Infosys, world's most valuable IT firm

Are Bangalore-based Infosys Technologies and Wipro Ltd, India's software bellwethers, the first and third most valuable software services companies in the world?

It would seem so.

Today, the $1.5 billion Infosys would be the costliest company to acquire even ahead of the $16 billion Accenture, the biggest consultancy and software solutions multinational.

Surprised? Don't be.

The EV or enterprise value of Infosys as on April 25, 2005 at $16.72 billion has nudged ahead of Accenture's, which had an enterprise value of $16.57 billion.

Infosys's market cap though at $17.41 billion is lower than that of Accenture's market capitalisation, which stands at $19.95 billion.

Also to understand how valuable Infosys is as a software company consider the enterprise values of other software companies, both Indian and global.

Bigger MNC competitors like EDS and Bearing Point have enterprise values of $10.27 billion and $1.40 billion, respectively. Another Indian IT major Wipro, with an enterprise value of $13.09 billion, is third after Infosys and Accenture in the most valuable software services companies list.

The enterprise value of a company is calculated by adding the total amount of long-term debt that the company is carrying on its balance sheet to the company's market capitalisation, whilst subtracting the value of cash and cash equivalents that are held by the company.

The enterprise value of a company also reflects the actual purchase price of the company if it were to be acquired without taking into account any premium or discount that may be offered at the time of sale.

With Infosys as a company carrying no debt on its balance sheet, it is but normal to expect a premium to be offered in case there is an offer to buy out India's most valuable software company.

Interestingly, the enterprise value of Infosys is higher than that of Accenture despite its most recent fourth quarter results that had disappointed market watchers and had also led to a fall in the Sensex.

Only IBM, which offers both products and software services -- and hence is not a pure play software consultancy and services player -- is more valuable than Infosys.

The $96 billion IBM dwarfs Infosys with an enterprise value of $135.92 billion and a market capitalisation of $121.16 billion.

Source : Rediff.com

Put your money where you shop

The retail sector will grow faster than the fastest growing sector in the country. But, in return, they sell at a premium. May be justifiably so.

More than a decade ago, shopping for clothes, perfumes, footwear and fashion jewellery - all under one roof - in Mumbai meant going to just one shop. Shopper's Stop in suburban Andheri.
Today, Shopper's Stop has six stores in Mumbai. Add to that an equally large number of competing stores like Pantaloon, Lifestyle and Westside.

Fast forward to 2010. There will be 600-odd malls across the country, constituting nearly 10 per cent of total retail sales. That is great news not just for shoppers but also for investors in stocks.

More here

Hindu Businessline Recommendations

Buy >> HCL Infosystems, India Glycols, Monsanto India

Reality Check

The indices gained yesterday. But it will not bring a sense of relief to investors who have been following the market goings on over the past couple of months. With equity markets globally in a state of dilemma, not much will change towards India overnight. But is it the end of the India story?

It is a known fact that most emerging markets and even key western markets have been on a slippery ground in recent times. With US consumer price index indicating a sign of inflationary pressure, US Fed chairman's strategy to control economic excesses in the world's largest economy is taking shape. It is a given that US rates are on their way up, only the speed and the quantum of the hikes is not really known.

If the rate hike is faster than anticipated, then FII flows could slow down, drying up liquidity in the emerging markets. However, in our view, despite the bonhomie, sustainability of growth of the US economy is still not really visible. And even if it was, there are too many worries it has created in the global investor's mind, which are unlikely to go away any time soon.

The pressure on the US economy over the past few years has been a blessing in disguise for other large emerging economies. In the past couple of years, global investors have really stepped out of their US horizon and looked at other regions. We believe that even if the US economy does sustain its current growth rate, the newer economies are unlikely to come in as an 'after thought' to global investors.

Sure, the next couple of months may be choppy, but longer term, the India story looks good. Even if India trudges along its usual 6%-6.5% GDP growth, that itself offers potential to equity investors to grow their capital, beating most other investing avenues. Though inflationary pressures are also evident in the economy, it is unlikely to be a very sharp rise in interest rates.

