A mixed bag

Idea Cellular had a mixed week with the telecom regulator's spectrum allocation norms coming as a dampener, while its numbers for the March quarter were ahead of market expectations.

During the quarter, the company saw its revenues increase 26.8 per cent over the same period in FY11 to Rs 5,369.7 crore, while net profits fell 12.9 per cent to Rs 239 crore. The fall in profits was due to doubling of tax outflows and steep increase in interest costs.

Idea also had a marginal increase in average revenue per user (ARPU) sequentially to Rs 160. Subscriber additions continue to be healthy. The company continues to have a very healthy proportion of active subscribers (those that recharge regularly) at 92.9 per cent. The only negative was that the realisation per minute declined sequentially from 43.3 paisa to 42.2 paisa as the usage increased. It remains to be seen how the company monetises the increased minutes of usage.

But the key negative for the week was the telecom regulators' recommendation for a steep increase in the reserve price for spectrum that is to be auctioned following the cancellation of 122 licences by the apex court. Further, the TRAI also recommended re-farming of 900 MHz spectrum and auction the airwaves there. That could entail further outflows if implemented.

Yet to catch up

Wipro reiterated its position among the IT majors by delivering financial growth higher than Infosys, but lower than that of HCL Technologies (HCL) and TCS.

But, as with Infosys, the company gave a feeble revenue outlook for the June quarter, which suggests that Wipro still has a long way to go to catch up with fast growing peers.

In the March quarter, the company's IT services division's revenues and EBIT (earnings before interest and taxes) fell marginally compared to the December quarter, respectively. In dollar terms, revenues grew 2 per cent. This is better than Infosys, but lower than HCL and TCS.

The key positive highlights for the quarter include large deal wins in line with peers, growth in the US geography ahead of competition as well as pricing increases. But tepid volumes , slower growth or decline in key verticals and a lacklustre guidance came as dampeners.

With all the listed IT majors reporting their March scorecards, HCL seems to have a head start in terms of business momentum.

Heavy penalty deals a blow

The stock of agro chemicals supplier, United Phosphorus, fell 14 per cent over the week. It was slapped with a penalty of Rs 252 crore by the Competition Commission of India. The company and two other agro chemical players were charged of collusive bidding in a tender floated by the Food Corporation of India for aluminium phosphide tablets used in warehouses. Interestingly, the total value of the tender, made in 2009, was about Rs 24 crore and the company's share was about Rs 8 crore. The quantum of the penalty, at 32 times the order awarded to United Phosphorus, comes as a shock.

The penalty amount is large; it has been calculated at 9 per cent of the average turnover of the company in the last three years ending FY-11. That's the formula used by the Competition Commission for calculating penalty.

United Phosphorus has maintained that there is no violation on its part and that it would seek an appeal. However, if it comes to the company having to pay out the amount, it would have to take a one-time hit. The penalty is about 40 per cent of the Indian standalone entity's earnings before interest, depreciation and taxes. The standalone company also had only about Rs 260 core of cash from operating activities in FY-11.

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