Infosys guidance could be lower
Saturday, March 31, 2007
Infosys Technologies Ltd, will announce its results for the FY06-07 and will issue a guidance for FY08-09 on the 13th of April. With FBT coming into force from April-1st, Infosys was forcing all its employees to exercise options to avoid taxes. Adding to IT exporters woes is the weak dollar.
Infosys stock has taken a beating of 20% from its high of Rs 2,400. Merill Lynch expects Infosys guidance for EPS growth to be in early 20s and will disappoint the market. The report further adds that the outsourcing story is intact and Merill maintains a BUY with a 12 month target price of Rs 2,600 which is slightly optimistic.
In the near term, their will be weakness in Infy stock however one who wants to take exposure should do so only from long term perspective [12 Months]. TCS has fallen by just 8% from its high of Rs 1,300. I don't agree with analysts who are biased in recommending a 5% discounted target for TCS compared to Infosys. I feel it is unjustified looking at the way TCS is cutting deals and expanding.
Published by DalalStreet Business @ 1:16 PM
RBI Hikes CRR Again
Friday, March 30, 2007
The Reserve Bank of India has hiked the CRR by 50 bps to 6.5% to be effective in two phases - 0.25% from April-14th and another 0.25% from April-28th. The move will suck Rs 15,500 crore from the system. The last time RBI had hiked was in Feburary.RBI has also has hiked the repo rate by 25 basis points (bps) to 7.75% with immediate effect. This means borrowing cost of Banks will go up and will hit their bottomline. Adding to the banking sector woes, RBI has also decreased the rate of interest on CRR desposits from 0.5% to mere 0.25%.
Labels: Cash Reserve Ratio, RBI India
Published by DalalStreet Business @ 6:54 PM
Man Industries get Mega American Order
Thursday, March 29, 2007
Man Industries has bagged an order to manufacture and supply 257 miles of LSAW and HSAW line pipes coated externally and internally with anti-corrosive systems. With this new order, Man Industries order-book stands at Rs 2200 crore.
Man Industries board meets on 31 March 2007, to consider a scheme of demerger between the company and Man Aluminium.
Man Industries is involved in manufacturing and supply of steel line pipes for high and medium pressure applications such as oil, gas, petrochemicals and water transportation. The company is one of the leading manufacturers and exporters of saw pipes and aluminium extrudates.
Man Industries posted a net profit of Rs 16.47 crore in the December 2006 ended quarter against Rs 7.83 crore in the December 2005 quarter. Net sales for the December 2006 quarter rose to Rs 327.11 crore (Rs 206.49 crore).
Published by DalalStreet Business @ 11:20 PM
IT Stocks hammered by worries of US slowdown
Wednesday, March 28, 2007
TCS plunged 4.3% to Rs 1205, Wipro lost 4% to Rs 561.70, Satyam Computer shed 4% to Rs 453 and Infosys shed 3.1% to Rs 1990.
IT stocks fell for the second day in a row today. The fall on Monday (26 March) arose out of concerns from the rupee’s recent surge against the dollar. The BSE IT Index had lost 58.31 points on (26 March), to 5,009.42. IT scrips had recovered from their lower level after a sharp fall in late-February - early-March 2007. The BSE IT Index had surged to 5,095.28 by 22 March, from a low of 4,730.30 on 5 March.
A crisis in the US subprime mortgage sector, which issues mortgages to high-risk borrowers, has raised concerns whether the broader housing sector, and even the world's largest economy, might be dragged down as well. The IT industry derives up to 60 - 70% of its revenue from the US market. The IT industry is eyeing an export turnover of $31 billion in the fiscal ending March 2007, at a time when the demand for offshore outsourcing remains strong.
Some in the investment community believe that IT bellwether Infosys' guidance for FY 2008 (year ending 31 March 2008) can be conservative in view of risks of a global slowdown. Infosys unveils its full year guidance at the time of announcing fourth quarter and annual results in March.
Any rise in the rupee directly impacts the revenue and profits of IT firms proportionately. The Indian rupee traded just below its strongest level in more than seven years on Wednesday (28 March 2007), as banks continued to sell dollars to generate funds in order to tide over a cash crunch.
At 12:00 IST, the rupee was at 43.157/167 per dollar. A break of 43.115 will take it to its strongest level against the dollar since November 1999. The rupee had settled at a 20-month peak of 43.29/30 on Monday (26 March).
