Reliance Life Insurance may not be able to come out with an initial public offer now, with the regulator IRDA saying that any Indian promoter having more than 26 per cent equity in an insurance venture can reduce its stake only after ten years.
"The IRDA has pointed out that the 6AA provision of the Insurance Act specifies that Indian promoters having more than 26 per cent shareholding shall after 10 years reduce it in some appropriate manner or within such period the central government may decide," IRDA chief J Hari Narayan said when asked what is the regulator's view on the company's IPO plan.
"At the moment they have not finished 10 years but if the central government wishes to reduce the period it is a matter to be decided by the government," he said.
When asked whether Reliance Life has sought reduction in the waiting period (currently 10 years) from the government, Reliance Capital Chief Executive Officer Sam Ghosh said, "I don't want to comment on that."
Reliance Capital is the holding company of Reliance Life Insurance.
Ghosh had said "the funds raised through this divestment would be partly infused into the insurance arm and partly into Reliance Capital."
Friday, July 10, 2009
Gold prices lower; traders eye bigger falls
Mumbai: India gold prices edged lower on Friday weighed by a strong rupee, but traders awaited bigger falls to replenish stocks for the upcoming festival season, dealers said.
The most active August contract was 0.17% lower at Rs14,457 per 10 grams at 1:31pm. It hit a low of Rs14,436 earlier.
The Indian rupee extended gains for a second day and traders said they would be watching quarterly earnings of companies for cues on economic outlook.
“They all are waiting for good bargains to stock up before festivals,” said a dealer with a state-run bank.
Dealers said a further three percent drop in prices could re-kindle buying interest.
“A decline to Rs14,000 could attract traders,” said another dealer with a private bank.
A series of festivals and auspicious days for weddings is expected to boost gold demand from August-end till the end of the year.
The most active August contract was 0.17% lower at Rs14,457 per 10 grams at 1:31pm. It hit a low of Rs14,436 earlier.
The Indian rupee extended gains for a second day and traders said they would be watching quarterly earnings of companies for cues on economic outlook.
“They all are waiting for good bargains to stock up before festivals,” said a dealer with a state-run bank.
Dealers said a further three percent drop in prices could re-kindle buying interest.
“A decline to Rs14,000 could attract traders,” said another dealer with a private bank.
A series of festivals and auspicious days for weddings is expected to boost gold demand from August-end till the end of the year.
Infy nos beat street, but co stays guarded on FY10 outlook
Infosys Technologies' Q1 FY10 profit after tax dipped to Rs 1,527 crore as against Rs 1,613 crore on a quarter-on-quarter basis. Its revenues declined 3% to Rs 5,472 crore as against Rs 5,635 crore QoQ.
Commenting on the road ahead for the IT bellwether, the management of Infosys Technologies, speaking to Us, said it continues to remain cautious in FY10. They expect operating margins to dip by 1.5% versus 3%.
The Infosys panel included S Gopalakrishnan, Chief Executive Officer and Managing Director; SD Shibulal, Chief Operating Officer; V Balakrishnan, Chief Financial Officer; Mohandas Pai, Member of Board and Director-Human Resource; Ashok Vemuri, Senior Vice-President, Member Executive Council and Head-Banking Financial, Services and Insurance; BG Srinivasan, Senior Vice-President, Member Executive Council and Head-Manufacturing; and Subash Dhar, Senior Vice-President, Member Executive Council and Head-CME.
Speaking on the company’s rupee guidance which has come in lower than the dollar outlook, Gopalakrishnan said the guidance at the lower end has surely been increased, but remains the same at the higher end. “However, the range has narrowed. In the short-term, we expect the volatility or uncertainty to continue. But on a medium- to long-term basis, there is confidence."
According to Balakrishnan, things have changed for the full year. “Earlier, in terms of constant currency, we said guidance would be either flat or see a 4% decline. Now, we are talking about a 3-4% decline. We want to be cautious on FY10 guidance as the markets are still unstable."
