e-Dynamics Solutions IPO - Are You Planning To Invest?

Are you planning to buy IPO of e-Dynamics? I just read few details of e-Dynamics IPO and could not resist to post it for IndianStocksNews.com readers to make their own decision.

The biggest and foremost deterrent for me about this company; their email ID.

edynamicssolutions@yahoo.com

An e-commerce technology company, apparently running e-commerce portal, have an email address hosted at Yahoo.com? They can't even have the email address hosted at their own domain name? Shows their expertise and dedication to technology.

Now take a look at their website. http://www.edynamicssolutions.com/ A non-functioning website for e-commerce technology solutions company! I tried visiting the website different times in the span of 12 hours and all the time all I could see was Magento error! Such a non-serious e-commerce company who can afford such a long downtime.

These two things are good enough to show how serious company is in their business of "technology". I don't even need to go into their financial details which are even shady.

Read this article about their financial shady practices.

e-Dynamics solutions IPO red herring prospectus on BSE Website.

Large Cap Stock Analysis - Wipro Limited

Here are stock research notes based on 3QFY13 results of large cap stock Wipro.

3QFY13 USD services revenue went up 2.4% qoq and it is slightly better than market estimates. IT services EBIT margin was up 16 bps as productivity gains and forex gains offset lower utilization and promotion costs. This and higher other income led to an EPS beat.

Company's 4QFY13 services growth guidance of 0.5 – 3.00% qoq is not very exciting but it does not derail the growth prospects.

Volumes declined 1% qoq but offshore – onsite realizations grew 3.0 – 3.2% qoq, continuing the trend of productivity gains in fixed price contracts that started last year.

The company noted that its pipeline had expanded 1.7 times since 3QFY12 and pointed out improved deal closures and a perceptible change in client sentiment over the past quarter.

Analysts are not overly worried about Wipro’s poor volumes as 3Q is seasonally weak and peers also saw a drop in volume growth.

It looks like that 4Q guidance factors in macro headwinds like US debt ceiling etc, delays in some project starts and about 20 tail accounts that Wipro plans to de-emphasise.

USD revenue growth is expected to pick up to 12.9% in FY14 from 5.6% in FY13.

Positives in 3Q: the top 10 accounts continued to grow ahead of the company’s average on sales investments; realization was up 4-5% yoy; and attrition was much lower yoy at 14.2% vs 19%.

In medium term, more upsides are expected in Wipro’s margins when the growth picks up.One may buy stocks of Wipro with a target price of Rs.460.

The shallowness of IT industry and India shining

IT Superpower. IT Behemoth. IT Capital of World. This is how India was used to being tagged in past 10 years. BJP's India shining was fuelled in reality by 'IT'. Congress tried to ride this 'shining India' and then became the reason of whining of India. Is Indian IT industry really so strong today? In just 10 years, this so called IT superpower has started loosing it's glammer, growth and .... shine too.

Read below fact from an article Golden age of Indian IT is over for good

"Recently, I read an article about this year's Google's Code Jam contest, which is a sort of Olympics for programming skills. At the qualifying stage, 17% of the contestants were Indians. By the third round, as the competition intensified, Indians were down to 0.7%.

Although India began with the highest number of participants, just three Indians lasted till round three, compared to 83 Chinese, 77 Russians, 36 Japanese, 25 Americans, 21 Poles, 13 Belarusians, 11 South Koreans etc. In fact, the code Olympics look much like the sports Olympics. So much for the IT superpower."

This is what the reality is. Indian IT industry hardly produces any 'products'. All it does is to provide cheap labour to western clients for offshore work rather than creating any Intellectual property. It is like modern day labourers who earn for the work completed on hourly basis, at slightly different scale though. And their contractors are so called Indian IT giants!!

How does it matter for stock market? The so called IT superpower is loosing it's position thanks to rising costs in India due to inflation and ever growing wages which are becoming increasingly unaffordable for offshoring client who looks for cheaper labour, especially in this era of slowdown. Another reason is slowdown/recession in developed world itself. This will stall growth of these IT bellwethers further in future loosing investor interest. Read: Should You Buy Stocks of IT Companies now?

Should You Buy Stocks of IT Companies now?

Q1 results of Infosys and TCS are out and both the companies have published contrasting results that create confusion in one's mind. Results of both the companies are generally benchmarked for entire IT industry and these recent results do not clarify situation of IT industry at all this time! What should you do at this time? Buy stocks of IT companies or not?

Infosys stock is dragging in red while TCS is up in green. Sheer contradiction by two biggest IT supremos of India creating state of confusion in small investor's mind.

US dollar income of Infosys has declined by 1.1% compared to previous quarter earnings. Also, achieving growth in the US dollar revenues for company could be difficult, especially when major corporations across Europe and US are reducing IT expenditures and so the number of projects that IT companies in India receive from them are decreasing. Also, Infosys has stopped providing quarterly guidance that will make guesswork more difficult for stock market analysts.