Published by DalalStreet Business @ 4:18 PM
Indiabulls Real Estate debuts and declines
Friday, March 23, 2007
The stock hit a low of Rs 359 and a high of Rs 414.80. Exchanges have set Rs 407 as base price for the scrip with a 20% price band. A strong 11.1 lakh shares changed hands in the counter on BSE. Indiabulls Real Estate (IBREL) was formed following the demerger of the real estate business of Indiabulls Financial Services (IBFSL). The company was listed on the bourses today.
It may be recalled that as part of the demerger scheme of IBFSL, a share of IBREL was issued for every share held in IBFSL with 9 January 2007 as record date. Accordingly, trading in equity shares of IBFSL was done on ex-entitlement basis with effect from 2 January 2007. IBFSL stock had settled at Rs 659.65 on BSE on 29 December 2006, the last day when the stock was trading cum-entitlement basis (for allotment of IBREL shares). At the moment of writing this, IBFSL was hovering at Rs 364.
The total equity capital of IBREL is Rs 35.93 crore, consisting of 17.96 crore shares of Rs 2 each. Avoid all Real Estate stocks until further notice.
Published by DalalStreet Business @ 11:38 AM
PSU Banks going back to Government
Friday, March 16, 2007
The finance ministry has ordered the recasting of the boards of all listed public-sector banks, cutting down the number of shareholder directors by 50% while raising the number of government appointed “independent” directors.
Extremely Bad Decision as the government’s grip on public-sector banks will increase.
In a related development, the government has also withdrawn its own directors as well as the Reserve Bank of India’s directors from the management committees of bank boards. This key board committee is responsible for clearing all big-ticket loans that cannot be cleared by the CEO of a bank. The loan-sanctioning power of the public-sector bank CEO is limited to Rs60 crore at small banks and Rs100 crore at big banks. This reminds me of the series of co-operative banks that went bankrupt in between late 90s and 2002 because of involvement of corrupt directors.
Bank CEOs, in private, say that while such nominees are technically independent professionals, in reality most of them are political appointments and normally belonging to the party in power. For instance, one so-called independent director who is set to join a large Mumbai-based bank is Rani Satish, the former minister of state for Kannada and Culture from the ruling Congress party.
“On what basis do I remove a shareholders’ nominee?” asks a visibly frustrated chairman of a very large public sector bank, who says the timing of the government decision is unfortunate because public-sector banks need more outside expertise at a time when they are trying to compete more aggressively with private banks that can attract a more diverse board.
The terrible decision by government to recast public sector bank boards does not technically abide by the capital market regulator’s norms on independent directors on the boards of listed entities. In accordance with Clause 49 of the listing norms, all listed corporations should have 50% independent directors on their boards.
Hopefully the rating agencies like Fitch and Moody's will downgrade India to RISKY category.
Published by DalalStreet Business @ 10:54 AM
HDFC Bank Online Mutual Fund Interface Sucks
Thursday, March 15, 2007
India's leading Private Bank, HDFC Bank is an arrogant bank and sucks badly in customer service.
Here is a Case Study on how HDFC Bank has violated the norms of Association of Mutual Funds of India in providing online mutual fund access to its consumers. I am one of the victim.
I bought units worth Rs 5,000 in Tata Index Fund Nifty Plan - Option A - Dividend Reinvestment. I had downloaded and read the offer document twice before investing. After my initial investment, the market fell and I wanted to BUY some more units, say worth Rs 2,000. I log on to my HDFC Bank and I was shocked that their interface doesn't let me invest less than Rs 5,000. I bought this to the attention of customer service and they are writing back that it has been clearly mentioned in terms and conditions. I wrote back saying HDFC Bank cannot float its own norms and they have to follow AMFI and Terms mentioned in the offer document. Unfortunately, I can't sue them because of WEAK legal system in India.
Here are the screen shots to prove my point.
This is how HDFC Bank takes customers for a ride. I would advise all our readers to stay away from HDFC Bank's Online Mutual Fund interface for investing.
Published by DalalStreet Business @ 12:33 PM
ITC to enter snacks segment
ITC has resolved to launch snack foods, to widen its portfolio of consumer goods and foods. ITC is India's top cigarette maker that also has interests in hotels, paperboard, apparel, retail and information technology, already sells ready-to-eat foods, biscuits and confectionery.
