>PANTALOON RETAIL (MORGAN STANLEY)

MANAGEMENT MEETING NOTES

Quick Comment: Reiterate OW -- We met with Kishore Biyani, the promoter of Pantaloon Retail. We maintain our investment thesis regarding improving business outlook and availability of capital to fund growth plans. Consumer demand has picked up sharply in the last two weeks, and the company has various alternate funding plans to expand its business. The management has also expressed its intention to improve transparency through better communication with investors. We reiterate our Overweight rating and believe that any volatility in the stock price should be viewed as an entry opportunity.

Consumer demand has recovered sharply: Management is quite surprised by the sharp recovery in consumption across its key categories such as food, fashion, and home (excluding consumer electronics). According to management, consumer spending in these categories is nearly back to the peak witnessed in the last 18 months. Home Retail had been particularly badly hit in this downturn; it is now witnessing a sharp reversal in growth trend, particularly in the furniture and furnishings segments.

Multiple options for capital raising weighed: The company currently has multiple options available for capital raising, including secondary market offering, strategic financial investors, strategic non-financial investor, rights issue, preferential offering, etc. Over the next 1-3 months, the company could conclude/ announce a few of these plans, we believe.

PRIL likely to stop subsidiary financing: PRIL is also evaluating various plans that include private equity investments in subsidiary companies and/or restructuring the group to ensure that Pantaloon Retail does not need to fund non-retail, finance subsidiary companies.

Key management insights in last 12 months: 1) Cost management at every stage of the cycle is important; 2)growth should not be chased but should be well measured; 3) entering new businesses should be calibrated.

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