be time-bound, Citi cautioned that higher input costs and volatility could pressure margins across gas transmission, trading and city gas distribution businesses.
Citi noted that February 2026 Henry Hub gas futures jumped sharply over the past week, rising from about $3.1 to nearly $5.5 per mmbtu. Although March 2026 futures suggest prices could normalise closer to $3.7, the spike could still weigh on fourth-quarter FY26 earnings for companies such as GAIL, Indraprastha Gas and Mahanagar Gas.
For GAIL, Citi said the impact would depend on how much of its US LNG sourcing is not tied to Henry Hub pass-through pricing and how higher feedstock costs affect petrochemical profitability. The brokerage estimates that a $2 per mmbtu increase in Henry Hub prices for one month could reduce GAIL's Q4FY26 EBITDA by about Rs 2 billion.
City Gas Distributors Feel The Squeeze
The pressure could be more pronounced for city gas distributors Indraprastha Gas (IGL) and Mahanagar Gas (MGL), where Henry Hub-linked LNG forms nearly 30% of the gas mix. Citi estimates the EBITDA impact at roughly Rs 0.8 per scm for these companies if higher prices persist, raising concerns around CNG pricing, demand elasticity and margins.
Citi flagged key risks for MGL, including higher gas costs, lower domestic APM gas allocation, slower CNG vehicle conversions, and potential long-term disruption from electric vehicles. Despite this, Citi maintains a target price of Rs 1,610 for MGL, based on a discounted cash flow valuation.
Asian LNG Prices Add Another Layer
Separately, Citi highlighted that a rebound in Japan Korea Marker (JKM) LNG prices in Asia-tracking oil prices more closely-could cap India's LNG imports.
This, in turn, could weigh on volumes and profitability for Petronet LNG, even as its long-term fundamentals remain supported by capacity expansion at Dahej and improving utilisation at the Kochi terminal.
Valuations Intact, Volatility Remains
Despite the near-term headwinds, Citi maintained its constructive long-term view on the sector. It values GAIL at Rs 205 per share, factoring in its gas transmission stability and stakes in listed and unlisted entities, while pegging IGL's target price at Rs 260. Citi's target price for Petronet LNG stands at Rs 260, based on a DCF valuation.
However, the brokerage cautioned that sustained volatility in global gas markets, higher-than-expected input costs and regulatory risks could continue to challenge earnings visibility for India's gas players in the months ahead.
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