Realty, banks drag the markets down

Tue, 27 Apr 01:30 pm

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The Indian markets ventured deeper into the negative territory during the previous two hours of trade on account of profit booking activity across index heavyweights. Currently, stocks from the realty, banking, consumer durables and metal sectors are dragging the markets down, while stocks from the power, FMCG and healthcare sectors are trading in the green.

The BSE-Sensex and the NSE-Nifty are trading lower, shedding around 50 points and 16 points respectively. While the stocks from BSE-Midcap like their larger peers are also trading in red, down by 0.25%, the ones in BSE-Smallcap are trading in the green, marginally up by 0.10%. The rupee is trading at 44.44 to the dollar.

Pantaloon Retail announced its 3QFY10 results yesterday. An all-round growth across all segments of operations resulted in a top line growth of 25.3% YoY during 3QFY10. The company’s 'Value retailing’ and 'Lifestyle retailing’ business segments, which grew by 31% YoY and 38 % YoY were the main drivers of this growth. Its operating margins remained stable at around 10.5% during the quarter. On back of robust topline and operating performance, the company managed to post a significant 62.7% YoY increase in bottomline. The topline and bottomline grew by 23% YoY and 45% YoY during 9MFY10.

It may be noted that lately Pantaloon has embarked upon a restructuring plan in order to streamline its operations into three business verticals - retail, financial services and support activities. In this regard, the company transferred its Value retail business to Future Value Retail Ltd with effect from 1st January, 2010. However, for the ease of YoY comparison, we analysed the results considering the combined performance. Nevertheless, along with restructuring its business, the company aims to revamp its supply chain and increase its return on capital employed to 20% going forward. We believe that this move will enable the company to consolidate Pantaloon’s operations as a pure retail play and improve return to shareholders.

According to a leading business daily, Indian IT majors like Wipro and Tech Mahindra are vying with global players like IBM, HP-EDS for a contract worth around US$ 1 bn from Telecom Corp, New Zealand’s biggest phone company. The telecom company is in discussion with a plethora of global IT players in order to outsource its non-core IT work so as to cut costs and improve profitability. The company’s US$ 1.5 bn IT infrastructure management project with HP-EDS is due to expire this year. It may be noted that this is amongst one of the largest renewal deals being sought by IT players around the world. Deals worth around US$ 10 bn to US$ 12 bn in annual contract values are estimated to expire and renegotiated this year. We believe that given the brand they have established in the field of outsourcing, Indian IT players are strong competitors to their global players at least in the service offering like application development and maintenance and IT infrastructure services.