Tech Mahindra + Satyam – Uncertainity for one more Quarter

April 30, 2009 · Filed Under conference call · Comment 

Highlights of the call

  • Satyam Computer has seen 30-35% client erosion. Both the Companies: Satyam Computer and Tech Mahindra would be working separately and merger would happen only after 2 years. There would be changes in the Satyam management soon. The funding of Satyam Computer has been done thru debt and cash. The Company has raised debt of Rs 2000 crore with average interest cost of 11%. The debt has been raised in Tech Mahindra and SPV. The debt is a combination of long-term debt and bridge loan.
  • The management believes that the environment is challenging. The performance of the Company was impacted by GBP depreciation against US dollar with about 50-55% of the revenues comes from GBP. The Company is seeing some positive signs of recovery but the real picture will be seen only after 6 months.
  • The management is cautious but the deal flow is good. The large deals are up but number of deals is down.
  • The volume dip for the quarter was 2% and pricing dip was 2.5%.
  • OPM was down 110bps at 27% on the back of lower volumes, lower realizations and higher SG&A expenses. OPM was benefited by Rs 25 crore on the back of re-alignment of employee benefits. Excluding the benefit OPM would have been at 24.7%.
  • The billing in GBP for the quarter was US$ 58 million down from GBP 60 million in the sequential quarter. The Barcelona deal (BTGS) had billing of US$ 19 million (US$ 27 million) against GBP 22 million (US$ 34.9 million). For FY09, Barcelona has contributed GBP 87 million. The management believes that the bottom for traditional BT business has not been reached. It expects uncertainty to continue for one more quarter. For the Barcelona deal, the management expects run-rate of US$ 18-20 million to continue for a while. Revenues from the GBP 350 million deal would begin from Q1FY10.
  • There has been huge transformation going on at BTGS leading to projects suspension leading to slowdown in operations.
  • The Company has increased the variable portion of pay as a cost control measure.
  • The Company is working with 2 large clients in Germany and 1 large client in Netherlands. This is furthering the Company’s focus into Continental Europe.
  • The company is working with a large North American customer which forma a significant part of North American business. The last 2 quarters have been flat for this customer.
  • Utilization is one of the key drivers for margin expansion. For the quarter, utilization including trainees has improved 300bps at 70%.
  • Other Income for the quarter stood at Rs 7.80 crore against loss of Rs 39.70 crore in the sequential quarter. Forex loss was US$ 1 million against US$ 9 million in the sequential quarter, provision write back of Rs 6 crore, refund of service tax of Rs 2 crore and interest/dividend income of Rs 5 crore.
  • At the end of March 2009, Tech Mahindra has forward hedges of close to US$ 700 million at Rs 43.63/US$ and GBP 270 million at US$ 1.88/GBP against US$ 720 million and GBP 265 million at the end of sequential quarter.
  • The salary costs was down 7% at Rs 449.6 crore on the back of hike of variable pay percentage, dip in headcount, lower number of contract workers and realignment of employee benefits.
  • Cash & Cash equivalents stood at Rs 1000 crore.
  • The Company has stopped campus hiring. It has made campus offers for 1500 for FY10, the joining of whom has been deferred. There would be offers pending for FY09 as well.
  • The number of active clients at the end of the quarter decreased to 108 against 110 at the end of sequential quarter. Out of total clients, 2 clients have contributed more than $ 50 million with 4 clients (4 in sequential quarter) contributing more than US$ 25 million. The contribution of the top client BT has decreased 15.3% contributing 52% (57% in sequential quarter) for the quarter. The top 5 clients contribution decreased 8.3% with contribution down at 78% from 79% and top 10 clients decreased 10% at 83% from 87% in the sequential quarter.
  • The Net reduction of manpower during the quarter was at 457 (294 additions in sequential quarter) employees totaling to 24972 employees as on March 31, 2009. There was reduction in headcount in software of 719 and addition of 242 employees in BPO and 20 added in support staff. The onsite-offshore mix as far as revenue generation is concerned was at 39:61 against 40:60 in the sequential quarter. Utilization including trainees improved 300bps at 70%.
  • The contribution of BT to revenues was down at 52% against 57% in the sequential quarter, in absolute terms it was down 15.3%. Top 2-5 clients contribution was up at 26% from 22% in sequential quarter and in absolute terms it increased 9.7% and that of top 6-10 clients was down at 6% from 8%.

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Sterlite Industries least cost producer of Aluminium

April 30, 2009 · Filed Under conference call · Comment 

Highlights of the concall

  • For Q4 FY09, the consolidated revenue of the company dipped 36% Y-o-Y to Rs 4356.98 crore with OPM declining to 18.1% from 32.8% in Q4 FY08. The net attributable profit at the end stood at 598.25 crore, 55% lower on Y-o-Y.