I was reading an article that explains how the IT industry is facing reduction in number of projects from their clients. Since the number of projects coming to companies are reducing constantly from bleak economies of Europe and US, the employees that IT companies had recruited are becoming overhead expenses for them. Normally, IT companies would recruit more employees than what they need, in anticipation of future flow of projects. It is called bench strength. Number of projects are not flowing in as they use to be in past few years but IT companies have to pay salaries and benefits to their bench strength without earning any revenues using their services. And looking at Europe and US, the trend seems to be continuing for next few quarters at least. You can read the article here.

Near future will certainly be difficult for most of the IT companies in India as they are dependent on Europe and US for major chunk of their revenues. Their first target will be to sustain the current levels of their revenues and then think of growth. From stock market's perspective, it tells you that these are the companies which may sustain but growing from here? Could be extremely difficult. And when there is no growth anticipated in near future, the stock remains range bound (call it dud) on bourses or it even declines.

In my opinion, stay away from IT sector stocks unless the economic scenario of Europe and US improves (which may take years!!), do not buy stocks of IT companies for now.

Stock to buy - Tech Mahindra

Should you buy stocks of Tech Mahindra post merger approval news and if yes, for what stock price target?

Recently, Tech Mahindra (Tech M) and Mahindra Satyam (Satyam) merger has been approved with their wholly owned subsidiaries, Venturbay Consultants Pvt. Ltd., C&S System Technologies Pvt. Ltd., CanvasM Technologies Ltd. and Mahindra Logisoft Business Solutions Ltd. The swap ratio approved by the board of both the companies is 2:17, i.e., 2 shares of Tech M (face value of `10 each) for every 17 shares of Satyam (face value of `2 each). The merger process could take up to nine months to complete and will be effective from April 1, 2011.

Shareholding pattern:
Mahindra Group will own 26.3% in the combined entity, British Telecom (BT) will own 12.8%, 10.4% will be held as treasury stock, 34.4% will be held by public shareholders of Mahindra Satyam and the balance 16.1% will be held by public shareholders of Tech Mahindra. The intention of creating a treasury stock is to allow the company greater liquidity when needed. This, especially in the matter of acquisitions, is on the agenda of both the companies. Tech M will issue 10.34cr new shares, thereby increasing its outstanding shares to 23.08cr and its equity capital to `230.8cr.

Well-diversified revenue mix:
The combined entity will have a broad-based play across industries such as manufacturing, BFSI, telecom, technology, media and entertainment, retail, transport and logistics and lifesciences and healthcare.

Geographically, the revenue would be balanced between Americas at 42%, Europe at 35% and emerging markets at 23%. British Telecom is Tech M's biggest, revenue share from BT would come down to ~17%, while Tech M currently derives 35% of its revenue from BT. The combined entity would have 75,000 employees in 54 countries with over 350 clients. Company would have net cash surplus of Rs. 1,600cr-1,800cr.

Read more:
Best Stocks To Buy Now in 2012

Stock valuation:
The benefits of the combined entity will start being reflected only after few quarters after merger completion. The combined entity is expected to post a 10.7% CAGR over FY2011-13E, with growth of 8.9% yoy in FY2013. PAT of Tech M and Satyam is expected to be at Rs.674cr and Rs.900cr for FY2013, respectively. Considering the new share count, the consolidated EPS comes in at Rs.68.2. If you value Tech Mahindra conservatively at 13x FY2013E EPS of Rs.68.2, one may buy stocks of Tech Mahindra with stock price target of Rs. 900 in with one year time horizon.

You may want to read:
Goodyear India - Stock To Buy from Evergreen Industry
Infotech Enterprises - Stock Analysis and Recommendation
Stock Analysis – BPCL 3QFY12 Results
Buy Stocks of Va Tech Wabag
Stock Analysis - Bharti Airtel
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys

Infotech Enterprises - Stock Analysis and Recommendation

Here are excerpts from Analyst meet of Infotech Enterprises (Infotech). This meet was focused on giving investors an idea about company's sysetms, processes and projects. The report of this meet is published by Angel Broking, a stock broking and stock research house.

The major take away from the meet was that the company is on the right track in terms of making investments to strengthen its product portfolio and is taking initiatives to improve its financial metrics.

Focus on systems and process to provide scalability:
During the meet, Mr. BVR Mohan Reddy, Infotech’s Chairman and Managing Director, highlighted that the company is now focusing on strengthening its leadership along with improving its systems and processes and making them scalable. Further, the company will take in SAP integration, as currently three of the company’s subsidiaries are operating independently.