ITC has estimated that branded snacks segment is growing at 30% annually. The category is dominated by unbranded regional firms. ITC's Bingo brand will initially sell varieties of potato chips and finger snacks priced at Rs 5 and Rs 10.
I am a little bit confused as to what is the core business of ITC now ? You thoughts :-)
Published by DalalStreet Business @ 12:34 AM
Dabur India jumps into retail bandwagon
Wednesday, March 14, 2007
On 13 March 2007, Dabur India had announced its plans to enter the organized retail market in India, through its wholly-owned subsidiary, H&B Stores (under incorporation). The Burman Family sold their stake in Punjab Tractors Ltd to pump cash into the retail venture.
The company will invest Rs 140 crores by 2010 to enter the retail market in India with a chain of stores on the Health & Beauty format. The company plans to establish stores ranging from 1,500 sq ft to 6,000 sq ft in size, offering international quality store environment and product range.
Three senior professionals and experts from the global retail industry have been roped in to drive the company's retail foray. This venture is also synergistic with the company's current portfolio of Ayurvedic & Herbal products and would add significantly to the company's distribution footprint.
Published by DalalStreet Business @ 9:33 AM
Torent Cables Investment Update
Tuesday, March 13, 2007
Torrent Cables is a leader in high-tension power cables. Its integrated manufacturing is equipped with the most advanced and well-accepted technology for the manufacture of XLPE-insulated cables up to 66 KV.
Major customers of TCL consist of private players engaged in the distribution of power, industrial houses, engineering, procurement and contractor (EPC) construction and state electricity boards (SEBs).
Of its various listed competitors (Universal Cables, Industrial Cables, Cable Corporation of India, Nicco Corporation, Fort Gloater Industries, RPG Cables, Polycab Wires, and Uniflex Cables), TCL is the most preferred and financially sound. Private sector power distributors — TCL’s main clients — are performing well and they are expected to maintain a similar trend. Public sector companies are also going private and working very hard to cut their T&D losses to improve their bottom line.
Insulated power cables are very safe means to transmit and distribute power among a large numbers of customers, eliminating power theft and reducer transmission and distribution losses considerably. Liberalization in the power sector is expected to create competition among distribution companies and the pressure to perform better will result in higher demand for insulated power cables. Overall, the entire sector is expected to do well in future.
TCL bravely faced rough weather in the recent past. During the turbulent times, TCL undertook a program for massive optimisation of its operations and reduction in cost. The company adopted the policy of cost-consciousness, waste reduction and improving competitiveness. Infusion of Rs 20-crore interest-free funds by the promoters in FY 2004 significantly supported the company’s efforts into reduce interest expenses. Today, TCL is one of fastest-growing and its products are perceived in the market as one of the highest quality yet available at competitive prices. Besides, unlike most others, the company is meeting all its delivery commitments on time.
Besides, the government’s initiatives on power sector reforms have resulted in an increase in demand for power-related products, including cables. Presently, India faces a 10-12% gap in supply of and demand for power. A rural electrification programme has been initiated to ensure electrification of all villages by 2009. There has also been a continued effort to upgrade and modernise the power distribution network. With all these developments, the power industry would attract increased investment. This means more demand for power cables. With this in mind, the cable industry is also working towards increasing its capacities.
TCL’s sales rose 55% to Rs 50.73 crore and net profit was up 66% to Rs 7.02 crore in the quarter ended December 2006 over the quarter ended December 2005. In FY 2007, we expect TCL to register sales and net profit of Rs 186.88 crore and Rs 18.95 crore, respectively. On an equity of Rs 7.48 crore and face value of Rs 10 per share, EPS works out to Rs 25.3. At Rs 179, PE is just 7.1. Long Term Investors can BUY Torent Cables.
Published by DalalStreet Business @ 1:11 AM
Punj Lloyd advances on bagging project overseas
Monday, March 12, 2007
The 300 KTPA plant, due to start up in the first quarter of 2010, is to be built at Saudi Kayan Petrochemical Company's petrochemical complex at Al-Jubail Industrial City, Kingdom of Saudi Arabia, and will incorporate technology from Basell GmbH.
The letter of intent is on the basis of a fixed price for contractor's services and a conversion to a lump sum Engineering, Procurement, Construction (EPC) price, once detailed engineering is sufficiently defined.
Simon Carves is a petrochemical giant with as many as 125 years of experience in successfully delivering plants safely, on time and within budget, to international customers. This project is the 39th high pressure polyethylene plant of to be executed by Simon Carves, Punj Lloyd's subsidiary.
