Aberdeen positive on Infosys, TCS, Satyam and realty stocks

Adrian Lim, Investment Manager, Asian Equities, Aberdeen Asset Management, said that there have been long-term buyers in tech stocks. He said that he is positive on Infosys, TCS and Satyam. Most of the management teams of the IT companies continue to focus on delivering a quality service to their clients and that should more an offset the short-term negative impact of a strong rupee. He further said that rupee concerns are over-rated.

About Indian scenario, he said that India is playing catch up with Emerging Markets peers in short-term. He is positive on banking & financial services and he expects good numbers from HDFC bank. He is also positive on Indian real estate stocks over next few years. Valuation levels have priced in a lot of good news, so if you do not hold property stocks, it maybe a difficult time to get in at a reasonable valuation point but the sector has got very strong fundamentals and we are optimistic over the next few years, he said.

Strength in the Q1 numbers would make a strong case for selective revisions upwards for the full year ending March ’08, he believes.



Have seen 3-5% higher pricing in contract renewal & over 5% higher pricing in new contracts: TCS

TCS lost 258 bps on margins due to Rupee; made up 206 bps on hedging. It made up 206 bps on margins via forex hedging and made up 213 bps via productivity on wage hike front. TCS factored in 40/$ in hedging. It started taking more than 1-year view on currency. Made up 206 bps on margins via forex hedging. TCS made up 213 bps via productivity on wage hike front.

TCS have seen 3-5% higher pricing in contract renewal and over 5% higher pricing in new contracts. Q1 saw a pricing increase of about 60 bps. It witnessed a volume growth of 7.6% QoQ. Financial and operational management helped in posting good quarters S Ramdoria added.

TCS onsite business is about 54%, offshore is about 41% ands the balance is through global delivery. Company has linked variable pay to company's team performance. Revenue growth is coming across all client categories. Improved billing, operational efficiencies and movement to offshore are few levers for margin improvement. BFSI share increased by 180 bps.

TCS will focus on Latin American, Europe and India but the management is (not sure about Europe). TCS geographical reach of clients is as follows. North America-51.5%, UK/Europe-30%. Pressure on margin may continue depending on Rupee.

Most of currency impact is now behind us. It expect to get 5% hike in new contracts.TCS is working on 20 deals worth over million, some are over 0 million. Chilean acquisition is delivering well and margins are good. The company will focus on organic growth but it will be premature to comment on group company merger.Diligenta has margins in single digit; expected to move to double digit in 12-18 months.FNS is doing extremely well; bank of china order based on FNS. Chile acquisition is also doing well.
Deal pipeline is very strong, S Crematoria added

The company is planning 12-15% wage hike for the year. It has capped attrition rate at 10.5-11.5% over last 4 quarters. TCS financial solutions revenue is based on license fee, maintenance contracts. Margins of TCS financial solutions would be 5-10% higher than overall. The company will be able to sustain the low attrition. Financial SBU will have 5-10% higher margins than average TCS margin . It expects atleast 40% of existing clients to renegotiate in FY 08.



Infosys set to acquire Philips Global's finance BPO for assured revenues of $ 200 Mn spread over 5 years

IT major Infosys Technologies is set to acquire Philips Global’s finance and accounts BPO for an assured revenue of $ 200 million spread over five years, says report in BS. Infosys will be taking over the subsidiary along with all the costs in the similar manner that TCS had acquired the operations of the Pearl Group in the UK. Once the takeover is completed, Infosys will bring down costs and restructure operations to make it a paying proposition.

This will be Infosys’ second acquisition in its 25-year history, after it had acquired Expert Information Services in Australia for around Rs 104 crore ($ 22.9 million) in 2003.

The acquisition of Philips will bolster the capabilities and reach of Infosys’ BPO, enabling it to deliver round-the-clock. Philips’ F&A captive has operations in Chennai, Warsaw (Poland) and Bangkok. The global staff strength of the captive is around 1,500 with 500 employees working out of the Chennai centre, which was set up in 2004.

Infosys’ BPO has close to 11,000 employees and has posted a top line of around Rs 662 crore and a net profit of Rs 151 crore in FY07.

Infosys, the country’s second largest software services exporter, currently has cash reserves of $ 1.4 billion. No official comments were available from the company. Usually conservative in the M&A game, the company has grown to $ 3.5 billion and employs around 71,000 professionals.

In the recent past, it was rumoured to be bidding to acquire Capgemini. The company officials have predictably been non-committal and maintained that they will go ahead and acquire it, if it fits into the Infosys’ game-plan.