Healthy market opportunity:
As per Zinnov Consulting, a leading IT consulting firm, the engineering market is expected to reach US$40bn by 2020 from US$10.4bn currently (led by industries such as aerospace, automotive, consumer electronics and telecom). Infotech, being a leader in the aerospace and telecom engineering spaces, has strong relationships with clients in these areas and, hence, can capitalize on this opportunity.

Focus on improving client mining:
Infotech’s management is currently focusing on adding and increasing its wallet share from ‘must have’ accounts across its target verticals. The company is doing this by changing the incentive structure of customer-facing roles and is investing considerably to improve client mining and account management skills.

Stock Valuation:
At current stock price of Rs.148, the stock trades at 8.6x FY2013E EPS of Rs.17.1. One may buy stocks of Infotech Enterprises in small chunks for target stock price of Rs.162, valuing it at 9.5x FY2013E EPS.

You may want to read:
Stock Analysis – BPCL 3QFY12 Results
Buy Stocks of Va Tech Wabag
Stock Analysis - Bharti Airtel
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Large Cap Stock To Buy - Dr. Reddy’s Laboratories

Stock Analysis - Bharti Airtel

Stock price target based on Bharti Airtel’s 3QFY12 results. The stock had a run from 320 to 400 and then back to 360 in past 2 months in line with run up of Indian stock markets. One may still buy stocks of Bharti Airtel but the stock price target will not be a significant upside from one year point of view.

Bharti Airtel had reported disappointing numbers for 3QFY12 because of weak minutes of usage (MoU) and several one offs, which hit revenue and cost. However, strong ARPM growth is the key positive for the quarter. Revenue from African operations was in line but margins remained under pressure.

As we all are witnessing Telecom spectrum scam and court orders of license suspension, telecom as industry is expected to consolidate from here. Also, Indian consumers are moving towards smart phone technology to use data on phones and this data usage will increase with time. Telecom players like Bharti Airtel would be big beneficiaries of this data usage growth and telecom sector consolidation.

Bharti has growth prospects in terms of 3G spectrum, DTH, African company it took over and potential growth in markets which are under penetrated.

With no doubt, Bharti Airtel is the best stock to buy from telecom sector in India with stable business and good balance sheet numbers. The target stock price for Bharti Airtel over the one year time period would be around Rs.400. One who is looking for moderate appreciation with less volatility and least risk in stock markets may buy stocks of Bharti Airtel.

You may want to read:
Stock Analysis – ONGC
Union Bank – Stock Analysis with Target Stock Price
Share Market Stock Tips - Buy Stocks of Chambal Fertilisers
Free Stock Market Tips – Buy HDIL for short term
Blue Chip Stock Analysis - Infosys
Large Cap Stock To Buy - Dr. Reddy’s Laboratories
Buy Stocks of Bank of Baroda
IRB Infra – Stock Analysis and Result Update

Safe Mid Cap Stock Idea

Here is one mid cap stock that is relatively safer compared to mid cap stocks space. NIIT Technologies, an IT stock with good growth rate could provide you very good investment returns in next 2-3 years.

NIIT Technologies is a mid-tier IT company providing IT solutions to customers aross North America, Europe, Middle East, Asia and Australia. It's services and solutions include application development and maintenance, managed services, cloud computing and business process outsourcing space to organisations across verticals. Revenue wise, Travel and transportation segment is single largest contributor(29%) while financial services and insurance contributes 37%, government segment contributes 18%, manufacturing and distribution 8% and rest is by all other segments.

Stock Financials
Company has reported almost 9% CAGR growth in topline and bottomline for past four years. Company's order book stands 15% higher at $169 million at the beginning of FY12 against the start of previous year. The maximum order intake was during the March 2011 quarter when company received fresh orders at $116 million were more than double the total number of orders in Dec.10 quarter.

Travel and transportation segment was the key growth driver during March 11 quarter with 12% sequential increase in total revenues to Rs 107 crore. Even with good growth, the company's operating profit margin was flat at 19.9%. Comapny has provided, on average, a 13% offshore and 3% onsite salary hike which could stress the margins in near future. But company operates at a utilisation level of above 80% which is higher compared to that of other IT companies.

Stock Valuations
NIIT Technologies is a consistent dividend paying stock with dividend yield of more than 4%!

At current stock price of Rs. 228, the stock trades at P/E of 12.11 for trailing four quarters EPS. Looking at the healthy order book lined up for execution in next one year, its' expected EPS in FY12 and FY13 is Rs.25 and Rs.35 resply. With same P/E of 12, NIIT technologies could touch Rs.300 in one year and Rs.400 in 2-3 years time frame if nothing drastically goes wrong for company.

One may buy stocks of NIIT Technologies at every dip in small quantities. It becomes very attractive if the stock trades around or below Rs.200.

