Category: Economy, Markets and Macro Views

Infosys Q4 net jumps 14.34% to Rs 1124cr. It has declared final dividend of Rs 6.5 per share. The company reported net profit of Rs 1,124 crore in the fourth quarter versus Rs 983 crore in the previous year.

Dalal Street analysts were expecting net profit of Rs 1039.08 crore (Rs 10.39 billion) in fourth quarter versus Rs 983 crore (Rs 9.83 billion) in the previous quarter, a growth of 5.7%.

FY2008 guidance at 22.8% is in-line with Street expectations.

Media reports suggest that Jet has sealed a deal to acquire Air Sahara at enterprise value of $450 million, marginally lower than $500 million that was decided upon when the two had inked the buy-out agreement in January 2006. The final price will only be clear after the formal announcement which is expected today, reports add.

Reports also suggest that Jet is willing to stick to its commitment to pay off outstanding creditors worth Rs 400 crore of Sahara which was part of the original enterprise value. After the January agreement, Jet had sought reduction in deal value. It had finally walked out of the deal in June 2006 after operating Air Sahara for about three months.

I may have never seen a research report recommendation as this one from Citigroup on Jet Airways. 3H – SELL because of High Risk. Target Price of Rs 390.

Citi analysts expect combined entity to report an EPS of Rs 23.83 for FY2008 and Rs 32.94 for FY2009. Visibility on Jet’s international operations remains limited; domestic market conditions are not expected to improve meaningfully over the next 12 months. Sahara integration another imponderable.

Target price of Rs390 is based on a 7.5x FY07E EV/EBITDAR multiple. Our multiple is based on a 15% discount to the average 8.8x CY06E EV/EBITDAR multiple of our regional airline universe (ex Air Asia). We believe the discount to the Asian airlines is justified given: a) the very competitive domestic landscape; b) delays in stabilization of Jet’s international operations; and c) soaring fuel costs (which Indian carriers cannot hedge).

The rally in SRF was on a high volume of 22.1 lakh shares on BSE.

The scrip of SRF had risen 17.1% to Rs 139.65 on Monday (9 April), boosted by the news of the company raising large money from the sale of carbon credits in the last financial year.

The scrip of SRF had declined sharply in the market fall during the period from early February 2007 to early March 2007, when traders offloaded derivative positions in the counter. From Rs 204.85 on 5 February 2007, it had tumbled to Rs 116.70 on 6 March 2007. The scrip moved in a tight band of Rs 116 – Rs 126, from 7 March to 5 March.

SRF has been one of the early movers in India to cash in on the carbon emission trading (CET) opportunity. Under the Kyoto Protocol, industries in developed countries can offset carbon dioxide emissions by buying carbon credits from projects that cut emissions in developing countries.

SRF’s solid surge in net profit in Q3 December 2006, was due to a huge revenue of Rs 122.28 crore from the sale of carbon credits. Its net profit jumped 417.8% to Rs 70.11 crore from Rs 13.54 crore. Net sales rose 11% to Rs 328.08 crore.

SRF has just finished doubling its capacity to produce engineering plastic, which finds varied application in several industries from auto component to electrical appliances to mobile handsets.

SRF is also banking big on coated fabrics. It is looking at procuring technology from abroad to stay ahead of the competition in this business.

SRF produces refrigerant gases — Fluorochemicals and Chloromethanes — which are used for refrigeration and air-conditioning. SRF has also formed a joint venture (JV) for making anhydrous hydrogen fluoride in China. The project will cost $9 million.

The BSE Sensex opened 350 points down and their was a war between the Bulls and Bears. The Bears mercilessly hammered all the SENSEX stocks around 2:00PM and the Index slipped by another 150 points. Weak hearted bulls joined the bears and bought the index down by 615 points to 12,400 levels. Sensex suffered the worst intra-day debacle since 28 Feb ’07.

This was expected because of the surprise CRR hike by RBI on Friday evening. Auto, Banking, Real Estate stocks were the worst hit. It was no good a day for IT stocks too. Mindtree, Wipro, HCL-Tech and Infosys were all dumped by fund managers.

I recommend Long Term Investors to stay away from the market. Are you Fu&*ing crazy ? Yes I am Fu&*ing insane. Long Term investors, keep away as you will get Indian stocks at still cheaper valuations. SIP investors need not worry at all.

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.

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%.