CP | Dalal Street

Infosys iRace + New Model Unveiled at Analyst Meet

December 8, 20091 min read

We attended the Infosys Technologies Analyst meet and here are the key takeaways. One-third of the total revenues from non-linear streams in the long term. Power focus on S&M team expansion / investments and re-alignment of human asset base (called iRACE) for higher technical / management / vertical depth.

Infosys envisages a revenue mix of 1:1:1 from business transformation, strategic global sourcing and new engagement models.

Organisation structure strengthened via increased thrust on technical / managerial skills development, higher investments in S&M and raising performance benchmark. S&M team strengthened via 30% increase in sales force from 700 to 900/ 1000 by year end.

HRD – Investments in building technology depth (2) creation of 25 career streams (3) creation of career paths and lattices (4) increasing span of control (Software Engineers: Project Analysts: Project Managers now increased to 1:3:9 vs 1:2:4.5 earlier) and (5) enhancing bill ability of its human resource asset.

India business update: Presently revenue from India contributes 1.2% to total revenue (Q2FY10). India biz has a 90 people sales team and 25 clients across verticals. Government is the biggest IT spender in the domestic IT market.

New verticals for higher growth include Lifesciences & Healthcare, Government.

Economy, Markets and Macro Views

Gold – Soaring Prices, Imports Down – Remaking in the Rise ?

December 7, 20091 min read

Indian gold demand has been price inelastic, with the bulk of Indian demand being jewellery. But record-high prices and the global recession, coupled with the drought, have kept away consumers this year. Latest data by the World Gold council indicate that India’s gold demand stood at 137.6 tonnes in 3Q09, down 49% YoY.

Cumulatively, demand in 9M09 was 264 tonnes, vs. 553 tonnes in the same period last year. This could be due to consumers meeting demand by (1) exchanging old items – exchange activity accounts for 60% of retail turnover in recent quarters. (2) melting down and (more…)

Equity Research

Indian Overseas Bank – Reduce

December 7, 20092 min read

Kotak has downgraded Indian Overseas Bank (IOB) to REDUCE from ACCUMULATE earlier after its stock price has moved closer to target price. Although stock is currently quoting at 1.0x its FY11E adjusted book value its disappointing core performance and sharp deterioration in asset quality in last few quarters are likely be depress its valuation.

The bank’s net interest income (NII) was flat at Rs.7.85 bn in Q2FY10 on back of increase in balance sheet liquidity. Its net profit declined 51.0% to Rs.1.76 bn in (more…)

Breaking Corporate India Earnings News

Reliance Power – Court Order will Delay Dadri Project

December 6, 20091 min read

The Allahabad high court ruled that procedures followed by Uttar Pradesh state government to acquire land of 2,500 acres for Reliance Power (RPWR) Dadri project were improper. The land was acquired for setting up of 7.4GW power project at Dadri based on gas from Reliance Industries.

While the dispute relating to gas supplies to RPWR’s gas-based plants from RIL-operated KG D-6 block is still under judgment, we believe the uncertainty on land for Dadri project will further delay it. We now estimate the Dadri project will come on stream in FY13E vs. FY12E before, assuming availability of gas supplies from KG D-6 block over medium term.

Delay in Dadri project commissioning would further strain future cash flows of RPWR, as 1) we forecast no meaningful cash inflow from projects under construction; for instance, we do not expect Sasan to generate positive cash flows till FY14E.

SOTP valuation is Rs 119 for Reliance Power for FY12. Expensive!!!!

India IPO Reviews and Updates

JSW Energy Review – Expensive + Bad Management

December 4, 2009April 19, 20203 min read

The years 2006 and 2007 belonged to the Real Estate companies. 2009 belongs to Power companies, but thankfully, due to powerless listing, Retail Investors have stayed away and let the so called anchor investors / FIIs commit their funds to these projects which are valued as though they are the High Growth Stocks, Electricity and that too in India 🙂

Promoters Background:They are the same Jindals who have defaulted / were on the verge of bankruptcy in their half hearted badly managed and implemented Jindal Vijayanagr Steel project, where we have already lost ton of in 90s money. (more…)

Economy, Markets and Macro Views

Higher CAPEX Growth in FY11- HSBC

December 4, 20091 min read

HSBC economists have an above-consensus GDP growth forecast of 8.5% for the next fiscal year. This forecast is led by an above consensus investment growth forecast of 14%, following a pickup in the capex cycle at the turn of the calendar year. Indian companies have raised INR528bn in equity in the current fiscal year, the second-highest level ever, and INR315bn in debt. (more…)

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