On operating margins:
This quarter, Balakrishnan sees operating margins coming down by 150 bps (1% = 100 bps) instead of the earlier 300 bps. However, he said, the margins will improve in the next three quarters. He expects operating margins to come in around 31.5%. “If you look at last year, our profit before interest and tax (PBIT) was 33.2%, so probably it will be 31.5% this year.”
On tax rate:
The company said the effective tax rate for Q1 FY10 is 20%. Balakrishnan believes it will be 20% for the full year because of improvement in margins as compared to 17% in Q4 FY09. "That will probably go up to around 19-20% for the full year.”
On pricing:
Shibulal said the pricing environment continues to be challenging. A client survey showed that 60% respondents expected a protracted recovery, which would start from March 2010 onwards.
On the national ID project:
Balakrishnan said the company will bid for the government’s ID project.
Commenting on the road ahead for the IT bellwether, the management of Infosys Technologies, speaking to Us, said it continues to remain cautious in FY10. They expect operating margins to dip by 1.5% versus 3%.
The Infosys panel included S Gopalakrishnan, Chief Executive Officer and Managing Director; SD Shibulal, Chief Operating Officer; V Balakrishnan, Chief Financial Officer; Mohandas Pai, Member of Board and Director-Human Resource; Ashok Vemuri, Senior Vice-President, Member Executive Council and Head-Banking Financial, Services and Insurance; BG Srinivasan, Senior Vice-President, Member Executive Council and Head-Manufacturing; and Subash Dhar, Senior Vice-President, Member Executive Council and Head-CME.
Speaking on the company’s rupee guidance which has come in lower than the dollar outlook, Gopalakrishnan said the guidance at the lower end has surely been increased, but remains the same at the higher end. “However, the range has narrowed. In the short-term, we expect the volatility or uncertainty to continue. But on a medium- to long-term basis, there is confidence."
According to Balakrishnan, things have changed for the full year. “Earlier, in terms of constant currency, we said guidance would be either flat or see a 4% decline. Now, we are talking about a 3-4% decline. We want to be cautious on FY10 guidance as the markets are still unstable."
On operating margins:
This quarter, Balakrishnan sees operating margins coming down by 150 bps (1% = 100 bps) instead of the earlier 300 bps. However, he said, the margins will improve in the next three quarters. He expects operating margins to come in around 31.5%. “If you look at last year, our profit before interest and tax (PBIT) was 33.2%, so probably it will be 31.5% this year.”
On tax rate:
The company said the effective tax rate for Q1 FY10 is 20%. Balakrishnan believes it will be 20% for the full year because of improvement in margins as compared to 17% in Q4 FY09. "That will probably go up to around 19-20% for the full year.”
On pricing:
Shibulal said the pricing environment continues to be challenging. A client survey showed that 60% respondents expected a protracted recovery, which would start from March 2010 onwards.
On the national ID project:
Balakrishnan said the company will bid for the government’s ID project.