Copper Business

    • The decrease in revenues from copper business was primarily on account of steep fall in LME prices of copper and fall in by-product realisation. The profitability in copper segment was also adversely impacted by steep fall in by-products realization and lower Tc/Rc.
    • The Gross Cost of Production for copper has reduced considerably from 16.94 c/lb in Q3 to 12.79 c/lb in Q4 FY09, mainly due to reduction in global commodity and crude prices.
    • After a good first half, the acid business saw a sharp decline in prices, mainly on account of cheaper fertilizer imports and low sulphur costs. The market showed signs of recovery at the end of the year.
    • Though fall in LME prices resulted in closure and cutbacks of several mines, global concentrate Tc/Rcs have been settled around 75/7.5 ($ 75 a tonne and 7.5 cents a pound) from this calendar year onwards. Spot market remains tight due to increased Chinese off take.

Aluminium Business

  • The company has shut down a part of the BALCO Plant I smelter in Q4 2009 due to higher operational costs and sold surplus power in commercial market, to maximize returns.
  • The decrease in revenue and profitability in aluminium division was primarily on account of reduction in LME. During Q4, LME prices of aluminium fell by about 50% to US$ 1360/tonne against US$ 2729/tonne in Q4 FY08.
  • The cost control measures undertaken by the Company along with the drop in input prices started yielding positive impact on the unit cost of production (CoP) at BALCO, which reduced to US$ 1385 per tonne in Q4 FY09 compared with US$ 1642 per tonne in Q3 FY09. Unit CoP in March 2009 was US$ 1177 per tonne. Going forward, the management expects the trend of reduction in costs to continue.
  • The first phase of the 500,000 tpa Jharsuguda I aluminium smelter is progressing well. Till date 257 pots have been brought in line, supported by 5 units of captive power plant. The remaining 76 pots in the first phase are ready for commissioning, awaiting power stabilisation. With this, the first 250,000 tpa phase is expected to be fully operational by Q1 FY10, six months ahead of the original schedule.
  • The first stream of the alumina refinery at Lanjigarh is fully operational and produced 171,000 tonne in Q4 FY09, close to its rated capacity. The second stream of the alumina refinery has also recently commenced operations. The company expects to start progressive feeding of the Lanjigarh alumina refinery with its own Niyamgiri bauxite by mid FY10.

Zinc Business

  • During Q4 FY09, HZL produced 175,438 tonne of mined metal and 150,544 tonne of saleable metal, an increase of 27% and 11% Y-o-Y respectively. The increase in mined metal production was primarily on account of the successful commissioning and ramp-up of the stream III concentrator at the Rampura Agucha mine while that in refined metal production was primarily on account of the additional production from the ramped-up 88,000 tonne de-bottlenecked capacity.
  • During Q4, refined lead production was lower at 15,691 tonne compared with Q4 FY08, primarily on account of an unplanned shutdown of the Ausmelt smelter in January 2009.
  • During Q4 FY09 and FY09 HZL achieved a record saleable silver production of 35,176 kilograms and 105,055 kilograms, an increase of 48% and 31% respectively Y-o-Y.
  • During Q4 FY09, cost of production, before royalty, was lower at US$ 621/tonne compared with the US$ 698/tonne in Q3 FY09.

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Biocon – Capex for FY’10 would be around Rs 100 crore

April 29, 2009 · Filed Under conference call · Comment 

Biocon came out with the financial results for the quarter ended March’09 and held a tele conference call on 28th April’09 to discuss the performance as well as future course of actions. The following are the key takeaways from the meet are as follows.