For India, FY06 has started on a good note. Structurally, VAT has been implemented, which has the capability to bring in cost efficiencies in the system over the longer term, despite early worries. Efforts are on to allow FDI in retailing and other sectors. Early indications are that the monsoon will be 'normal' this year. This again is a proven positive for the Indian economy. All in all, the benchmark indices at 13 times forward FY06 earnings, does not seem to be steep. Pick and choose!

Source : Equitymaster

Mangalam Drugs - IPO Analysis

Networth Stock Broking recommends a SUBSCRIBE on Mangalam Drugs. Click here to download the entire report.

A pull-back rise possible

The Nifty is trading near its 200-daily exponential moving average that lies at 1908. Volatility can be expected around this level. The index can see a pull-back rise in the near term. In case of a pull-back the Nifty can test 1953-1960 levels, where it can faces resistance. On the downside the index is likely to test at 1894-1872 levels in the short term. The short-term bias remains Down till the resistance at 1970 holds on a closing basis.

On an intra-day basis if the Nifty manages to sustain above 1934, then we may see the index stretch to 1953. On the downside Nifty has support at 1916. If it breaks 1916, then we may see the index seeking lower levels in the vicinity of 1900. Satyam made a matching low at Rs364; on the upside the stock can test Rs386. Tisco has support at Rs352; on the upside the stock can pull back to Rs374. Reliance can pull back to Rs538-542 levels, where resistance can be expected. Infosys faces resistance at Rs1,976 above which the stock can test Rs2,006 levels.

Source : Sharekhan

i-flex, Infosys among top 10 Banking Solutions

Indian companies operating in the banking technology space are seen as a natural choice for banks across the world which wish to adopt advanced technology systems.

In a recent survey conducted by International Banking System (IBS), four Indian companies figure among the top 10 companies worldwide in the banking technology space.

According to the Annual Sales League released by IBS, the four Indian companies are i-flex Solutions (ranked at the top), Infosys (at fifth), InfrasoftTech (eighth) and Nucleus Software (10th).

Meanwhile, another study conducted by the Tower Group, which is an advisory research and consulting firm, points out that technology spending in the global banking industry is well on its way to increase by approximately 4% during the 2005 calendar year. Significantly, almost three-quarters of the spend will take place out of Europe and North America.

"Consumer banking will continue to represent the largest share in technology spending while wholesale banking will experience a steady recovery during the year," said Nasscom research head Sunil Mehta. Flexcube — an internet banking and e-finance platform from i-flex — has been ranked as the world's best universal banking solution for 2002 and 2003 by IBS. "Citigroup accounts for almost 38% of our aggregate revenue. Other top clients include the North Carolina Department of State Treasurer, Bharat Overseas Bank, IMF etc," said i-flex Solutions CEO and CFO Deepak Ghaisas. Infosys software product Finacle is used by approximately 84 banks worldwide. 3i Infotech is ranked 18th worldwide for banking technology products. "In fiscal 2004, our suite of banking software solutions contributed to about 8% of our total income," said 3i Infotech managing director and CEO V Srinivasan.

Rights, bonus, splits no more good news for stocks

38 of 45 scrips have declined after such Announcements

The shares of 38 companies, out of a total sample of 45, whose prices got adjusted for either bonus, rights or stock-splits between January and April 2005, have seen their prices decline sharply after the
respective adjustment.

A Business Standard Research Bureau study shows that out of the 45 stocks, 16 have declined between 20 per cent and 50 per cent, while 12 fell between 5 per cent and 20 percent. The scrip price of only seven companies firmed up after the adjustment, while ten scrips declined by
around five per cent each.

The shares of Interworld.com got adjusted for stock-split when the face value was reduced from Rs 10 to Re 1 per share on February 14, 2005. After adjusting for the stock-split, the stock price fell by a
big 50 per cent from ex-split price of Rs 3.35 on February 14, 2005 to Rs 1.70 on April 15.

Likewise, Doctors Biotech India's share price declined by 35.2 percent from ex-split price of Rs 8.50 on January 18 to Rs 5.51 on April 15. The stock was split, from Rs 10 per share to Re 1 per share.

Hitech Gears' shares, adjusted for a 1:1 bonus issue on March 16, has fallen by 27.4 per cent, from Rs 202.65 to Rs 147.05 now.

