Gujarat Gas maintains strong credit rating amid strategic mergers

India Ratings and Research (Ind-Ra) has affirmed Gujarat Gas Limited's (GGL) bank loan facilities, maintaining a strong credit profile. This affirmation comes as GGL prepares for the amalgamation of Gujarat State Petroleum Corporation Limited (GSPC) by end-FY26, with Ind-Ra’s assessment factoring in the consolidated business and financial profile of the resultant entity. The company's credit metrics remain strong, characterized by a net cash position and robust cash flow generation of INR20 billion-INR23 billion from its City Gas Distribution (CGD) and gas trading businesses.

Gujarat Gas, India's largest CGD entity, recorded a total volume of 8.8mmscmd in 1HFY26, primarily from industrial (52%) and Compressed Natural Gas (CNG) (38%) segments. Revenues are expected to increase from new geographical areas and a sustained focus on CNG volume growth, including the addition of 20 new CNG stations under the FDODO model in FY26. Despite a total capital expenditure of INR2.9 billion in 1HFY26, the company remained net debt-free, with its entire external debt repaid by FY23.

Post-amalgamation, GGL will operate as a direct subsidiary (25.86%) of the Government of Gujarat, benefiting from GSPC's extensive gas sourcing capabilities. The industrial segment has faced shifts due to propane availability but GGL is actively pursuing strategies to retain customers, including price reductions of INR3.25/scm as of August 2025 and exploring entry into the propane trading business.