  • The consolidated net sales for the quarter ended March’09 posted a growth of 75% to Rs 466.26 crore. Excluding the revenues from the Axicrop, the net sales for the quarter increased only by 10% to Rs 292.10 crore. Net profit with including Axicrop declined by 62% to Rs 24.88 crore and without Axicrop declined by 69% to Rs 20.30 crore.
  • For the year ending March’09, the net sales on consolidated basis registered growth of 53% to Rs 1616.51 crore and net profit decline by 80% to Rs 93.12 crore. Excluding the sales from Axicrop and sales from sold Enzumes business, the net sales grew by 13% to Rs 1139.30 crore and profits declined by 81% to Rs 86.60 crore
  • Axicrop contributed 37% to total sales for the quarter and 29% to year.
  • Axicrop wins German AOK tender for Metformin with order worth of Rs 100 crore for next two year which would be expected to start supply by June’09.
  • Profit of the company hit by Mark to Market losses of Rs 147.19 crore for the year and Rs 41.43 for the quarter.
  • Minority interest loss of Rs 8.57 crore is due to loss in one of its subsidiary.
  • R & D expenditure for the year increased by 27% to Rs 60 crore.
  • Average realization per dollar is at Rs 45.
  • Total India’s insulin Market size is Rs 450 crore per year. Of which plan insulin would be around Rs 300 crore and Analog is around Rs 150 crore.
  • Oral Insulin IN105 enters into Phase III clinical trials.
  • Sales revenue from Research Services grew by 28% to Rs 225 crore in FY’09.
  • Syngene and Clinigene’s EBIDTA grew by 21% to Rs 70 crore but MTM hit the performance and posted losses of Rs 18 crore for the year.
  • Syngene and Bristol Myers Squibb Company opened a fully dedicated research and development facility for Bristol Myers Squibb in Biocon Park, Bangalore.
  • Tax rate for FY’10 would be around 10%.
  • Indian branded formulation business (Retail business) for the year grew by 40% to Rs 100 crore.
  • Licensing income for the quarter was stood at Rs 6.4 crore and for the year Rs 12.30 crore.
  • Company received final approval for Glargine from DCGI to market in India.
  • Balance sheet position as 31st March’09: Cash and bank balance – Rs 11.9 crore, Sundry debtors- Rs 367.10 crore, Inventories- Rs 319.20 crore and loans and advances- Rs 101.50 crore.
  • Capex for FY’10 would be around Rs 100 crore.
  • US President Obama requested US FDA to approve safe biogeneric and UH MHRA already gave product guide line for each bio-generic product. For capitalizing this opportunity, the company has expanded its research base. Expected to incur R & D expenditure of Rs 80-100 crore for FY’10.
  • Company has hedged 25% future revenues with zero cost call option where downside is protected at around Rs 46 to a dollar or the upside is capped at around Rs 55 per dollar. It also hedged 75% of its revenues with put option with banks by paying some premium (which is undisclosed) where downside is protected at around Rs 50 and upside is not capped
  • Expects to maintain same growth in revenues for FY’10.

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Triveni Engineering sugar inventory of 3,42,000 tonne

April 29, 2009 · Filed Under conference call · Comment 

Highlights of the concall

  • The net sales for the quarter increased 25% Y-o-Y to Rs 457.58 crore. The OPM for the quarter improved 60 bps to 23.3% on the back of significantly higher sugar prices on Y-o-Y while PAT at the end stood 10% higher at Rs 37.77 crore.
  • Sugar operation achieved turnaround during the quarter with 60% growth in sugar revenue to Rs 320.08 crore and registering a strong PBIT of Rs 50.37 crore (Rs 1.13 crore in Q2 FY08).
  • Engineering businesses registered a dip of 9% in revenue on account of the overall market conditions. There have been some deferments of deliveries to the customers due to their financial condition and availability of funds to make the final payment. However the turnover during Q2 FY09 is higher by 40% when compared with Q1 FY09 indicating improved sentiments.
  • During the current sugar season the company has produced 335,300 tonne of sugar, 42% lower Y-o-Y with average recovery of 8.98% (9.89% in FY08).
  • The sugar dispatches during the quarter were at 124,200 tonne with average realization of Rs 19600 per tonne.
  • The company has sugar inventory of 342,000 tonne of sugar at the end of March 2009. The company will get benefited from firm sugar prices on this inventory.
  • The average cost of production for sugar during the season stood at Rs 2000 per quintal. The average landed cane cost was at Rs 154 per quintal.
  • The company exported 725.64 lakh units of power during the quarter at average realization of Rs 3.37 per unit. The company is not expected to sell any significant amount of power in coming two quarters.
  • During the quarter the company produced 100.50 lakh liters of alcohol and sold 73.76 lakh liters of alcohol at average realization of Rs 25.66 per liter. The company has 70 lakh liter alcohol inventory at the end of March 2009 and expects to produce about 150 lakh liters of alcohol in next 2 quarters of this sugar year. The management expects the alcohol realization to improve in coming quarters.
  • The company has total order book of Rs 768.10 crore as on 31st March 2009 in its engineering division. Out of which Rs 517 crore stood at steam turbine business for 715 MW, Rs 63.1 crore from speed gears and gearboxes business and Rs 188 crore from water and waste-water treatment business.
  • The management expects that the India will import about 2.5 million tonne of sugar (including raw and white sugar) and would export 3.5-4 million tonne of raw sugar in next sugar season. The management expects that the duty free raw sugar import scheme will be extended to the next year as well.
  • The management expects that the sugar prices, which have softened recently, may rise again post election but up to the maximum of highest price touched recently.
  • The management further expects that the sugar prices may depress in Q4 FY09 and Q1 FY10 when the sugar selling pressure will come from Brazil.
  • The company has contracted to import 40,000 tonne of raw sugar from Brazil. The arrival of the sugar may take couple of months. The company has contracted the sugar at favourable price and the total cost (landed cost + processing cost) would be quite lower than the current sugar realization. The company will process this sugar in next sugar season only.
  • The company has Rs 1390 crore debt as on 31st March 2009 at average cost of debt being 9.4% consisting of Rs 575 crore working capital loan (debt cost @ 10%) and Rs 815 crore term loan (debt cost @ 9%).