Maintain Overweight on IT services, Infy, TCS Nos in line, most of Rupee rise over, raised FY08 Sensex EPS forecast to Rs 860: UBS

Manishi Raychaudhuri, Executive Director of UBS Securities said we have Overweight on IT services despite rising Rupee. Infy, TCS numbers are in line. Fundamental strength in the business remains intact. Billing rates may improve and we may be in the last leg of Rupee appreciation. Most of the Rupee rise is over and Rupee is seen at 40/$ by year-end. We are looking at 18-19% over top line & bottom line growth.

Telecom, Cement, Cap Goods & Engineering sectors are likely to outperform. However, Automobile, Oil companies could report negative earnings growth for the quarter. Earnings forecasts have gone up from 18-19% to 23% in FY08. For full year, we forecast for 20% growth for FY08 and 20% in FY09, Manishi added.

He further said Sensex FY08 EPS forecast has gone up from 821 to 860. We remain bullish and our Sensex target is of 15000. We have increased weight on Autos and partly on banks. Market has seen worst of interest rate increases, may see few more CRR hikes. CVs & tractors segment will be less affected by interest rates.

Capex cycle is likely to do secularly well in next 2-3 years. Most of our Overweight is on the capex cycle plays. We are bullish on banks with larger exposure to corporate not retail. We do not have any exposure to real estate companies in modern portfolio, Manishi concluded.



Satyam bags 4 large orders from Singapore and Australia

Satyam Computer Services has recently bagged four major deals in Singapore, Australia and UAE. Two of these deals from Singapore government are primarily outsourcing and IT services contracts. For Emirates Bank, the global IT giant will implement a ubiquitous Enterprise Financial Management solution which will help the bank in having better efficiencies and control at the Emirates Bank Group level and also augment their business strategy for continuous enhancement of their internal processes. This solution will enable integration of support functions and build best-in-class organizational processes.

All these deals are among the largest hauls to-date in the specific regions following its participation in recent public and private tenders. In Australia, the company will deliver Application Development and Maintenance and Consulting Services to one of Australia's largest transport provider.

"We mine almost 17% of our revenues from ROW region (Row consists of all geographies other than Europe and Americas). The outsourcing forecasts in the coming years are promising in this region," said Virender Aggarwal, Director and Senior Vice President of APAC and MEIA.

Satyam has bagged two multi-year outsourcing and IT services contracts from the Singapore government. The company is addressing the on-going initiative by Singapore to outsource its government IT needs to reap the full gains of technological revolution and sizeable macroeconomic benefits, Under these agreements, the company will have end-to-end responsibility for application management and maintenance of new and existing systems. In addition, the company will consult the respective government departments on future technology directions and business practices. In some cases, the company will also provide them with business transformation initiatives in order to yield optimum business results.

On July 17th, Emirates Bank signed a strategic contract with the company to implement an end-to-end Enterprise Financial Management (EFM) solution for itself. This solution is critical to the bank's business needs and will create and implement a single source of financial data. The contract will assist in meeting the requirements of various entities that form part of Emirates Banking Group, the solution will be based on Oracle Financials and the contract is a large multi-year one.



TCS battles Rupee war successfully, mitigates forex risk via pricing & productivity

Two-and-a-half billion dollars. That's how much TCS has hedged to protect itself from losses from a rising Rupee. But in the June quarter it has managed to mitigate the impact of Rupee appreciation.

Q1 Highlights:

Forex hedges at $ 2.5 billion

Adds 6 clients worth over 0 million

Volume growth of 7.6%, pricing growth of 0.6% (QoQ)

Rupee impacted by 6.6%, negative impact of 258 bps

Wage hikes reduced margins by 208 bps

Mitigated forex risk via pricing, productivity, SG&A improvement

Hedging gains largely offset rupee impact at net level

Offshore contribution at 41.1% Vs 41.3% (QoQ)

Adds 54 new clients Vs 43 new clients (QoQ)

Adds 5,512 net employees Vs 5,827 (QoQ)

Other income at Rs 151.6 crore Vs Rs 89.79 crore (QoQ)

Top client grew at 4.15%, BFSI grew 5.5% (QoQ)

Attrition rate at 11.5% Vs 11.3% (QoQ)




Renault declines comment on possible tie-up with Bajaj Auto

Renault has declined comment on possible tie-up with Bajaj Auto. The company said that it is open to any Indian partner for small car project. Renault sees opportunity to source components worth Euro 100 million per year soon.

Renault management further said that Mahindra-Renault will add 15 cities to its retail network of Logan. The company has added second shift for Logan production.

