Category: Breaking Corporate India Earnings News

For Q2FY10, PIL standalone revenue remained flat at 2,016 mn, while its PAT grew by 31% to INR 396 Mn. The EBITDA margin at INR 409mn was up 27% on YoY and 88% on sequential basis. The EBITDA margin at 20% witnessed rise of 424 bps on YoY due to lower forex losses (INR -5 Mn this quarter against 113 Mn during similar period, year ago) and lower other expenses (down 18% YoY). Higher PAT, however was backed by higher
other income which rose to INR 98 Mn (+77% YoY). Other income included reversal of excess provision for doubtful debts (INR 9.5 mn) which made last year, redemption of MF and Other Investment and Interest on FD.

PIL’s order book continued to stand at INR 8000mn, after adjusting for projects on hold and scrapped which has execution cycle of ~12 months.

India’s industrial sector is back and back with a vengeance. The 10.4% year-on-year rise in August was the first double-digit increase in output since October 2007 and compares with a bottom of – 0.2% in December. On a seasonally adjusted basis, our calculations suggest that output rose 2.3% on the month and 5.9% in 3 month-on-3 month terms (25.9% annualised). The latter is India’s strongest increase since at least mid-1994 and can only be termed a powerful V-shaped recovery.

The breakdown of the August release by industry showed mining (12.9%), manufacturing (10.2%) and electricity (10.6%) all registering double-digit growth.Meanwhile, basic and intermediate goods were up 10% and 14.3% respectively, with capital goods production rising 8.3%. The last of these remains below the long-term average of 9.8%. Non-durable consumer goods were the only area to show a slowdown (to 3.7% from 5.8%).

Infosys reported 1.2% revenue growth QoQ in constant currency, which was below our/street expectations. Revenue upsides were essential to drive FY11 upgrades and lack of the same is a disappointment, in our view. Next quarter guidance (flattish) builds in no “year-end budget flush” – one can argue that (as usual) it is conservative.

Margins improved another ~50bps sequentially, which was the key reason for EPS beat (vs. our estimates). Infosys has managed margins very well through the downturn and 2Q margins are a 7-year high (34.6% EBITDA margins in 2Q).

Management sounded more positive than the recent past and expects flattish to a marginal increase in 2010 IT budgets. However, they don’t expect a budget flush which results in a flattish 3Q guidance. Pricing renegotiation are largely over.

Analysts expect full year EPS of Rs 103.96 for FY10 and Rs 110 for FY11. With INR getting stronger Vs the USD, Investors CAN Book Profits in the counter and take exposure to Indian Inclusive Growth Story Stocks. The days of HOLDING Infosys Fad is behind us 🙂

Gold futures scaled a new record on concerns that declining currencies will stoke inflation and increase the demand for the yellow metal as a hedge against inflation.

Gold futures soared to a new record of $1,045 an ounce in intra-day trades in New York, breaching the previous record of $1,033.90 in March 2008. The December delivery contract settled at $1,039.70 per ounce, up 2.2%, or $21.90, on the Comex division of the New York Mercantile Exchange.

On the National Stock Exchange in India GoldBees is up 1% in morning Trade – INR 1564 / Gram.

Spot gold jumped 2.6% to a record $1,043.78. The metal has gained 18% this year.

Gold held in the SPDR Gold Trust, the biggest exchange-traded fund backed by gold, touched an all-time high of 1,134 metric tonnes seen on June 1 and was at 1,098.07 tonnes on Monday.

Silver futures for December delivery surged 4.6%, or 76 cents, to $17.295 an ounce on in New York. The metal climbed to a 13-month high of $17.69 on September 17 and is up 53% this year.

For the week ending 19 Sep ’09, headline inflation (the wholesale price index, WPI) stood at 0.83%. Inflation for the week ending 25 Jul-09 was revised to -0.71% (from -1.58%).

In a shocking move, all major constituents of the WPI index – primary, fuel and manufacturing products – registered a w-o-w rise.

Government Blind Spectator to Food Inflation – Food inflation continues to move up. Price rises were noticeable for vegetables, egg, meat and fish. Food grains, pulses and fruit prices witnessed a w-o-w fall.

India’s monetary authorities face a quandary. On the one hand, signals for monetary tightening are everywhere: strong pick-up in WPI inflation, double digit CPI inflation and significant liquidity overhang. On the other, a subdued global growth outlook, lack of strong domestic growth and the government’s large market borrowing program point towards maintaining an easy monetary policy. While we expect the RBI to start tightening much ahead of the G-3 (Euro area, Japan and the US), the tightening is unlikely to start before late FY10. In the meanwhile, in a bid to manage inflationary expectations, the RBI’s communications are likely to turn increasingly hawkish

The issue of bank consolidation has figured once again with the government saying that public sector banks would need to merge into bigger entities in order to improve upon their competitive strength as the banking industry in the country is opened more liberally to the global banks.

Finance secretary Ashok Chawla said on the issue on Tuesday that subject to synergy and reasonable similarity in culture, public sector banks really needed to look at consolidation and merger over next 5-10 years. He added that in order to support the growth of the economy at 9-10% size was a very important factor.

A number of government committees including the committee on financial systems, whose recommendations laid down the foundations of financial reforms in the country, have earlier argued in favour of greater consolidation. As India opens up its financial system on a growing basis to foreign institutions, in line with commitments made at multilateral trade negotiations and general intentions of the government itself, it has been felt by various quarters that India should have larger domestic banks that can be comparable to global majors. Government of India, Indian Banking Association and Reserve Bank of India (RBI), have all from time to time batted for greater consolidation.

Recommending the consolidation, the finance secretary said, ‘Size is important in today’s world to achieve optimum economies of scale and therefore as a general prescription it would be good for the medium size banks to look at where there are synergies where there are cultural fits and carry forward the process of mergers and acquisition which is essential something which the banks and management have to take a call on.