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Balrampur Chini Mills Expects a structural change in sugar prices

April 29, 2009 · Filed Under conference call · Comment 

Highlights of the concall

  • During Q2 FY09 the net sales of the company grew 15% Y-o-Y to Rs 357.11 crore mainly on the back of higher sugar prices. The OPM for the quarter slipped from 43.2% to 36.7% on Y-o-Y, though was notable considering the past down cycle and performance of industry pees and PAT ended 1% higher at Rs 66.19 crore.
  • The segmental revenue from sugar business surged up 19% at Rs 293.85 crore while that from distillery and cogeneration business dipped 8% and 19% to Rs 41.34 crore and Rs 75.84 crore respectively.
  • Sugar production during the quarter was at 27.28 lakh quintals (56.87 lakh quintals in Q2 FY08 with average recovery of 9.35% (10.41% in Q2 FY08). The average sugar realization for the quarter was at Rs 20.3 per kg as compared to Rs 14.52 per quintal in Q2 FY08.
  • The company has produced 44 lakh quintals (bags) of sugar during the season. The company had 31 lakh quintals of sugar at the beginning of the season with average cost @ 1405 per quintal which has almost been sold till end Mar’09.
  • As on 1st April 2009, the company has sugar inventory of 43 lakh quintals, the average cost of production for which would be Rs 2050 per quintal (including costs for whole year) pre-interest and pre-corporate overhead.
  • The landed cost of cane to the company for the season stood at Rs 151 per quintal.
  • The current RS and ENA prices are about Rs 30-31 per liter and the management expects it to surge up to Rs 35 per liter going forward due to demand supply mismatch. Current molasses prices are about Rs 5500 per tonne
  • The company is expected to produce 5.68 crore liters of alcohol and ethanol in sugar year 2008-09 (so far has produced 3.20 crore liters of alcohol and ethanol in H1 FY09). The company has committed 21% of its capacity to supply to Oil Manufacturing Companies.
  • The Uttar Pradesh government has bought power at Rs 4 for a special window for three months (i.e. March, April & May’09). The company expects its co-gen operations to conclude by May 2009 and will get benefit from higher prices from UP govt. The company expects to produce and export about 9-10 crore power units till May’09.
  • The management expects the effective income tax rate to be about 20% for FY09 and going forward as well.
  • The company has long term loans of Rs 1020 crore and working capital loan of Rs 290 crore. The average interest cost being at 9% and about Rs 105 crore debt repayment would be due for the year ended September 2009. The company expects the interest cost to be about Rs 95 crore for FY09.
  • The management expects that the sugar production in next year would be about 18 million tonne. And company would be producing about 6 lakh tonne of sugar in next sugar season.
  • Considering most of the countries including India are facing sugar deficit and this deficit is expected to continue atleast next 2 years, the management expects a structural change in sugar pricing and consumer behavior in India as well as in world as sugar contributes not very significantly to the consumer basket. The management expects the sugar prices may surge up quite significantly going forward.

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Wipro BPO Hiring 1,200 at its Hyderabad facility

April 29, 2009 · Filed Under business · Comment 

The BPO arm of Wipro Technologies is planning to induct 1,200 new employees at its Hyderabad unit in next six months. The unit has current bench strength of  around 3,000.

The new recruitments will be mainly from Andhra Pradesh and the rest from other states in south and north India and 40% of employee’s salaries will spend on providing training to staff as per the requirements of its customers.

The move comes on back of expectations that the Indian BPO industry is set grow five-fold in coming years and will continue to grow in current turbulent times as well as it helps reduce operating cost for the customers.

The BPO business contributes 7% to overall revenues of Wipro and the company is planning to set up a new centre in Europe this year.

The company is targeting to add 30 to 40 new customers in this fiscal.

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Man Industries wins prestigious order from Middle East

April 29, 2009 · Filed Under business · Comment 

Man Industries, one of the leading manufacturers of large diameter pipes in India, has has emerged as winner for a prestigious order from the Middle East for Rs 1,340 crore. The order will be completed in this financial year.

The company has also emerged as lowest bidder for the orders worth Rs 1,100 crore in domestic and international markets which will be awarded in near future. