Short Takes - Gloom clouds Infosys

The Infosys stock was given the thumbs down by the market, plummeting 8 per cent in the wake of announcing its June 2012 quarter results.

The company reduced its revenue guidance by half for the year, pegging revenue growth at 5 per cent in dollar terms to $7.34 billion. The company’s earlier estimate was at 8-10 per cent.

Infosys also took an unanticipated pricing cut and recorded a 3.7 per cent decline in realisations. Revenues in dollar terms declined by 1.1 per cent and profits fell by 10.2 per cent, on a sequential basis.

Further, the IT major indicated that pricing of some contracts could be re-negotiated. There are also hints about tweaking billing rates, in the light of competition and the tough macro environment.

European revenues declined by 8.1 per cent. In terms of clients, Infosys added one client in the $200 million category and six in the $50-80 million category.

TCS shines bright

TCS stole a march over Infosys, reporting a 3 per cent sequential growth in revenues and 2.9 per cent increase in net profits in dollar terms for the June 2012 quarter. There was growth in profit, despite wage hikes and a one per cent decline in pricing.

Growth in key verticals of BFSI, telecom and manufacturing outpaced the company’s overall growth rate in revenue terms. Of particular note is that, for the second consecutive quarter, TCS managed to grow the troubled telecom vertical.

In terms of client additions, though, TCS fell behind Infosys, adding just three clients in the $50 million dollar plus category.

TCS, with a consistent, broad-based growth and beating expectations, will probably render the company more favourable in the market compared to Infosys.

HDFC Bank

HDFC Bank has weathered tough macro conditions to post yet another quarter of strong growth. Profits for the bank grew 31 per cent, helped by an improved net interest margin, better-than-industrial growth in advances and higher non-interest income.

While the banking system witnessed a moderation in credit growth, HDFC Bank managed to grow its loan book by 9 per cent. This growth came from corporate advances, which expanded 15 per cent in the June 2012 quarter over the March 12 quarter.

Net interest margins improved to 4.3 per cent in the June 2012 quarter from the 4.2 per cent the quarter before. Due to an improvement in credit-deposit ratio, the rise in the corporate book, which are typically low-yielding and short term in nature, did not affect margins. While the low-cost deposits ratio fell, it was combated by a rise in proportion of high yielding loans such as gold, credit card and equipment financing.

There was no compromise in asset quality due to current challenging environment as gross NPA ratio stood at 0.97 per cent as of June 2012 against 1.04 per cent a year ago.

Even so, despite seeing no sharp slippage in asset quality, the bank increased its provisions by 63 per cent sequentially. Net NPA ratio as of June 2012 was at 0.2 per cent and restructured loans were at 0.3 per cent.

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