According to Credit Suisse research, while many of the mid-sized Indian IT companies have attractive financials, these stocks trade at significant discounts to their larger peers
There are signs of improving demand in information technology (IT) sector, which can benefit all companies. However, margins of mid-sized IT companies tend are more leveraged to revenue pick-up due to their smaller scale. Besides these stocks are available at significant discounts compared with large companies, says Credit Suisse in a research report.
"Mid-sized IT services companies can offer attractive stock price returns and outperform larger peers when the demand environment is improving. The improving environment benefits all companies - a "rising tide lifts all boats" argument – while the larger companies usually navigate a deteriorating environment better. Also, in an improving environment, as price-to-earnings (P/E) multiples of the larger companies expand, investors can get attracted to the multiples, often single-digit, that the mid-sized ones offer," the report said.
While many of these mid-sized companies have attractive financials – high return on equity (ROE), net cash, good growth – these stocks trade at significant discount to their larger peers given the plethora of investment options in this sector and their higher leverage to economic cycles.
"At this point in time, most of these companies trade at single-digit 12-month forward P/E multiples, on consensus estimates. We also believe that the risk to changes in consensus estimates is to the upside – we do not think the full impact of the recent significant rupee depreciation is factored in and an improving demand scenario can also lead to some upgrades. A combination of even a 2-3 point multiple expansion and likely earnings growth over the next 12 months can lead to attractive stock price returns," the financial services company said.
Credit Suisse said, there is some amount of unpredictability in smaller stocks given the smaller scale of operations – one large customer that defers spending or a large project that gets cancelled can hurt near-term earnings and hurt stock prices disproportionately.
“Hence, we prefer a combination of good near-term revenue momentum, inexpensive valuations and reasonable-quality management. Among our coverage universe, we like Tech Mahindra (though it is possibly no longer a 'mid-sized' company), Mindtree and Hexaware. Outside our coverage universe, stocks such as KPIT and Persistent have demonstrated some good business momentum recently," Credit Suisse added. Strangely, Credit Suisse does not cover one of the top performers of the IT sector, Accelya Kale.
Tightening the noose around QNet, the economic offences wing of Mumbai police froze two bank accounts that have Rs45 crore in balance. Meanwhile, the police custody of Manjunath Hegde, arrested in the same case has been extended
Economic offences wing (EOW) of Mumbai police, which is probing QNet has frozen two bank accounts related with the Hong Kong-based controversial multi-level marketing (MLM) operator. These bank accounts reportedly have a balance of Rs45 crore. In addition, the police custody of Manjunath Hegde, arrested in this cheating case, has been reportedly extended, says sources.
Last week, EOW registered a case against QNet, for allegedly duping thousands of investors by selling them plastic and glass products terming them miraculous objects for treating severe diseases like Cancer.
The complainant, Gurupreet Singh Anand, a computer consultant from Lokhandawala, Andheri stated that his wife was duped for Rs30,000 by some people who had introduced themselves as the independent representatives (IRs) of QNet. Anand told the police, “They (IRs) had said that one of the bio-products my wife bought could be used to treat my 12-year-old son's brain related diseases.”
The first information report (FIR) names five accused, including QNet's Hong Kong-based founder Dato Vijay Eswaran, a Malaysian by birth and an Indian by ethnicity, who is photographed hobnobbing with the Prince of Saudi Arabia, in order to enhance its credibility in the Gulf.
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The Lok Sabha was adjourned till Friday following uproar over missing coal block files and protest over Telangana issue
Amidst a high drama over suspension of 11 members of Palirament (MPs), the Lok Sabha, lower house of the Indian Parliament was adjourned for the day on Thursday. This was triggered by minister for parliamentary affairs Kamal Nath when he brought a motion to suspend 11 MPs from Andhra Pradesh.
The MPs, including seven from Congress and four from Telugu Desam Party (TDP) were being suspended for protesting over the Telangana issue. However, an aggressive Opposition scuttled the move.
Hell broke loose as soon as Kamal Nath moved the motion to suspend seven Congress and four TDP members for disturbing the proceedings regularly since the beginning of the Monsoon session from 5th August. "Unfortunately, the House has not been able to function since the beginning of this session in light of the protests by these members," he said.
Nath brought the motion as TDP members were in the Well protesting division of Andhra Pradesh, repeating the scenes witnessed ever since the session began. Immediately, members of almost the entire opposition were on their feet, vociferously protesting the motion.
Kalyan Banerjee (TMC) stormed the Well as several members angrily shouted 'No, No' in disapproval of the motion.
N Sivaprasad, an agitating TDP member who was in the Well and is among those named by Nath, took out a whip while his party colleague M Venugopala Reddy tried to pull down microphones on the Speaker's podium.
Later, a Congress member who was among those named also stormed the Well along with his agitating party colleagues. He too tried to pull down the microphones. However, alert Lok Sabha staff prevented it.
In the midst of ruckus, Speaker Meira Kumar adjourned the House at around 12:15pm for nearly 30 minutes.
When the House reassembled, it was adjourned for the day as commotion continued.
In the process, consideration of the much-touted Food Security Bill, slated to be taken up today, was again scuttled. The Land Acquisition Bill, another crucial legislation was also listed on the day's agenda.