Calls for the day 10th july
RESEARCH -Nifty (FUT) R-4110/4145/4225 S-4070/4035/3995; Sensex (CASH)
R-13875/13995/14230 S-13760/13640/13520; MARKET OUTLOOK: VOLATILE
9.15
9:46 AM 7/10 RESEARCH -Nifty (FUT) R-4110/4145/4225 S-4070/4035/3995; Sensex (CASH) R-13875/13995/14230 S-13760/13640/13520; MARKET OUTLOOK: VOLATILE
11:32 AM 7/10 RESEARCH : INTRADAY CALL ( CASH ) : BUY GESHIP ABOVE 225 TGT 232 SL 222
12:27 PM 7/10 RESEARCH : INTRADAY CALL (CASH) : BUY SHIPPING CORP ABOVE 121 TGT 126 SL 118.50
1:17 PM 7/10 RESEARCH- INTRADAY CALL (CASH) : BUY TATASTEEL ABOVE 374 TGT 385 SL 368
2:29 PM 7/10 RESEARCH:INTRADAY CALL ( CASH ) : SHORT SELL IVRCLINFRA BELOW 333 TGT 316 SL 338
R-13875/13995/14230 S-13760/13640/13520; MARKET OUTLOOK: VOLATILE
9.15
9:46 AM 7/10 RESEARCH -Nifty (FUT) R-4110/4145/4225 S-4070/4035/3995; Sensex (CASH) R-13875/13995/14230 S-13760/13640/13520; MARKET OUTLOOK: VOLATILE
11:32 AM 7/10 RESEARCH : INTRADAY CALL ( CASH ) : BUY GESHIP ABOVE 225 TGT 232 SL 222
12:27 PM 7/10 RESEARCH : INTRADAY CALL (CASH) : BUY SHIPPING CORP ABOVE 121 TGT 126 SL 118.50
1:17 PM 7/10 RESEARCH- INTRADAY CALL (CASH) : BUY TATASTEEL ABOVE 374 TGT 385 SL 368
2:29 PM 7/10 RESEARCH:INTRADAY CALL ( CASH ) : SHORT SELL IVRCLINFRA BELOW 333 TGT 316 SL 338
Thursday, July 9, 2009
Don't see an increase in Infosys' FY10 outlook: JP Morgan
Bhavin Shah of JP Morgan said the Software Technology Parks of India (STPI) extension in the budget will benefit companies by 3-4% in FY11. He sees limited upside in Infosys but finds TCS still undervalued.
On the Q1 results of IT companies, Shah said he does not expect big surprises from IT this quarter. "IT companies are likely to see low single-digit revenue decline. We expect margin erosion based on hedged positions and would look out for the Q2 FY10 outlook." He sees some resumption of growth in Q2 FY10.
Speaking on Infosys' Q1 numbers which are expected tomorrow, Shah expects some margin erosion on visa; and selling, general and administrative costs. "We see a better chance of upside in dollar revenues."
He does not expect a meaningful diversion from guided EPS. "We see FY10 and FY11 EPS at Rs 106.5 and Rs 126.8 respectively."
Shah does not expect Infy to increase its full-year guidance. "We may see some guidance revision from Q3 FY10."
Here is a verbatim transcript of the exclusive interview with Bhavin Shah
Q: Will the Software Technology Park of India (STPI) extension in the budget change your forecast at all for the next year?
A: I believe the government has essentially answered most requests from the technology sector. I think the extension of STPI should help different companies depending on which company you are looking at, maybe from a marginal impact to 3-4% benefit in FY11.
While Fringe Benefit Tax (FBT) is not a big number, it suddenly removes some of the procedural headaches, so some small benefit from there as well. Also, there is some simplification on the service tax related matter for export companies. I think there are multiple things that seem to have been addressed.
Q: Before we speak about Infosys specifically, tell me what are you expecting from the IT sector per se during this quarter?
A: We don’t expect any big surprises from this quarter itself. I think we are going to see anywhere from one to low single to mid-single digit revenue decline depending on how well some companies are hedged and obviously some small rupee appreciation, So depending on that, you will see some margin erosion. Also, some companies have one-off cost in Q1 like visa and selling, general and administrative expenses (SG&A). So, that itself is not going to be a big surprise. I think what companies come out and say about the September quarter is going to be a lot more interesting. We do expect companies to talk about resumption of some sort of growth in the September quarter, not a huge growth but some sort of low single-digit growth.
Q: What about Infosys specifically, do you expect it to change its guidance at all for the full year tomorrow?
A: We do not expect them to increase their yearly guidance. While there is slightly better probability of an upside to the revenues on a dollar basis, I think they will probably keep in mind some sort of the rupee appreciation as well. So, it is unlikely that we see any material change to their full-year guidance. For the September quarter, we expect a low to mid single-digit kind of growth outlook.