Stock Analysis Post Results - Wipro

Recently WIPRO announced their 4th quarter results. Checkout stock analysis to know what the latest numbers mean to you as an investor in WIPRO.

Should you buy stocks of telecom companies now?

Telecom, especially mobile phone companies, as a sector is going through a rough patch for some time now. Primary reason being spectrum allocation scam that dates back to years (2G spectrum). Most of the telecom stocks have corrected significantly. Should you buy stocks of telecom companies in such conditions?

I just read opinion of Brics securities on this. If we go by their opinion, we should not be buying stocks of telecom companies for long term at all. The dream run in telecom businesses has already happened. In near future, it is going to probably stay in a trading range for a long time. Reliance Communications has got its own problems to deal with. Bharti telecom is near to stagnating revenues.

Most importantly, average revenue per users (ARPUs) is going to stagnate in telecom sector. At some point of time even the subscriber base is going to stagnate. No growth at all in these bread and butter areas!

In my opinion, with so many new telecom operators fighting for sectoral pie, competition is fierce and companies do not have pricing power. Have you seen those 1/2 paisa per second ads from MTS? And the recent 0 paisa per second from Videocon! What? You haven't heard of 0 paisa per second from Videocon? visit this http://www.zeroishere.com. Next, I guess, new telecom companies would pay subscriber to use mobile phones!

Anyways, what all I want you to pay attention is the fierce competition between these players. Companies who does not have pricing power can not sustain their growth.

Read more: Telecom stocks - Any takers?

All Telecom stocks may be good for trading occasionally but for long term gains, new growth drivers seems lacking. With 2G and 3G spectrum scams haunting them, you shouldn't be buying stocks of telecom companies at this point if you are looking for long term gains.

Telecom stocks - Any takers?

With latest recommendation from TRAI to recover the spectrum cost from all telecom operators in India is the latest news related to spectrum scam in which politicians and telecom companies have shamelessly looted taxpayer's money. Is this going to affect telecom stocks?

"A. Rajane 3000 crores khaaye", it's an old news! Pata nahi sala yeh log kaise itana paisa khaa jaate hai. Mai ek rupaye ka coin bhi khaaun to muze to doctor ke paas jana padegaa operation ke liye!! Yeh RAJA ko 3000 crore rupayese subah problem nahi hogi??? Kaunsaa kayamchurna khata hogaa kameena? ;)

Anyways. TRAI has recommended to increase the 2G spectrum prices for all 2G operators in India which have licenses.

All companies collectively will need to pay RS.24,700 crores! These are rough calculations but following are the numbers which telecom companies will have to shell out as a price for their corrupt business strategies.

BSNL: Rs.7563 crores (not listed in stock marekt)
Bharti Airtel: Rs.4284 crores
Idea cellular: Rs.1985 crores (idea of corruption is bad sirjee!!, shame on you)
Vodafone: Rs. 1763 crores
MTNL: Rs. 1150 crores
Aircel: Rs. 489 crores
Loop telecom: Rs. 191 crores
R-Com: Rs. 78.7 crores

Newly launched companies like Videcon, loop, uninor, Tata teleservices (old CDMA player, got GSM 2G license recently, R-COM (same as Tata) will be bearing a brunt in this. Collectively these companies will have to shell our Rs. 7000 crores. It is just an IDEA and not the exact figure.

Bravo! Big companies, big fines! Every company listed here is going to pay price from their kitty of profits, reserves, investments. Book value and profits of each of these companies are going to be eroded and so the value of shares. Being a shareholder, each one will be paying price in terms of book value and profit share.

Stocks of these companies will loose it's sheen and stock value at least in medium term. Do not buy stocks of any telecom company at least for next few weeks till the picture gets clear.

IT Stocks could be in trouble : Ohio bans offshore IT projects by govt depts

Here is the big news for IT industry in India, and whats more, it is not good at all. Ohio state in US has completely banned outsourcing of it's state government IT projects to offshore development. How does this affects Indian IT stocks?

This could be just a beginning and more US states could follow the same in order to keep the jobs in American soil and for Americans only. Check the related news here.

Last month, the US Congress passed a controversial legislation increasing visa fees for funding the country’s Mexico Border Security program. States such as Virginia are facing a massive backlash against outsourcing that could further affect the prospects of Indian IT firms.

Checkout my earlier article "Should you buy stocks of IT companies for long term?"

Although Indian IT companies could setup American subsidiaries with American employees to fight the anti outsourcing moves, ultimately where it boils down to is the profitability from investment perspectives. IT companies setting up more and more offices in US, employing more US employees means spending in dollars and in American standards which is very high when compared to their offshore development centers in India where they pay small salaries in INR and earn in dollars keeping big profits. These high profits gave very good returns in past which could not be the case going forward in future. And so it would be difficult to find multi bagger IT stocks in future.