Recently, Punj Lloyd, along with its offshore engineering arm, PT Sempec Indonesia, a wholly-owned subsidiary, secured an offshore platform project - Heera Redevelopment Project - on an engineering, procurement, construction (EPC) basis from ONGC. The Heera field is located about 80 km west of Mumbai, in the Arabian Sea. The project is scheduled to be completed within 16 months.
The order backlog for the group stands at Rs 11,201.74 crore, and is representative of unexecuted orders till 30 September 2006, as well as all new orders received till date. The company was also awarded a letter of intent for 2,66,000 cb phase III expansion of the bulk liquid products terminals by Horizon Terminals, UAE. The value of the project is Singapore $ 49.65 million.
Punj Lloyd had fixed 6 April 2007 as a record date for splitting the existing shares of Rs 10 each into five equity shares of Rs 2 each.
Punj Lloyd also set up a new engineering services outsourcing firm, Simon Carves India, as a wholly-owned subsidiary. It will initially cater to the group's engineering requirements. Gradually, the subsidiary will also compete for outsourcing contracts from other companies. Engineering Services Outsourcing (ESO) holds tremendous potential because of robust growth across Europe, Asia and US, leading to significant development in the engineering services sector, the company said.
Reports indicate that India has the potential to garner around 25% of the global ESO pie, worth around $50 billion by 2020. Currently, the ESO market is worth around $15 billion, with India garnering a healthy 12% share, the report added. We have a BUY rating on Punj Lloyd with a price target of Rs 1,400.
Published by DalalStreet Business @ 7:56 PM
Ambani brothers sudden interest in Media
You already know about Anil Ambani's media ventures from the past one year. His journey began by acquiring controlling stake in AdLabs. Additionally, Anil Ambani bought Rs 1,000 crore worth of SHARES OF TV BROADCASTERS - 10% IN AAJ TAK[TV Today Network] and 6% stake in CNN-IBN shortly after listing.
Today, Mukesh Ambani announced his plans to invest $300 Million in setting up 8-10 TV channels under the leadership of former Star TV CEO, Peter Mukerjea.
It makes strategic sense for Anil Ambani being in the communications business and will very soon step into Dish TV offering. But why is Mukesh Ambani interested in the Media business is every body's guess and both the brothers no longer care for the Non Compete Agreement they signed ?
Tags: Invest India, Media India , India TV, TV
Published by DalalStreet Business @ 11:30 AM
Bajaj, ICICI, HDFC - Insurance Subsidiaries Adding Value
Tuesday, March 06, 2007
Many Indian companies like ICICI, Bajaj Auto, HDFC, Aditya Birla Nuvo etc ventured into Life and General insurance business incorporating a wholly owned subsidiary to grow beyond their core business. Withn 3-5 years of operations, subsidiaries are now ready to be hived off as individual business entities. The insurance industry is expected to grow at 21% CAGR between 2007 and 2011 and private operators are all set to grab a big slice.
1. ICICI Ltd
ICICI Prudential is the market leader amongst the private life insurers with a market
share of 9.5% the second largest life insurer after LIC. It is the largest private operator with a market share of 30% amongst private companies. It has PAN India presence with 472 branches and 176,000 advisors. Per share value of life insurance for ICICI Bank, INR 219.
2.Bajaj Auto Ltd
Bajaj Allianz is the second largest private insurance company in India with a total market share of 5.3% and 17% amongst private operators. It has 900 offices in India and derives 70% of its business from agents while the other 30% from alternative channels like GE Money, Syndicate Bank etc. Valuation of Bajaj Allianz is pegged at Rs143 billion. This amounts to an estimated Rs686 per share or 25% of Bajaj Auto’s current market value.
3.HDFC
HDFC has tied up with Standard Life and has conservatively operated till now. It is the third largest operator amongst private players. It has around 500 offices for sales leads and 52,000 financial advisors to promote various insurance products. HDFC Standard Life Insurance Co. is valued at Rs83bn or US$1.9bn on a 12-months forward basis implying Rs149 per share of its parent HDFC.
Published by DalalStreet Business @ 11:32 AM
Blood on the Street
Monday, March 05, 2007
With a thumbs down to the infrastructure sector and unthoughtful measures of taxation trigerred the post-budget sell off into a blood bath on Dalal Street.At 11:00AM, the Sensex is down 500 points at 12,385. Indian markets were overheated. Adding to its woes, Slow dose of Interest Rate hike, Thumbs down to infrastructure companies and the broken promise about tax holiday for IT companies trigerred the massive sell off in Indian markets.
