M&M spreading wings, stock up

Wed, 16 Dec 12:30 pm

   Previous Close   

   Pre-Open   

   10:30 am   

   02:30 pm   

   Closing   

Despite several attempts to pare the opening losses, the BSE Sensex remained in the negative territory during the previous two hours of trade. Currently, stocks from the telecom, IT, auto and healthcare sectors are leading the pack of gainers, while stocks from the realty, banking and oil and gas sectors are trading weak.

At the time of writing, the BSE Sensex and NSE Nifty traded in the red, down by 26 point and 11 points respectively. The BSE-Midcap index is trading flat while BSE-Smallcap is trading marginally up by 0.2%. The rupee is trading at 46.69 to the dollar.

According to a leading business daily, Infosys, India's second largest IT services exporter is considering prospects of a joint venture with the IT arm of German engineering major Siemens AG. It may be noted that Siemens AG is planning to hive off its IT services and solutions unit as a strategic move. Its performance in FY09 was dented by the on-going economic slowdown in the Europe and rest of the world. Siemens' IT revenue fell 21% YoY to Euro 1.1 bn during FY09.The parent thereby decided to hive-off the loss-making unit and is considering all options like a JV, IPO and a hive-off into a separate entity by July 2010.

If the deal with Infosys goes through, it will help the Indian IT major to boost its revenues from the European markets. The company has already hinted that it aimed to increase its revenue contribution from Europe to 40% in the next couple of years. At present it generates over 60% revenue from the US, 25% from the Europe and the remaining comes from rest of the world. The cash rich company has also hinted that it plans to take the inorganic route for gaining strong foothold into the target markets. IT stocks are currently trading in the green.

As per a leading business daily, Mahindra & Mahindra (M&M), India's automobile major, has planned to foray into the aerospace business with the aim to tap the defence offset market. For this purpose it has acquired 75% stakes in two Australian aerospace companies, Aerostaff Australia (AA) and Gippsland Aeronautics (GA) through its aerospace arm ,Mahindra Aerospace (MAPL). It may be noted that the company is eyeing the renewed demand for economical air transport across the world. There is a growing need in both civic and defence markets.

AA is a tier-II component manufacturer which makes high-precision, close tolerance aircraft components and assemblies for large aerospace original equipments manufacturers (OEM). This acquisition aims at tapping the growing defence offset and commercial aviation market. GA is an established brand in general aviation and has delivered about 200 planes in 32 countries. This acquisition is expected to aid M&M's entry into the fast growing general aviation segment. The company is also setting up a new plant worth around US$ 10 m at Bangalore for making 2 to 20 passenger aircrafts. We believe that this move will help M&M diversify its revenue stream and leverage on its international presence. It currently generates over 60% of its revenue from automobile and over 26% from farm equipments. Stocks from auto sector are finding favour.