Call-center jobs returning to US & IT Stocks

One more bad news for Indian call centers and to an extent for IT companies too. I had recently written an article "Should you buy stocks of IT companies for long term?" referring to Another Proposed Law To Stop Offshore Outsourcing which is called as "Stop Outsourcing and Create American Jobs Act of 2010". Here is another news that could be troublesome for Indian Call centers and maybe for IT companies too.

The recession in America had reached at it's peak last year. It lost roughly 8 Million jobs to recession. Yes, that's 8,000,000 jobs! And since loosing these jobs, American companies have been able to create only 500,000 jobs back in economy. Rest of the jobs are still not in economy and American unemployment rate is at staggering 9% and increasing month by month.

This depressed economy has reduced operating costs so much that Indian outsourcing industry has not remained as attractive as it was 10 years back. People in America are demanding all these jobs back in their country and they are ready to accept the jobs at lower wages. The most basic motto behind outsourcing jobs to Indian companies was to save on costs. Now that cost is coming down for Amercian companies in the form of lower wages. Plus they have lot of advantages such as no cultural difference, no language trainings, no accent trainings, no hassles and frustrations for American customers to understand non-American English. The list is quite long. Many of the rural American areas are almost matching the cost of Indian labor and operation costs.

Checkout the latest news from US about this here: Call-center jobs returning to US

Why am I writing this here? On Indian Stocks News? How is it gonna affect stocks? And which stocks?

Most of the giant IT companies today have call centers as their integral part of business. Wipro, Infosys, HCL ... they all have it. And that division is going to get affected in long term. if not affected, they would certainly not grow at the historic growth rates for sure. Same is applicable to an extent in software services domain. Although not immediately, in long run. The "Stop Outsourcing and Create American Jobs Act of 2010" is set to make entry this year and if it gets passed, it is going to hurt all the outsourcing from America.

All in all, I would like to repeat my opinion: I strongly feel that it is going to be extremely difficult in future for Indian IT companies to even keep up the growth rates they are accustomed to in last 10 years. This ultimately is going to take toll on their overall profitability and profit growth. The kind of explosive growth experienced by Indian IT companies in past few years could stall in future and so would slow down the growth of their stock price.

Finding a multibagger stock out of Indian IT companies stable is going to be extremely difficult in future. It is my gut feeling to not to keep my portfolio relied on IT stocks for growth. I would be glad to know your opinions, you may use comment form below to post your opinions.

Checkout: Should you buy stocks of IT companies for long term?

Stock report - TCS after recent results

Stock report on TCS after it's recent results declaration. TCS does not need any introduction as India's largest software exporter. It leads the IT companies in India in terms of revenues earned. Is it a stock to buy post it's Q1 result? For what target should one buy stock of TCS now?

The company has reported better than expected revenue and earnings for Q1 FY 2011 observing the strong rebound in demand. Revenue on a constant currency basis has increased by 7.3% Q-O-Q against the stock market expectations of 5.7%.

The growth rate is better than that of rival Infosys (6%). This level has not been seen since Q3 FY 2008. It looks like corporate IT spending has increased and played a prominent role in improving the performance of the company. Steps taken by the company to maintain better margins has definitely helped it.

USD revenue has increased by 6.4% Q-O-Q on strong volume growth of 8.1%. Despite wage hikes in the quarter, the profit margin fall is just 36 bps leading to a better than expected EPS growth. Order flow for TCS is picking up with 10 deals in Q1 and 15 more in the pipeline.

Stock dividend from TCS is at 20 Rs/share. At current stock price, Rs. 840, this dividend yield stands at 2.38%. This makes TCS a good dividend yielding stock and keep in mind that this is one of the safe stock to buy from IT pack in Indian stock markets. Tata sons ltd. holds more than 73% shares of TCS and dividend income from TCS is one of the biggest income source for TATA sons which they reinvest in other group companies. The biggest beneficiary of good dividend yield from TCS is TATA company itself and this very fact would keep clocking good dividend income year after year for investors.

EPS projection for FY 2011 - 13 has been hiked by 4 -5%. The projected/estimated EPS for FY 2011 comes at approx. 36-37 range. IT Industry has always commanded a P/E ratio of around 21. And TCS, being largest IT company commands premium P/E on top of this. It's current P/E is at 27.87. If we consider P/E of 25 for our future calculations, it takes us towards target stock price of Rs. 900 - 925. One may buy stock for long term investment portfolio.

Should you buy stocks of IT companies for long term?

I came across an article while researching on future of Indian IT Stocks and to make a decision whether I should buy stocks of IT companies for my long term investment portfolio. Here is my opinion.

