In Chennai, exam postponed following agitation; regional bar councils object to exam saying that it puts graduates from rural, impoverished background at a disadvantage
The All India Bar Examination (AIBE) was held on Sunday at about 45 centres across the country, despite a pending petition before the Supreme Court on the legitimacy of the exam.
The Bar Council of India (BCI) described the conduct of the exam as a success, but legal activists believe there could be a backlash from the nearly 22,000 law graduates who took the exam, if the court decides that it is null and void.
Meanwhile, in Chennai the exam was postponed to 27th March following an agitation that had built up over the past few days. Several regional bar councils have objected to the exam, saying it was unnecessary and that it would put students particularly from a rural, impoverished background at a disadvantage.
"We urged the court to resolve the issue before the exam, or postpone the exam till a conclusion is reached," legal activist Prakhar Sharma said. "But the BCI went ahead and held the exam anyway. Serious legal complications may follow."
Nearly 22,000 law graduates who appeared for the exam have paid the requisite fees and this money will also become an issue, Mr Sharma said. "Students may demand a compensation. They are unemployed until they pass the exams and they were preparing for it for six months, even after their five-year course. Of course it is a loss," Mr Sharma said.
Before the examination, students were asked to sign an undertaking that they would take and pass the exam in order to be eligible to practice as advocates. If the court decides to rule against the authority of the BCI to make the exam compulsory, the students who have signed the undertakings would all be party to an illegal measure.
About the postponement forced in Chennai, Mr Sharma said, "The regional councils have the power to make rules, and the BCI only gives its assent to it. So it is unlikely that the state bar councils will take this lightly."
RTI activist Babubhai Vaghela said, "The BCI's council before the court said that they are authorised to amend the Advocates Act 1961, this is a false claim. They must go to Parliament for an amendment because that is the job of the legislature."
The government has notified United Stock Exchange, as a “Recognised Stock Exchange”, where trading would not be deemed as speculative transactions
The government has notified United Stock Exchange (USE), as a "Recognised Stock Exchange", where trading would not be deemed as speculative transactions. As per the relevant clause of the notification, trading in derivates are not speculative transactions. However for the purpose of claiming it to be non-speculative the derivates should be traded on a recognized stock exchange only.
The Income-Tax Department said in a notification dated 22 February 2011, "The Central Government hereby notifies United Stock Exchange of India Ltd as a recognized stock exchange with effect from the date of publication of this notification in the official gazette," A notification from the Central Government further mentioned, "This notification shall remain in force until the approval granted by the Securities and Exchange Board of India (SEBI) is withdrawn or expires, or this notification is rescinded by the Central government."
"The Central government can withdraw the recognition granted to United Stock Exchange of India Ltd if any of the conditions specified in relevant Income-tax Rules, subject to which the recognition is granted, is violated," The notification said further.
USE launched with currency derivatives on 20 September 2010 and introduced Currency Options with effect from 29 October 2010.
With declining margins and attrition challenges, mid-cap IT companies’ shares are being beaten down, even as their large peers continue their northward journey
Noted British economist, EF Schumacher, wrote a book called, Small is Beautiful. The falling stocks of mid-cap IT (information technology) companies and the rising stocks of large companies from the same sector, has proven the phrase wrong. It perhaps indicates that, "Small is (not) beautiful." Big is, indeed!
Stocks of mid-sized IT companies have been falling, even as their large peers continue their northward journey.
In the period from 4 January 2010 till today's trading session on 7 March 2011, the stocks of mid-sized IT companies have wilted by more than 50%. During the same period, the Sensex—after hitting a high of 21,004.96 points on 5 November 2010—has moved up 4%. The BSE IT index, the benchmark index of IT companies, has inched up by 18% in the same period. It closed at 6,168.82 on Monday (7th March).