Earlier, there was a news that Nissan Renault may partner with Bajaj Auto for its $ 3000-car project in India. The partnership to build a small car could have been a part of a larger alliance between Renault and Bajaj Auto covering commercial vehicles. While Bajaj Auto is keen to enter the passenger segment, Nissan Renault boss Carlos Ghosn recently announced it would develop a small car with a price tag of $ 3,000 using Indian expertise. The car is Renault’s big pitch for global volumes after the Logan and will be positioned below it.

Renault already has two separate joint venture partnerships in India with Mahindra & Mahindra. Mahindra Renault, a marketing company largely, is in-charge of selling Renault’s global low-cost sedan Logan in India. The two partners, along with Renault’s sister company Nissan, are also putting up a greenfield plant in Chennai that will be used by all three. Renault is also setting up a powertrain plant in India as a 100% subsidiary.



L&T bags another order from Tata Steel worth Rs 980 Cr

After the recent order from Tata Steel worth Rs. 1070 crore, L&T has today bagged yet another order from Tata steel for Rs 980 crores for the supply and installation of blast furnace for its project in kalinganagar, orissa.

Yesterday Larsen & Toubro Limited (L&T)-led consortium bagged orders worth Rs 1070 crore for Supply & Installation of Sinter Plant and other packages from Tata Steel. Today Larsen & Toubro Limited (L&T) has bagged an order for Rs 980 crores for the supply and installation of Blast Furnace from Tata Steel for its project in Kalinganagar, Orissa.

Tata Steel is setting up the 6 Million Tonnes Per Annum (MTPA) integrated steel plant in Kalinganagar Industrial Complex at Duburi in Jajpur district of Orissa, to be completed in two phases of 3 MTPA each. L&T will supply and install the Blast Furnace as a part of the first phase of this Greenfield project. Having a capacity of 3.2 MTPA this blast furnace will have a useful furnace volume of 4300 Cu.m and would be the largest Blast Furnace in Tata Steel and the first of its kind in India. This is scheduled for completion in 40 months. L&T’s scope covers detail engineering, supply, erection and commissioning of mechanical, electrical & Instrumentation systems along with site services comprising of civil, structural & sheeting works.

L&T along with its international consortium partners Paul Wurth Italia and India are presently executing EPC (Engineering-Procurement-Construction) projects for construction of Blast Furnaces of 3800 Cu.m for the expansion of Tata Steel, Jamshedpur.L&T has attained & sustained leadership position along with its international consortium partners in supply & installation of iron making facilities on EPC (Engineering-Procurement-Construction) basis.




Suven Life Sciences plans $ 45 Mn expansion, to grab large market share in custom chemicals synthesis market

Suven Life Sciences is planning to scale up its drug discovery development and support services (DDDSS), ET report says. The idea is to grab a large market share in the custom chemicals synthesis market to service the fast growing clinical trials business in India.

Towards this end, it has lined up a $ 45 million (Rs 202.5 crore) expansion plan for this fiscal. The expansion will be largely funded from money raised through banks. The DDDSS and R&D units will come up near Hyderabad. “We will invest $ 25 million in the drug discovery and development support services, which will become functional over the next 24 months. Besides this, we are also planning to invest $ 10 million for the proposed R&D centre,” Suven Life Sciences CEO Venkat Jasti.

The R&D centre at Pashamylaram near Hyderabad, will work on finished dosage forms and preparation of abbreviated new drug applications. It is expected to commence operations in April-May 2008.

“The returns from this business will help the company scale up its innovative research initiatives and establish a much larger capacity for manufacturing innovator products after clinical trials,” a senior industry analyst said. Some of the other companies producing chemicals according to tailor-made needs of large innovator drug companies (or custom chemical synthesis) are Shasun Chemicals and Drugs, Nicholas Piramal and Dishman Pharmaceuticals.

The expansion plans also include setting up a generic drug manufacturing facility over 20 acres in the Pharma City at Vizag. The company will spend $ 10 million for this facility, which will start rolling in another 18-24 months. Future products — partly generic and partly regulated chemical entities — will be made at this facility.

Suven Life Sciences hived off its clinical trials operations into a separate entity last year. The company clocked revenue of Rs 114 crore in 2006-07. “We have not considered a dilution of our equity stake in the company so far, private equity players have shown interest in our company on several occasions,” Jasti said.



Krishna, Godavari and now Cauvery, Reliance strikes gas again

Reliance Industries have struck gas again.The company has sent a discovery notice to the Directorate General of Hydrocarbons and the DGHC is assessing the extent of the discovery.

Sources say that the discovery has been made in the Cauvery basin.This would be Reliance's first success in the Cauvery basin. The company has already made a series of discoveries in the K-G basin, where Reliance made the world's largest gas find in 2002.

Officials at Reliance Industries could not be contacted for details but sources say that the discovery is "very significant". Reliance is expected to make an announcement today.