The article talks about "Stop Outsourcing and Create American Jobs Act of 2010", an act that is targeted to punish American companies who "outsource" the projects and work to offshore companies such as IT companies in India.

Title and link of article: Another Proposed Law To Stop Offshore Outsourcing. If you read the first immediate comment of an American reader just below the article, you would understand the sentiments people carry against outsourcing, specially India. Why India? Because Indian IT companies have largest share of outsourcing from American corporates.

Last month, Congressmen Gary Peters, Tim Bishop and Jerry McNerney proposed this legislation to curb outsourcing to countries such as India. The Stop Outsourcing and Create American Jobs Act of 2010, the Bill clearly aims to discourage US firms from shipping jobs overseas.

So how does it bothers IT stocks in India? If this act passes, American government could go barring the American companies, who are outsourcing the work, from participating in government contracts. So these companies have to think twice before outsourcing.

A lot is being written against the outsourcing and to keep the American jobs in America. The Bill, being initiated by Senator Charles Schumer, is expected to focus on H-1B and L1 visas given to IT and other professionals and could possibly impose some restrictions on them. The similar is expected to be done to keep jobs in American soil and with Americans, as a very common feeling is developing that recession has took a toll on millions of American jobs and Americans are losing their jobs to other countries.

The elections to the US Senate are scheduled to be held in November 2010 and the sentiment against outsourcing will only rise in time to come.

Another fact lies in the title of this article "China replaces India as preferred outsourcing destination". Though at the moment the country has still not reached the level of maturity seen in India, the growth of China's outsourcing market is significant. Indian IT companies have got a big competitor right next door and it is rising!

With these developments, I strongly feel that it is going to be extremely difficult in future for Indian IT companies to even keep up the growth rates they are accustomed to in last 10 years. This ultimately is going to take toll on their overall profitability and profit growth. The kind of explosive growth experienced by Indian IT companies in past few years could stall in future and so would freeze the growth of their stock price.

Finding a multibagger stock out of Indian IT companies stable is going to be extremely difficult in future. It is my gut feeling to not to keep my portfolio relied on IT stocks for growth. I would be glad to know your opinions, you may use comment form below to post your opinions.

Should you buy stocks of Infosys post Q1 FY11 results?

Infosys, the second largest IT exporter from India, announced their Q1 FY 2011 results. The company’s net profit for the first quarter of FY11 slumped a surprising 7.98% The stock price has slipped by Rs.100 (3.44%) in markets. Should you buy stocks of Infosys now?

The net profit came in at Rs 1,488 crore as against Rs 1,617 crore, on quarter-on-quarter basis (QoQ). However its revenues jumped to Rs 6,198 crore from Rs 5,944 crore, a jump of 4.27%.

Infosys has increased its dollar revenue guidance for entire FY11 to a growth of 21% on the higher end of the band from the earlier estimate in April of 18%. This gives a strong signal of demand recovery for company services from it's clients. Infy’s top five and the top 25 clients grew faster than it's rest of the customer base. This reflects revival in IT spending of larger US companies. Infy also bagged eight bigger deals — worth more than $100 million each.

The stock price of Infy at present is at Rs 2792. The stock is fully valued at this price. If it trades below Rs 2760-2770 for a day or two, it could turn bearish and go up to Rs 2600 or worst ~ Rs 2550-2500. These levels would be the best levels to buy stocks of Infy as these are relatively cheaper levels in terms of valuations.

It is definitely not a strong buy right now. One may start accumulating at lower levels than today's. Long term stock price target, looking at future guidance, could be around Rs 3100.

Good mid cap IT stock to buy - KPIT Cummins Infosystems

A good mid cap stock to buy from IT sector with good valuations.

KPIT Cummins Infosystems provides business and technology solutions (Automotive, Semiconductor Solutions)through Business IT & Intelligence to BPO / KPO for the CTO, CIO and CFO of global customers from focused verticals.

In the last four-five months, the business environment and visibility for this company has improved a lot and even the dynamics and the way people look at this company has changed after acquisition of Sparta. KPIT is expected to have a good quarter ahead and expected revenue growth for KPIT is 7.7% quarter-on-quarter (QoQ) basis.

Market capitalization fir company is Rs 926.49 crore. The company touched its 52 week high Rs 142.15 and 52 week low Rs 32.40 on 18 Jan, 2010 and 08 Apr, 2009, respectively. Currently, it is trading -16.5% below its 52-week high and 266.36% above its 52-week low.

Company is likely to post an EPS of Rs 11.8 in FY10 and Rs 13.5 in FY11. At the CMP , the stock trades at a P/E of 9.8x on FY10E and 8.3x on FY11E.

The stock is moving along the upsloping support trendline. The strength of the stock’s uptrend is evident from the fact that it has not closed decisively below the trendline.

It is recommend to buy stocks of KPIT with a target price of Rs 140 in the short to medium term.