In the period considered above, the share price of Firstsource Solutions Ltd fell by 52%, MindTree Ltd dropped by 46%, MphasiS Ltd was down by 37%, Tech Mahindra plunged by 33%, Patni Computer Systems Ltd fell by 7%. On the other hand, Tata Consultancy Services (TCS) Ltd has moved up by 48%, HCL Technologies has climbed up by 22%, Infosys inched up 16% and Wipro grew by 7%.
What are the reasons for this sluggish growth? Analysts tracking these stocks say that mid-sized IT companies are caught in attrition challenges, which is pressurising their margins. Other factors like excessive focus on horizontals and vendor consolidation are leading to sluggish growth and the subsequent impact is being seen on their stocks.
According to Abhishek Kumar, associate, Centrum Broking, "There are lot of attrition challenges in mid-size IT companies. Such companies have to pay more to retain their employees, which is not the case for bigger IT companies, as they can afford lower wages due to their brand name."
Elaborating on this trend, Rohit Anand, senior research analyst at PINC Research, told Moneylife, "They (mid-cap IT firms) have not exhibited good financials in a few recent quarterly results, they are bogged down by sluggish revenue growth and pressure on margins due to increase in salary costs because of rising attrition in the industry. Broader markets are not well suited for mid-caps at this point of time. Investors prefer to stay invested in blue-chip stocks, which have a long history of good returns to investors."
On company-specific details, Mr Anand said, "Mid-cap firms haven't announced big deals. There was one big deal announced by Patni, but that couldn't help increase the revenue momentum and it even lagged behind its mid-cap peers in revenue growth. Patni is expected to be muted in terms of share price performance due to lack of revenue growth, much below the industry average. MindTree announced two deals worth $70 million last week, but the exit of the chairman and the lack of leadership at the senior level is putting the company at risk."
The latest quarterly results of mid-cap IT companies were disappointing, as operating profits were down. Again, the operating profit of the large caps inched up. Firstsource Solutions' operating profit for the December 2010 quarter came down toRs20.74crore from Rs30.63 a quarter earlier. Similarly, for MindTree, for the third quarter, it stood at Rs44.96 crore-down by 17% as compared to the second quarter. The operating profit for the latest quarter of the mid-caps as compared to a quarter ago fell by 11% for Mphasis; 10% for Tech Mahindra and 55% for Hexaware. While for Patni, the operating profit for the fourth quarter stood at Rs188.75 crore, an increase of just 1% as against a quarter ago.
Meanwhile, the operating profit on a quarter-on-quarter basis for large-cap companies increased. It grew by 32% for HCL; 9% for TCS and 8% for Wipro. However, for Infosys, growth remained flat.
Despite the stumbling revival of the US economy, mid-cap IT companies have been unable to win contractors and projects due to the current vendor-consolidation process that is going on. Again, the projects are being grabbed by the major IT giants.
"There is vendor consolidation going on in the US and Europe. So contracts are given to one large company instead of many mid-cap companies," said Srishti Anand, an analyst tracking IT stocks at Angel Broking.
Mr Kumar echoed her views, "If mid-cap IT companies have to win a project and compete with the bigger companies, they have to lower their prices. Because of this, they don't enjoy the economies of scale, which leads to higher costs."
Large-cap IT companies, due to their vertical offerings, are able grow with healthy financial results as compared to the mid-sized firms, which only have horizontal concentration. This directly affects the revenues in case clients decide to downsize. "Mid-cap IT companies are skewed in terms of vertical exposure as compared to larger peers having a diversified basket," added Ms Anand.
Going beyond, there is a concern for these companies-as margins are expected to come down even more. Mr Kumar said, "Diversified offering and foraying into domains like banking and manufacturing can enable growth. Otherwise, the pressure on margins will continue from both the supply and demand side."
Mr Anand said, "Revenue growth (of mid-cap firms) will lag, compared to large-cap firms and the margins will be under pressure due to further salary costs, already high utilisation and currency headwinds." He added, "Share price performance of mid-cap IT firms will lag that of large-cap firms at a generic level. A few mid-cap IT firms, due to their USP (unique selling proposition), positioning and margin levers might post relatively better results."