Infosys plans to move out of auto

Wed, 25 Nov 02:30 pm

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The Indian markets witnessed choppy trades with alternate bouts of buying and selling during the previous two hours of trade. The Sensex pared some of its initial gains that it saw early this morning. Stocks from the oil & gas, FMCG, metal and auto sectors are leading the pack of gainers, while healthcare, realty and power sectors failed to garner investors' interest. The overall advance to decline ratio is poised at 1.1 to 1 on the BSE.

The BSE-Sensex is trading higher, up by around 79 points while NSE-Nifty is up 23 points. The BSE-Midcap and BSE-Smallcap are also trading higher, up by around 0.12% and 0.30% respectively. The rupee is trading at 46.25 to the dollar.

According to a leading business daily, Infosys, India's second largest IT services exporter is planning to reduce focus on its engineering services division catering to automotive giants. The company has decided to de-risk its topline from the segment which has become highly competitive and price-sensitive. With the automotive industry, particularly that in the US, beaten out of shape by the economic slowdown, pricing has taken a hit for the premium service players like Infosys. The company now plans to shift focus towards engineering segments like aerospace (only 1% of topline) which provide a lot more stability and visibility of revenues. Other segments that top the priority list in engineering services are heavy engineering, hi-tech, energy generation, medical and apparel.

It appears to be a good move by Infosys if the company can exit the unviable segments and venture into segments which have huge growth potential. It may also be noted that automotive sector contributes only a negligible proportion of the company's engineering services revenue while aerospace contributes 40% of the same.

According to a leading daily,JSW Steel is planning to sell 40% stake in its upcoming 10 m tonne steel West Bengal unit to its overseas partner Japanese steel giant, JFE. It may be noted that last week JSW Steel announced a strategic alliance with Japan's second-largest steelmaker JFE Steel Corporation. This deal will allow JSW to access JFE's technology for producing steel used in automobiles. Further it is expected that the Japanese partner might invest close to US$ 1 bn for buying 40% stake in JSW Bengal Steel. The funds so raised are expected to be used in building up the steel plant which will cost about RS 350 bn.

This is a positive development for JSW Steel which had to delay the construction of this plant due to unavailability of funds last year due to the credit crisis. It now expects the construction to begin soon as it has already acquired 4,500 acres of land for the same in West Bengal.