IDEA Cellular - Stock Analysis

This telecom sector stock has recovered from its lows in February 2010 and has witnessed a renewed buying in the overall buoyant market.

IDEA Cellulars stock has underperformed the benchmark indices over the past six months following the investor concerns over the lower-tariff regime in the domestic telecom space and increasing competition from new entrants.

BUSINESS:
Similar to its bigger peers,such as Bharti Airtel and Reliance Communications, Idea Cellular, the country's sixth largest mobile service provider,has become a pan-India telecom player with presence in all the 22 circles.In the current fiscal,the telco added seven circles in its repertoire.

With 62.1 million customers at the end of February 2009,Idea commands a 10.7% market share of the countrys total subscriber base of 579.3 million.It has been adding over 2.2 million users every month,one of the fastest in the sector.

Idea operates the circles of Punjab and Karnataka through its subsidiary Spice Communications,in which it had acquired a 41.1% stake in 2008.Idea also holds 16% in telecom tower company,Indus Towers,along with other two shareholders,including Bharti Infratel and Vodafone Essar.Effective from January 1,2009,the telco transferred its passive infrastructure in nine circles to its subsidiary ICTIL.

STOCK FINANCIALS:
The Aditya Birla Group-controlled Ideas business has grown rapidly since the financial year 2005.Revenue has grown at a fouryear compounded annual growth rate (CAGR) of 48% and net profit has increased by 84.6%.

In the quarter ended December 2009,the company reported a robust sequential growth of 6% in sales at Rs 3,149.5 crore.Its profit before interest,depreciation and tax remained stable at Rs 814.1 crore.At Rs 170,net profit dropped by 23% compared to that in the previous quarter. Its operating margin in the 11 established circles remained constant at over 30%.This is despite a 10% sequential drop in per minute realisation due to the tariff cuts.A 4% jump in per user minutes of usage (MoU) supported margins.

GROWTH PROSPECTS:
Idea has launched its operations in the seven services during the nine months ended December 2009.These operations initially will be loss making thereby reducing overall profitability of the company.However,as the company wins more subscribers and its operations stabilise in these circles over a period of time,this would improve its bottom line.Also,now that the company is a pan-India player,its capital expenditure on 2G technologies would taper down gradually while its revenue and profits reflect growth from its new operations.

CONCERNS:
Erosion in realisations on per user and per minute basis,rising percentage of subscriber outflow or churn and widening loss of its subsidiary,Spice Communications,are the major concerns that may continue to cast a shadow on Ideas performance in the short term.

STOCK VALUATIONS:
At the current price of about Rs 65,Ideas enterprise value is 7.2 times its earnings before interest,depreciation and taxes.Its valuation lies between that of the countrys largest telco Bharti Airtel (7.4) and the second biggest player RCOM (6.1).

Based on P/E multiples,Ideas stock with a P/E of 21 looks expensive than its peers Bharti (12.5) and RCOM (6.6).This needs to be seen in the backdrop of the fact that its profit had suffered in the past four quarters due to losses from its new service launches.The situation is expected to change gradually as the company starts generating more business from these circles.Mobile number portability (MNP) is likely to be launched in the next three months.

Though its exact impact is difficult to ascertain at the moment,Idea is expected to weather the storm given its national presence and good branding strategy. The stock is likely to see some weakness in the near term due to uncertainties over MNP and the launch of 3G services. However,investors can use dips in the stocks price to buy stocks with a horizon of two years.
Source: ET Investor's Guide

Bharti Zain Deal Analysis - Buy Stocks For Long Term

Investors in Bharti Airtel may have little to cheer about in the short term,with the Indian telecom giant inching closer to buying Zain Telecoms African assets. What could be possible impact of this deal on Bharti's stocks?

Concern over the impact of borrowing for the buyout on Bharti's balance sheet and competition in Indian markets may weigh down the stock in the near term,but stock market analysts consider more declines to around Rs 280-300 as an opportunity to buy stocks for the long run.

The acquisition of Zain will make sense over the next 3-5 years, said Ambareesh Baliga,V-P,Karvy Stock Broking.Investors with a long-term investment horizon should accumulate Bharti shares,with the stock expected to trade range-bound, he said.
The Bharti stock closed at Rs 306.80,down 3% on Tuesday.

In the short term,investors are uncomfortable about the acquisition due to lack of clarity about the impact of the deal that will give Bharti access to 15 African telecom markets.Uncertain valuations of the 3G licences,coupled with added exposure to new markets,are concerns to investors, said Dharmesh Mehta,MD-India Equities,Enam Securities.