Similarly, the stock price of Aarti Industries, which gave a liberal bonus in the ratio of 2:1, went down by 27.1 per cent, from Rs 127.65 (ex-bonus) on February 9 to Rs 93.05 on April 15.

ING Vysya Bank's stock price also fell by 27 per cent from ex-rights price of Rs 200.05 on February 21 to Rs 146 now. The bank issued shares in the ratio of 3:1 at a premium of Rs 35 on a rights basis to existing shareholders.

Others in the category include: Karnataka Bank whose stock price has fallen 26 per cent, Ipca Laboratories (22.6 per cent), Vijay Textiles (21 per cent), Matrix Laboratories (17.2 per cent) and Gammon India (15.4 per cent).

The seven companies which bucked the trend include Vyapar Industries, whose shares appreciated 109 per cent after it became ex-bonus, Mercator Lines (ex-split prices up 20 per cent), G V Films (up 12.5 per cent ex-split), Hindustan Sanitaryware (up 5.7 per cent ex-bonus), Prraneta Industries (4 per cent ex-split) and Gujarat NRE Coke (1 per cent ex-bonus).

Source : Business Standard

Sharekhan Stock Update

Geometric Software Solutions 
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs550
CMP: Rs485.00

 

Growing in double-digits 

 

Result highlights

• Geometric Software Solutions' overall results are in line with our expectations.
• The top line is up by 14.7% in rupee terms quarter on quarter (qoq). In dollar terms the same is up by 17.2%.
• The operating profit margin fell during the quarter but if we ignore the one-time expenses incurred during the period the same is largely in line with expectations.
• The company has given a robust growth guidance for FY2006: a growth of 45-50% in the top line in US Dollar terms and a similar growth at the net profit level.
• At the current market price the stock is quoting at 12.3x FY2006E earnings.
• We maintain our Buy call on the stock.

Result Dates

April 18

Teledata Informatics, Dhampur Sugar

April 19

Essel Propack , HCL Infosystems, Castrol India, Hexaware

April 20

Helios Matheson, Wockhardt, Infotech Enterprises, Aptech, Guj. Ambuja Cement, Sakthi Sugars, Uttam Galva Steel, Kopran

Equitymaster - Zee Telefilms - StockSelect

Equitymaster in their weekly StockSelect recommends a BUY on Zee Telefilms with a target of 190.

Download the StockSelect here

Hindu Businessline Recommendations

Buy >> Aventis Pharma

Sell >> Hero Honda, Dr Reddy's Lab

3i Infotech Status

Check your status here

Expect further weakness

The Nifty breached its recent low of 1970. On the downside the index could decline to 1930 or 1900. On the upside the Nifty faces resistance in the 1992-2004 range. Any intra-day bounce will face resistance around the 1992-2004 range and in the short-term the index could decline to 1900. Intra-day the Nifty faces a resistance at 1972 and on the downside it could decline to 1930. The intra-day bias is down as long as the Nifty stays below 1972.

Maruti faces a resistance at Rs412 and on the downside the stock could decline to the Rs398-390 range. SBI faces a resistance at Rs636 and on the downside the stock could decline to Rs605. Satyam could see intra-day weakness below Rs381. Intra-day Tata Motors is likely to test Rs403. A break below Rs403 is likely to see further weakness in the stock. The stock faces a resistance at Rs419.

Time : Short Term (Nifty)
Target : 1900
Trend : Down
Reversal : Up Above 2004
Support/Resistance : 1930/1952

Source : Sharekhan

Lower Guidance - a buying Opportunity .. .

Networth Stock Broking does a pre-quarter result check on IT companies and suggests a buy on dips on frontline techs and a few niche players.

EPS Growth guidance to be lower compared to last year

 As Q4FY05 tech results are in the offing, we believe that more emphasis would be on the outlook for FY06. The expectations are high following the thunder performances in FY05 with the tier-I companies expected to report more than 40% growth for the year ended March 05. However for FY06 the growth rates are expected to return to normal growth rates due to the base effect and hence would not positively surprise investors to trigger a fresh rally. We expect prices of tier-I IT companies to adjust to these growth rates. We believe that valuations are still attractive on a Price to Growth (PEG) basis. We recommend investors to use every dip in prices as a buying opportunity.

Click here to download the entire report