Forecast 2011: Kotak expects a ‘blockbuster' year for top three Indian ITs

Based on a strong quarter of consulting sales and bookings by Accenture, and robust growth in new licence sales by Oracle, Kotak Institutional Equities expects blockbuster growth for the top three Indian IT services firms–TCS, Infosys and Cognizant—in the new year

Accenture's November 2010 earnings saw consulting revenues driving growth with a 15% quarter-on-quarter uptick, which clearly suggests increasing discretionary spends, according to Kotak Institutional Equities. Outsourcing revenues also grew a strong 6.5%. Constant currency revenue growth hit double digits for the first time in several quarters and outsourcing order booking was up 28%.

Oracle saw a 14% q-o-q growth in dollar terms. New software licence sales amounted to $2 billion, up 23% year-on-year. This was the highest-ever new licence sales in the November quarter.

Based on these numbers, Kotak Institutional Equities gave a heads-up to its clients about possible upgrades in estimates of tier-I companies. "Our current estimates do not factor in this possibility yet (potential of 30%+ constant currency revenue growth year) and we believe that neither do the consensus numbers. We clearly see a possibility of further revenue upgrades for tier-I names. Also, with most of the Street having reset their rupee/$ assumptions to 43-44.5 for FY12, a weaker rupee could lead to meaningful EPS upgrades as such."

A large part of the hope for higher discretionary spending by US companies is based on Federal Reserve data which suggests that American corporations are sitting on roughly $1.9 trillion in cash!

Kotak expects the best growth to come in mid-cap names such as Hexaware, Mindtree and Satyam. Best large-cap growth is expected from HCL Tech and Infosys. TCS and Wipro seem to be lagging behind in terms of growth and yet they are the most expensive.

IT companies have been outperformers in the last month or so, as they were considered safe havens in the middle of the scams that broke out, and the relatively positive data coming out of the US. Infosys has gone up almost 14% from a low of Rs2,950 on 24th November, while TCS and HCL Technologies are up 16% and Wipro is up by as much as 20%.


Siesta Logistics raises $10million PE investment from Ashmore Alchemy

Siesta Logistics Corporation Ltd (SLCL), an integrated logistics service provider and a part of the Siesta Group, said that it has raised $10 million in private equity from Ashmore Alchemy India, a joint venture between Alchemy Partners LLP and Ashmore Investments (UK).

Headquartered in Bengaluru, Siesta Logistics has a strong network of transport branches and nearly 10 freight and customs outlets supported by 20 nominated agents effectively covering Asia, Australia, Hong Kong, Europe, South America and North America. In addition, the company is also a part of global logistics network which has 375 members, offices in 382 cities and network in 132 countries across the globe. SLCL network of clients includes Schneider Electric, Airbus, Fujitsu, ITC, UB Group, SBQ Steel, Philips, Parle Agro, Lakhani, Lilliput, Videocon, Shiv-Vani Oil, Thermax Industries, Everest Industries, and Jubilant Organosys among others.

Kiran Salunke, managing director, Siesta Logistics said, “The minority stake investment by Ashmore Alchemy will be utilised to increase our global reach and service capabilities across the global logistics hub.”


Govt reduces customs duty on onion imports to zero

New Delhi: With onion prices skyrocketing to as much as Rs85 per kg in some retail markets, the Indian government today said it has brought down customs duty on imports of the commodity to zero from 5%, reports PTI.

“The customs duty on onions has been brought down to zero,” finance secretary Ashok Chawla told reporters here today.

The step comes amid a sharp rise in the price of onions up to Rs70-Rs85 per kg in retail markets across the country from just Rs35-Rs40 a few days ago on account of damage suffered by crops in the key-producing states of Maharashtra, Gujarat and a few southern states due to excessive rains, which has led to large-scale hoarding by some traders.

The steep hike in onion prices set alarm bells ringing in the government, which has imposed a ban on onion exports till 15 January 2011, with a view to increase availability in the domestic market. However, it is likely to take at least three weeks before the common man gets any relief from the measure.

“Onion prices will remain high for the next 2-3 weeks and the situation is likely to improve only after that,” food and agriculture minister Sharad Pawar said yesterday.

While Mr Pawar had indicated the government did not have any plans to import onions to bring down prices at home, small 450-tonne consignments of the commodity from neighbouring Pakistan have been making their way into the country across the Punjab border since yesterday.

Compared to the exorbitant domestic prices, the price of the onions imported from Pakistan is just Rs18-Rs20 per kg.

A worried prime minister Manmohan Singh, whose government has been grappling with high inflation for much of the past year, has also stepped into the picture and asked the agriculture and consumer affairs ministries to take effective steps to rein in onion prices.

“The prime minister desires all necessary steps to effectively deal with the extraordinary price rise of onions and bring the prices down to an affordable level,” an official source said, quoting letters written by Mr Singh to the ministries concerned.


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