Q: What are you going with in terms of rupee EPS number for the full year?
A: We have Rs 106.5 for FY10 and Rs 126.8 for FY11. Our FY10 earnings per share (EPS) is above their guidance. We don’t think that there is going to be any material change to their guidance this year, not yet. Maybe come October they could consider further revisions.
Q: What’s your general call on the sector now? Do you have buys out on most of the top stocks in coverage in the IT sector at current prices?
A: We like the sector in general and do believe that over the last several months with a slowdown in demand there has been a fair bit of slag that has been developed in the system. Companies will be able to hire people a lot more easily over the next couple of years. In the meantime, we have had increase in capacity in terms of engineering costs. So, the labour pool availability is going to be significantly improved over the next several years. As far as the demand goes, obviously we have experienced some slowdown. The general offshore trend remains pretty firm. So, we continue to be overall positive on the sector. When you think about individual stocks, Infosys has done well and we have limited near term upside for Infosys per se. We do think that TCS still remains somewhat undervalued and so expect higher upside on TCS. We obviously have Satyam. On this one, we expect meaningful upside and have an Rs 100 price target on Satyam.
Q: What about midcaps. You just alluded to Satyam, if you come down from Infosys, TCS, Wipro and HCL Technologies, how do you look at the next rung in IT now?
A: When I look at the target price versus current share prices there has been a fair bit of improvement in the midcap stocks as well, so that is why we continue to focus on companies where we still feel that there is meaningful upside. I think Satyam and Tech Mahindra come to the mind. There is significant room for margin improvement in Satyam. If you look at it from an FY11 basis, those two looks particularly cheap.
Q: Give us target prices both for Satyam and for some of the other stocks under coverage for you now?
A: We continue to think of meaningful upsides on Satyam. Rs 100 price target versus Rs 70 current price, so that is a pretty big gap. TCS is another one which we find somewhat undervalued compared to Infosys and Wipro. We have an Rs 550 price target on TCS, so that is another one that we would recommend.
On the Q1 results of IT companies, Shah said he does not expect big surprises from IT this quarter. "IT companies are likely to see low single-digit revenue decline. We expect margin erosion based on hedged positions and would look out for the Q2 FY10 outlook." He sees some resumption of growth in Q2 FY10.
Speaking on Infosys' Q1 numbers which are expected tomorrow, Shah expects some margin erosion on visa; and selling, general and administrative costs. "We see a better chance of upside in dollar revenues."
He does not expect a meaningful diversion from guided EPS. "We see FY10 and FY11 EPS at Rs 106.5 and Rs 126.8 respectively."
Shah does not expect Infy to increase its full-year guidance. "We may see some guidance revision from Q3 FY10."
Here is a verbatim transcript of the exclusive interview with Bhavin Shah
Q: Will the Software Technology Park of India (STPI) extension in the budget change your forecast at all for the next year?
A: I believe the government has essentially answered most requests from the technology sector. I think the extension of STPI should help different companies depending on which company you are looking at, maybe from a marginal impact to 3-4% benefit in FY11.
While Fringe Benefit Tax (FBT) is not a big number, it suddenly removes some of the procedural headaches, so some small benefit from there as well. Also, there is some simplification on the service tax related matter for export companies. I think there are multiple things that seem to have been addressed.
Q: Before we speak about Infosys specifically, tell me what are you expecting from the IT sector per se during this quarter?
A: We don’t expect any big surprises from this quarter itself. I think we are going to see anywhere from one to low single to mid-single digit revenue decline depending on how well some companies are hedged and obviously some small rupee appreciation, So depending on that, you will see some margin erosion. Also, some companies have one-off cost in Q1 like visa and selling, general and administrative expenses (SG&A). So, that itself is not going to be a big surprise. I think what companies come out and say about the September quarter is going to be a lot more interesting. We do expect companies to talk about resumption of some sort of growth in the September quarter, not a huge growth but some sort of low single-digit growth.
