S&P also affirmed its ‘BBB’ rating on TCS on the back of a good operating performance despite the global slowdown
Credit ratings agency Standard & Poor's (S&P), has said that it has affirmed Tata Consultancy Services Ltd’s long-term corporate credit rating to ‘BBB’ and revised the company’s outlook to ‘positive’ from ‘stable’.
S&P said that it expects the company's revenue, which was steady during the downturn, to register moderate growth, going forward. “Growth will be fuelled by the global economic revival and our expectation that India-based IT service providers will continue to benefit from higher outsourcing," said Suzanne Smith, S&P's credit analyst and managing director, corporate and government ratings, for South and Southeast Asia.
TCS derives more than 90% of its revenue from overseas contracts, while its operating expenses are largely denominated in local currency, the ratings agency said.
S&P said that the positive outlook reflects its expectation that TCS’s operating performance would improve with a revival in the global economy. It also reflects the ratings agency’s view of the resilience and flexibility of the company's operating performance during the economic crisis, it added.
After the ban on entry load for mutual funds (MFs) by the market regulator, banking channels have become the dominant route for fund companies to distribute MFs, as small distributors are finding it unprofitable to sell these funds.
While banning entry loads, the Securities and Exchange Board of India (SEBI) has asked distributors to disclose the upfront commission to be paid by the investor to the distributor. But banks don’t exactly share SEBI’s idea of such disclosure.
Axis Bank has charged its customers a fee for subscribing to a new fund offer of Axis Mutual Fund. It does not call it advisory fee. It did not disclose it upfront. It calls it a ‘professional’ fee and has charged it to the customer’s account.
“The Professional Fees for Axis Equity Fund NFO was Rs250 as decided by the bank as distributor. All the customers investing in the Axis Equity Fund NFO through Axis Bank were briefed on the services offered and consequent professional fees to be charged by the bank at the time of investment,” said Axis Bank to Moneylife.
However, the customer’s awareness of any such deduction by the bank is open to question (unless a customer himself inquires), and should the charges be deducted as ‘professional fees’?
Clearly, while SEBI has declared that commission paid by the investor directly to the distributor should be transparent, banks have other ideas.
“Banks don’t specify that charges are deducted for sale of mutual funds. The bank should send a debit note specifying the type of professional services they have rendered to the customer. A doctor or a lawyer can charge a professional fee but how can a bank charge professional fee?” asked an independent financial advisor (IFA).
“Some banks take a mandate (signature) from the client, for instance power of attorney (POA). Everything is in the hands of the bank itself. All banks which sell MFs charge some or the other amount from customers like 0.5% of the total AUM (Assets Under Management),” said a chief executive officer (CEO) of an investment advisory firm.
“Upfront commission should not be charged under professional fees. SEBI in its guidelines has stated that banks can charge an advisory fee if the customer knows about it and hands over a cheque to the bank. It should not be deducted directly from a customer’s account. If you take a onetime mandate, it is just like a blank cheque. The customer does not read all the minute details mentioned in a form. If a mandate is taken by the bank, they can deduct any type of charges from the customer’s account,” added the source.
HDFC Bank charges Rs200 as upfront commission for selling a fund. Presently, a majority of banks have tied up with asset management companies (AMCs) to sell funds. Some banks have also appointed a mutual fund advisor who is certified by AMFI. ICICI Bank and HSBC officials could not be contacted for comments and our email queries remain unanswered.
The company, which had earlier withdrawn its plans to enter the market due to adverse conditions, is targeting the primary markets again
Man Infraconstruction Ltd had filed its red herring prospectus with SEBI in July 2008 and had subsequently stepped back from a public issue due to adverse market conditions. However, it subsequently decided to test the waters again.
The company’s issue opened on 18th February and closes on 22nd February with 5.6 million shares on offer through a 100% book-building route. As on 18th February, it got a 19% subscription out of the 1.6 million shares quota reserved for retail individual investors (RIIs) and 4.13% (out of 2,268,000) and 8.73% (out of 540,000) for qualified institutional buyers (QIBs) and non-institutional investors, respectively. There were no subscriptions under the employee category.
“We estimate the company to report subdued bottom-line compounded annual growth rate (CAGR) of a mere 8% over FY09-FY12E. On the valuation front, the IPO is available at a price-to-earnings ratio (P/E) of 11-12x FY12E earnings on the lower and upper price bands respectively, which is at a premium to listed players. Moreover, due to the concentrated nature of business and subdued earnings growth, we believe the stock should trade at a discount to its peers. Hence, we recommend avoiding the issue,” said Angel Broking in a research note.
Credit Analysis & Research Ltd (CARE) has assigned ‘IPO Grade 3’ to the issue indicating ‘above average’ fundamentals. Post the issue, the promoter group will hold 63.48% of the share capital. The issue size is pegged at Rs136.70 crore-Rs141.80 crore with a price band of Rs243-Rs252. The company’s order book stood at Rs2,020 crore as on 31 December 2009.
Although the company is bidding for Build Operate and Transfer (BOT) and Public Private Partnership (PPP) projects, it has no prior experience in undertaking such projects.
On a nine-month basis, the company’s total income fell by 19.3% at Rs318 crore for the December quarter of 2009 compared to Rs394 crore for the corresponding period last year. It registered consolidated revenues of Rs594 crore in FY09 compared to Rs236 crore in FY08.
Its earnings before income, tax, depreciation and amortisation (EBITDA) margin in FY09 was 26% and net margin was 14%. EBITDA increased from Rs22 crore in FY2007 to Rs55 crore in FY08 and went up to Rs152 crore in FY09, at a CAGR of 163.25%.
The company focuses on residential, commercial and industrial construction. More than 90% of its order book comes from the real-estate segment. High focus on real-estate projects exposes the company to business risk, as realty activity may decline in a downturn, thereby affecting the order flow for building contractors.
“In terms of valuation, the stock is offered at around 13-13.5x its FY10 earnings on post-issue diluted equity base. This is largely in line with the average valuations of its peer group companies,” said Sharekhan in its research note.
Incorporated in 2002, Man Infraconstruction has undertaken projects in Maharashtra, Kerala, Gujarat, West Bengal, Goa and Tamil Nadu. The company is engaged in construction services for port infrastructure along with residential, industrial, commercial and road infrastructure projects.