FIIs have pressed substantial sales over the past few days in contrast to an intermittent surge in inflow in February 2007. As per provisional data, FIIs were net sellers to the tune of Rs 613 crore on Friday (2 March 2007), the day when the Sensex had lost 273 points. Their net outflow was worth Rs 3080.80 crore in four trading sessions, from 26 February 2007 to 1 March 2007.
What Fund Managers are Saying ?
From a life closing high of 14,652.09 on 8 February 2007, the Sensex has lost 14.8%. Deutsche Bank in a post-Budget report states that BHEL, Infosys Technologies, Punjab National Bank and Grasim (a high-risk, high-return play) are its top picks.
UBS shares a similar view. ‘Post the recent correction, relative valuations don’t appear as expensive as they used to be. India is now the fourth most-expensive market in Asia compared to the most expensive status tag it had about a month back.
Published by DalalStreet Business @ 11:06 AM
Budget 2007 - Impact and Analysis
Thursday, March 01, 2007
Looks like the FM had directions from Italian Lady to slowdown the growth and focus on "Common Man", especially with UP elections around the corner. FM rightly said, Budget is presented in a context of Economic and Political conditions. Here are some thoughts,
Sector Cement: [Negative]
These guys have had an extended honeymoon and thus its good that they are punished hard.Increasing excise duty from Rs400 to Rs600 for price above Rs190 per bag and reducing from Rs400 to Rs350 is a negative as cement price per bag in most of the places is above Rs190 at present. With demand strong we believe the increase in the duty would be largely passed on, but continuous efforts by the Government to curb the price increase and reduce the profitability of the industry is visible.
Sector Oil & Gas: [Positive]
Reduction in ad valorem excise duties for petrol and diesel – positive for Oil Marketing Companies IOC, BPCL and HPCL. Reduction in custom duties on Plastics, polyester and intermediates – positive for Reliance Industries, GAIL, IOC and IPCL
Infrastructure status to cross-country pipeline projects – positive for Reliance Industries, GAIL, GSPL, Gujarat Gas and Indraprastha Gas Ltd.
Extension of service tax to mining of oil and gas – marginally negative for ONGC, Reliance, and Cairn India
Healthcare: [Positive]
Healthcare allocation increased. Allocation for immunization program is Positive for Panacea Biotech. HIV eradication to gain momentum - Positive for MNC, Cipla, Wockhardt. 150% weighted average tax deduction for R&D expenses extended for 5 years is Positive for research driven pharma companies-Ranbaxy, DR Reddys Labs, Sun Pharma, Cadila Healthcare, Biocon and Glenmark. Clinical trials out of service tax net. Medical insurance deduction u/s 80DD increased to Rs15,000 is positive for Apollo Group, Max India as more population would be covered by medical insurance.
Information Technology: [Negative] End of Honeymoon
The pampered kid of the Indian industry is all set to face some uphill tasks. Minimum Alternate Tax to be applied to IT companies to 11.2% on book profits. Inclusion of ESOPs under the FBT net negative for the sector. Non-extension of STP benefits beyond 2009 negative especially for medium & smaller sized IT companies. SEZ operations will be spared.
Construction: [Negative]
The budget proposed withdrawing the ten-year income tax breaks on infrastructure construction contracts available under section 80 IA, with retrospective effect from April 2000. WTF ? Am I Kidding ? No way. Before you do business in India be prepared to pay Taxes in retrospective LOL. What a D**k Head :-)
The withdrawal of the benefit will raise the tax liability of construction firms which in turn will impact their profit margins, analysts say. Further, their short-term cash-flow may also be affected due to tax payment for previous years as the tax benefit has been withdrawn from April 2000. One of my favorite stock Punj Lloyd is also in the constructions business but more than half of its contracts are outside India just like L&T.
Real Estate:
Commercial Real Estate rentals bought under Service Tax net. Tax exemptions for Hotels and Convention centers in Delhi and NCR regions. But who knows after the commonwealth games, some other D**k Head Finance Minister may impose tax collections in retrospective. LOL
Their were no significant announcements for Banking, Telecom and Power Sectors in this budget.
Published by DalalStreet Business @ 3:58 AM