Q: What about Infosys specifically, do you expect it to change its guidance at all for the full year tomorrow?
A: We do not expect them to increase their yearly guidance. While there is slightly better probability of an upside to the revenues on a dollar basis, I think they will probably keep in mind some sort of the rupee appreciation as well. So, it is unlikely that we see any material change to their full-year guidance. For the September quarter, we expect a low to mid single-digit kind of growth outlook.
Q: What are you going with in terms of rupee EPS number for the full year?
A: We have Rs 106.5 for FY10 and Rs 126.8 for FY11. Our FY10 earnings per share (EPS) is above their guidance. We don’t think that there is going to be any material change to their guidance this year, not yet. Maybe come October they could consider further revisions.
Q: What’s your general call on the sector now? Do you have buys out on most of the top stocks in coverage in the IT sector at current prices?
A: We like the sector in general and do believe that over the last several months with a slowdown in demand there has been a fair bit of slag that has been developed in the system. Companies will be able to hire people a lot more easily over the next couple of years. In the meantime, we have had increase in capacity in terms of engineering costs. So, the labour pool availability is going to be significantly improved over the next several years. As far as the demand goes, obviously we have experienced some slowdown. The general offshore trend remains pretty firm. So, we continue to be overall positive on the sector. When you think about individual stocks, Infosys has done well and we have limited near term upside for Infosys per se. We do think that TCS still remains somewhat undervalued and so expect higher upside on TCS. We obviously have Satyam. On this one, we expect meaningful upside and have an Rs 100 price target on Satyam.
Q: What about midcaps. You just alluded to Satyam, if you come down from Infosys, TCS, Wipro and HCL Technologies, how do you look at the next rung in IT now?
A: When I look at the target price versus current share prices there has been a fair bit of improvement in the midcap stocks as well, so that is why we continue to focus on companies where we still feel that there is meaningful upside. I think Satyam and Tech Mahindra come to the mind. There is significant room for margin improvement in Satyam. If you look at it from an FY11 basis, those two looks particularly cheap.
Q: Give us target prices both for Satyam and for some of the other stocks under coverage for you now?
A: We continue to think of meaningful upsides on Satyam. Rs 100 price target versus Rs 70 current price, so that is a pretty big gap. TCS is another one which we find somewhat undervalued compared to Infosys and Wipro. We have an Rs 550 price target on TCS, so that is another one that we would recommend.
Budget By Udayan Mukherjee
A game of patience
Hope is a dangerous thing, as investors found out yesterday. If the Finance Minister was guilty of presenting an insipid budget that was low on the detail that the market wanted, investors too were perhaps guilty of expecting too much, too soon. That doesn't absolve the Finance Minister of a budget that is low on ambition, boldness and vision but at least it teaches investors to not hope for the moon going into a policy event.
The real damage was done when the FM spelt out the 6.8% deficit number implying a large market borrowing programme with little detail on how he "would get back on the FRBM path". Global rating agencies will pass their judgement in the next few days but the bond market didn't wait that long. The benchmark bond yield shot past 7% raising fears of interest rate spikes and triggering off a collapse in stock prices. At a macro level, that perhaps was the undoing of the market. At a more micro level, a lot of sectors had run up expecting substantial boosts from the budget. Education, real estate, textile and fertiliser stocks which had meaningful rallies leading up to the event collapsed completely . The surprise was Infrastructure, where stocks sold off as well, as apart from an increased outlay for the NHAI the budget was a bit low on bold moves.
Then there was disinvestment, which the market had pinned some hopes on. The pitiful Rs 1100 crore figure which the FM unveiled dashed those hopes. That number is truly inexplicable.