Checkout: Bharti Airtel Stock Analysis

The size of borrowing has contributed to the nervousness among investors.Bharti has arranged $8.3 billion in loans for the $9-billion acquisition.Broking firm Edelweiss,which recommends a buy on the stock,estimates that the debt could affect Bhartis consolidated earnings by about 20% and raise its net debt-to-equity ratio to roughly 1.1 times.

INVESTORS are also concerned if Bhartis bet on the African markets would be successful,as most economies there are still underdeveloped and prone to regulatory risks,with the 15 countries having different regulators.The stock may consolidate around the current levels.So far,there have not been too many institutional investors,who have aggressively bought the stock because of lack of clarity about the terms of the deal, said Anita Gandhi,head-institutional business,Arihant Capital Markets.

Some stock brokers feel that Bharti could be a better bet than most other Indian telecom stocks, despite the uncertainty. We are currently having a downgrade rating on all telecom stocks,as we do not expect any major earnings upgrades over the next few quarters. There is nothing in most telecom stocks as future earnings,thanks to cut-throat competition and price wars, said Bharat Shah,head-institutional sales,Ventura Securities. Investors who want a good telecom stock to buy for the long term can look at buying stocks of Bharti at current levels.
Source: Economic Times

Stock Analysis - Bharti Airtel

Bharti Airtel's stock is currently trading at a historically low valuation. The stock has a steep fall since October 2009 in contrast with a marginal increase in the benchmark indices during the period. Is it time to buy stocks of Bharti? Checkout the stock analysis..

Investors have dumped the stock following concerns over falling telecom tariff structure and a possible adverse impact of Bharti's recent overseas acquisitions on its balance sheet.While the India's largest telecom operator is expected to take a hit in its performance due to these developments in the near term,it appears to be poised for a long-term growth.

BUSINESS
Bharti Airtel constitutes nearly 22% of the country's total subscriber base of 55.9 crore.With more than 27% share in the country's wireless revenue,it also leads the sector's revenue matrix.Bharti generates nearly 80% of its revenue from mobile services division.Enterprise and carrier services account for over 18% of revenue and the remaining comes from telemedia activities.

The company has a pan-India presence with operations in all the 22 telecom circles.It has been adding over 28 lakh users each month for the past six months.At January 2010,the company had 12.2 crore subscribers,a rise of 38% over its previous year levels.Apart from these revenue streams,Bharti has a telecom infrastructure subsidiary called Bharti Infratel.It provides passive infrastructure services through a network of over 29,806 towers (at the end of December 2009) in 11 circles.Among new services,Bharti Airtel offers digital TV services through its direct-to-home (DTH) operations.It had two million subscribers for DTH in the December quarter.

CURRENT SCENARIO
After a flurry of tariff cuts in October,the domestic telecom sector has not witnessed any major rate cuts.While lower tariffs would continue to impact the sector's operating parameters adversely in the next two quarters as well,there is a fair chance that rates may not decline further.This means the domestic telecom tariffs will finally stabilise at the new plateau.It needs to be noted that not all players would be able to run operations profitably at the current tariff schemes.Especially for new entrains,it would be difficult to compete with the established players,which are almost at the end of their capital expenditure cycle.This indicates that consolidation is imminent and players,such as Bharti,may emerge as beneficiaries.

OVERSEAS ACQUISITIONS
In January 2010,Bharti acquired Warid Telecom's Bangladesh operations.It is also in advanced talks with Kuwait-based Zain to buy its operations in 15 African markets.While the impact of Warid takeover is not significant due to its comparatively smaller operations,takeover of Zain Africa will increase Bharti's debt burden.According to preliminary estimates,Bharti's debt-equity ratio may shot up to 1.1 from the current 0.4 post-acquisition. However,this is not likely to restrict Bharti's accessibility to capital in future given its cash generating operations. Also,globally telcos tend to have D/E ratios above 2.

The challenge for Bharti will be to grow Zain's African operations after the acquisition.The takeover will help Bharti set its footprint in African markets where Zain is the market leader and mobile penetration is less than 20%. Further,average revenue per user (ARPU) in Zain's African markets is about $8.2 agaisnt $5 for Bharti,which can also rationalise Zain's operating costs by deploying its outsourcing strategy.

STOCK VALUATIONS
At the current price of about Rs 290,Bharti is trading at a trailing 12 month P/E of 11.6. This is lower than P/E of 19.8 for Idea Cellular,the fifth largest telecom operator in the country. Further, Bharti's enterprise value is less than seven times its profit before interest,taxes,depreciation and amortization. Though its EBITDA growth is expected to slow down in the short term due to lower tariffs and increasing number of low usage users, Bharti's non-wireless operations and overseas businesses would support profits. Bharti looks more prepared than its peers on this front. It appears to be better placed to take advantage of new opportunities in the telecom space given its scale and reach. Investors can hold on to the stock and can even accumulate it on fall given lower.
Source: ET Investors' Guide