Piramyd Retail: Wait for gains

Indiabulls, with its edge in the realty sector, should be able to bring the firm out of the red

Piramyd Retail posted losses of Rs 47.8 crore in FY07 and followed it up with a half yearly loss of Rs 45.9 crore in September 2007.

However, the retailer has some value because it has rolled out over 10 lakh sq ft of retail space across seven Piramyd lifestyle stores and 35 TruMart convenience stores, in some very good locations.

Thus, there is some infrastructure that Indiabulls Wholesale Services, a wholly owned subsidiary of Indiabulls Real Estate, which has bought a controlling interest of 63.9 per cent, can build on.

Indiabulls has planned a Rs 1,500 crore investment in retail and plans to set up 30 hypermarkets. Piramyd will bring to the table a presence in two more formats.

Given that organised retailing is yet in its nascent stages and Indiabulls has an edge in the real estate space, it should be able to turn the company around quickly. It is the high cost of real estate that is stymieing growth of other retailers.

Piramyd came out with its IPO two years ago at Rs 120, and has traded mostly at a discount since then. It had accumulated losses of Rs 55.3 crore at the end of FY07, and after the current year's losses, its net worth stood eroded by 80 per cent.

Obviously, Indiabulls will need to pump in resources to pull Piramyd out of the red. But then, it plans to be in the retail business and has obviously allocated adequate capital.

The Piramyd stock has risen 64 per cent in the last one week and 120 per cent over the past month.

However, from these levels, shareholders should be willing to wait a while before they see similar returns.

Gail: Growth in gas volumes

Gail is expected to significantly grow its volume of gas transmission from its agreement with Reliance Gas Transportation Infrastructure for transporting natural gas from the Krishna-Godavari (K-G) basin.

The stock had reached a 52-week high of Rs 501.95 during Monday trade, and closed at Rs 499 at the end of the day's trade, after the announcement.

Analysts highlight that Gail's transmission volumes are likely to increase from 82 mmscmd (million metric standard cubic metre per day) to over 130 mmscmd by FY10, a growth of more than 20 per cent.

That's mainly because of increased gas transported from RIL's KG-D6, coupled with higher gas availability from PMT (Panna, Mukta and Tapti) and higher capacity at Petronet LNG's terminal at Dahej.

Apart from enhanced gas transmission in the medium term, Gail is also expected to leverage its petrochemical capacity, which is set to increase by 32 per cent, given the commissioning of its new 100,000-tonne HDPE (high density polyethylene) capacity in January 2008.

While demand for this new facility is expected to remain strong in the Asian region, pricing pressures are expected over the next few years due to capacity expansions that would come onstream in neighbouring countries.

As a result, GAIL's ability to manage changes in the polymer cycle over the next few years will be crucial.

Nevertheless, several brokerage houses have raised their earnings forecast for FY09 and FY10, given the anticipated growth in volumes in its various businesses. The stock trades at 17 times estimated FY08 earnings and 14 times FY09 earnings.

With contributions from Shobhana Subramanian and Amriteshwar Mathur