Indices hold on to gains

Mon, 26 Apr 11:30 am

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On account of profit booking witnessed among index heavy weights, the Indian stock markets pared some of their early gains during previous two hours of trade. The stocks from the metal, consumer durables, banking and telecom sectors are leading the pack of gainers. Energy, healthcare and realty sectors are the only ones languishing in the red.

The BSE-Sensex and the NSE-Nifty are trading higher, up by around 64 points and 20 points respectively. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 0.6% and 0.7% respectively. The rupee is trading at 44.32 to the dollar.

Mid-tier IT firm, 3i-Infotech (3i) announced its FY10 results last weekend. The company’s topline grew by 5% QoQ and 7% YoY during 4QFY10 and FY10 respectively on account of revival in its software services and BPO business. Despite 1% YoY expansion of operation margins, 3i's bottom-line plummeted drastically by 88% YoY during the year. This largely happened on account of the company discontinuing its operations of several government projects which it signed in 2007.

It may be noted that in 2007, 3i signed 'Master Service Agreement' (MAS) with several state governments of India that required setting up and operating Citizen Service Centers across these states. However on account of adverse business environment 3i exited these agreements which entailed a compensation of Rs 109.2 m on these agreements. Further considering it unviable, 3i exited this line of business making the asset base amassed for these projects disposable. As these assets will be disposed at their realizable value, the company wrote them off resulting in a loss of Rs 2.6 bn. This severely dented the net profits for 3i. Excluding exceptional items, profits remained flat for FY10. Working with the government of India has not been any easy task ever. Nevertheless given the huge pool of opportunity that e-governance brings, it is important for Indian IT companies to learn this soon.

Procter & Gamble Hygiene and Health Care Ltd. (P&G) released its 3QFY10 results on Friday. The company posted a strong topline growth of 15% YoY. The topline growth was supported by strong performance of the company’s two segments, healthcare and feminine hygiene. The healthcare segment posted a 15% YoY growth led by strong sales of VICKS vaporub and VICKS cough drops while the feminine hygiene segment grew by 16% YoY. Growth of the feminine hygiene segment was aided by robust sales of Whisper Ultra, Whisper Maxi and Whisper Choice. P&G’s bottomline grew by 26% YoY during the quarter. Higher bottomline growth as compared to the topline comes on the back of lower costs of goods and lower advertisement expenditure as a percentage of sales. The company’s strong performance comes on the back of new product innovations and increase in distribution levels.