Personal finance Tuesday

IndusInd Bank revises interest rates on term deposits; Sundaram MF floats Fixed Term Plan-AI; Reliance MF launches Fixed Horizon Fund-XVII-Series 4; Sundaram MF unveils Fixed Term Plan-AM; Edelweiss Securities launches stock trading on mobiles

IndusInd Bank revises interest rates on term deposits

IndusInd Bank has revised interest rates on domestic term deposits. For deposits ranging from 7-14 days, the rate is 3%. For 15-45 days, the rate is 4%. Deposits above one year but below two years will receive 9% rate, while above two to below three years will get 8.75% rate.

Senior citizens will get an additional interest rate of 0.50% over and above the rates applicable for deposits below Rs1 crore. However, this rate is not applicable for NRO deposits).

Sundaram MF floats Fixed Term Plan-AI


Sundaram Mutual Fund has launched Sundaram Fixed Term Plan-AI, a close-ended income scheme.

The investment objective of the scheme is to generate income with minimum volatility by investing in debt and money market securities, which mature on or before the maturity of the scheme.

The new issue closes on 14th January. The minimum investment amount is Rs5,000.

Reliance MF launches Fixed Horizon Fund-XVII-Series 4

Reliance Mutual Fund has launched Reliance Fixed Horizon Fund-XVII-Series 4, a close-ended income scheme.

The investment objective of the scheme is to generate regular returns and growth of capital by investing in central and state government securities and other fixed income/debt securities normally maturing in line with the time profile of the scheme with the objective of limiting interest rate volatility.
The new issue closes on 12th January. The minimum investment amount is Rs5,000.

Sundaram MF unveils Fixed Term Plan-AM

Sundaram Mutual Fund has launched Sundaram Fixed Term Plan-AM, a close-ended income scheme.

The investment objective of the scheme is to generate income with minimum volatility by investing in debt and money market securities, which mature on or before the maturity of the scheme.

The new issue closes on 21st January. The minimum investment amount is Rs5,000.

Edelweiss Securities launches stock trading on mobiles

Cashing on the increasing penetration of GPRS-enabled mobile phones, the brokerage firm Edelweiss Securities said that its web-based securities trading platform has started equity trading on mobile phones, for its customers.
"Edelweiss.In customers will now be able to trade in equity (on both NSE and BSE), NSE Futures & Options and NSE Currency Derivatives using their mobile phones," the company said in a statement.

Through trading on the GPRS-enable mobile phones, the customers will be able to view their order book and will be in a position to take stock of their holdings, the statement added.

User

As outsourcing firms lose their cutting edge, BPO stocks shed their sheen

India-based Business Process Outsourcing companies are taking away US jobs and are recruiting by the thousands. But why are listed BPO stocks doing badly and what is their long-term future?

The US is reeling under high unemployment, which is often blamed on India's Business Process Outsourcing (BPO) sector, which is accused of pulling out jobs from the US to India.

That should mean great business for BPOs, right? Well, BPOs remain one of the largest employers and highest-paying sectors in the country. But why do their stocks continue to provide dismal returns on investment?

In January 2008, the Sensex was at over 21,000. It then crashed and almost regained its previous peak by October 2010. During this period, Allsec Technologies Ltd is down by a jaw-dropping 72%, Firstsource Solutions Ltd has fallen by 67%, while Tricom India Ltd has plunged by 65%.

Similarly, others like Cambridge Solutions Ltd went down 45% and Spanco fell 33%. On the other hand, the BSE IT Index-which comprises software companies-moved up by 62% in the same period.

What has hurt these BPOs stocks so much? Analysts tracking these stocks say that these BPO companies have no major competitive edge, with the result that their margins are continually being squeezed, especially due to rising employee cost.

The percentage of employee cost to net sales has shown a rise on a year-on-year basis. The employee cost to net sales for Cambridge Solutions rose to 52% in the September 2010 quarter from 37% in September 2009.

Similarly for the relevant periods, the percentage for Firstsource Solutions and Sparsh BPO rose to 52% from 50% and rose to 57% from 54% respectively. However, for Spanco, employee cost to sales percentage remained the same.

Allsec Technologies was the only one among the BPO stock selection whose cost to sales fell to 63% in the September 2010 quarter from 73% in September 2009.

"The BPO business generally comes from the global arena where there is huge competition. The increasing cost of employees and the change in rate of inflation increases the pricing and hence margins are pressured. Earlier the margins were around 18%-20%, but now they have dipped to 13%-14%. In December, due to the festive season, there was a dip in the business. The growth in this sector is muted to only around 2%-2.5%," said a research analyst from a leading brokerage firm, who preferred anonymity.

According to Rohit Anand, senior research analyst at PINC Research, "BPO companies have lagged behind in revenue growth and margins have also been affected due to the appreciation in the rupee, coupled with the high attrition rate in this industry."

Another analyst explains that these stocks are also depressed as various clients of these BPO companies are seeking consolidation of business (outsourcing with allied IT services), which may be a tough ask for a number of these service providers.

Consolidation among BPO companies might help, but even that is not happening. "There is not much of consolidation going on in the BPO industry. Over the past two quarters, fewer contracts were given to these companies. Going forward, these stocks may look up if consolidation takes place," said an analyst tracking IT stocks, requesting anonymity as he is not authorised to speak to the media.

KPO firm eClerx Services Ltd seems to be an exception, with the stock trending upwards. From the Rs269 level on 8 January 2008, the stock was at Rs695.55 in yesterday's trading. "eClerx has given strong returns over the past year," said Mr Anand.

Mr Anand added, "Going ahead, the performance of BPO companies is expected to be better as business volumes pick up. Billing rates have stabilised now, so there are no major headwinds for operating margins. Also, the attrition rate is expected to ease."

User

Capgemini promotes three Indian leaders to new global positions

Capgemini appoints Salil Parekh as CEO of application services in North America, UK and Asia Pacific, Aruna Jayanthi as the CEO of India operations and Baru Rao as the CEO of application services in Europe

Providers of consulting, technology and outsourcing services Capgemini said it has promoted its three Indian executives.

Salil Parekh, who was the chief executive officer (CEO) of global financial services, Asia Pacific and India offshore, is appointed as the CEO of application services businesses of Capgemini that include North America, the UK and Asia Pacific.

Aruna Jayanthi, who was the global delivery officer for Capgemini Outsourcing, is appointed as the new CEO of India operations. As a global delivery officer, she improved the quality, productivity and profitability of Capgemini's outsourcing operations worldwide.

Baru Rao, who was the CEO of India, will now be taking on a new role as the COO for application services in Europe with 22,000 employees. He will focus on the top line improvement through offshore leverage and innovation and margin improvement through industrialisation.

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