Not that this budget had nothing postive for the stock market and corporate India. The scrapping of FBT, extension of 10A/10B for IT companies, removal of CTT and no rollback of excise cuts were all positives, partly offset by the hike in MAT. The scrapping of the surcharge on personal income taxes may even be a limited consumption trigger. Tobacco companies were spared the axe this time and ITC was one of the few stocks that ended in the green, contrary to investor fears.
Yet what the market wanted was a green signal, that finally the drought on reforms is over. That a government, shorn of the Left, will press ahead with bold policy moves. The charitable view is to accord the FM the benefit of doubt : he didn't have enough time to unveil a big bang budget and the best is yet to come, over the next few months and in the next February budget. The cynical view is that the market is running ahead of itself; despite the electoral surprise, things will improve only incrementally and over a much longer duration than investors want. The truth, as often, perhaps lies somewhere in the middle. While investing in India, the virtue of patience cannot be overstated.
Hope is a dangerous thing, as investors found out yesterday. If the Finance Minister was guilty of presenting an insipid budget that was low on the detail that the market wanted, investors too were perhaps guilty of expecting too much, too soon. That doesn't absolve the Finance Minister of a budget that is low on ambition, boldness and vision but at least it teaches investors to not hope for the moon going into a policy event.
The real damage was done when the FM spelt out the 6.8% deficit number implying a large market borrowing programme with little detail on how he "would get back on the FRBM path". Global rating agencies will pass their judgement in the next few days but the bond market didn't wait that long. The benchmark bond yield shot past 7% raising fears of interest rate spikes and triggering off a collapse in stock prices. At a macro level, that perhaps was the undoing of the market. At a more micro level, a lot of sectors had run up expecting substantial boosts from the budget. Education, real estate, textile and fertiliser stocks which had meaningful rallies leading up to the event collapsed completely . The surprise was Infrastructure, where stocks sold off as well, as apart from an increased outlay for the NHAI the budget was a bit low on bold moves.
Then there was disinvestment, which the market had pinned some hopes on. The pitiful Rs 1100 crore figure which the FM unveiled dashed those hopes. That number is truly inexplicable.
Not that this budget had nothing postive for the stock market and corporate India. The scrapping of FBT, extension of 10A/10B for IT companies, removal of CTT and no rollback of excise cuts were all positives, partly offset by the hike in MAT. The scrapping of the surcharge on personal income taxes may even be a limited consumption trigger. Tobacco companies were spared the axe this time and ITC was one of the few stocks that ended in the green, contrary to investor fears.
Yet what the market wanted was a green signal, that finally the drought on reforms is over. That a government, shorn of the Left, will press ahead with bold policy moves. The charitable view is to accord the FM the benefit of doubt : he didn't have enough time to unveil a big bang budget and the best is yet to come, over the next few months and in the next February budget. The cynical view is that the market is running ahead of itself; despite the electoral surprise, things will improve only incrementally and over a much longer duration than investors want. The truth, as often, perhaps lies somewhere in the middle. While investing in India, the virtue of patience cannot be overstated.
Calls for the day 9th july
RESEARCH -Nifty (FUT) R-4125/4185/4275 S-4085/4030/3995 ;Sensex (CASH)
R-13970/14170/14510 S-13835/13630/13495 ;MARKET OUTLOOK:
VOLATILE)(09.03A)
12:11 PM 7/9 RESEARCH : INTRADAY CALL ( CASH ): BUY ABB ABOVE 715.50 TGT 735 SL 705
1:12 PM 7/9 RESEARCH : INTRADAY CALL ( CASH ): BOOK PROFITS TRIVENI
R-13970/14170/14510 S-13835/13630/13495 ;MARKET OUTLOOK:
VOLATILE)(09.03A)
12:11 PM 7/9 RESEARCH : INTRADAY CALL ( CASH ): BUY ABB ABOVE 715.50 TGT 735 SL 705
1:12 PM 7/9 RESEARCH : INTRADAY CALL ( CASH ): BOOK PROFITS TRIVENI
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