Daiwa downgrades Gail to hold

MUMBAI: Daiwa Capital Markets has downgraded Gail to hold from outperform on the grounds that transmission volume remains subdued and a rise in the subsidy burden continues to affect the company's prospects.
"We now forecast gas transmission volumes for Gail of 109mmscmd (115.2mmscmd previously) for FY13 and 113mmscmd (115.8mmscmd previously) for FY14, as we see no substantial catalysts for volume growth despite new transmission pipelines being commissioned over the period," said Daiwa's analyst Nirmal Raghavan in a note to clients.
The broker cut its six-month target price for the Gail stock to Rs385 from Rs413. On Friday. Gail shares fell 1.7% to close at Rs 360.55.
"We also expect Gail's subsidy burden to rise. We now forecast a gross under-recovery burden of Rs 1.62 tn for FY13, leading us to raise our subsidy burden forecasts for the company to Rs 35.4 bn from Rs 26.3 bn for FY13 and Rs 37.7 bn from Rs 27.3 bn for FY14," the analyst said.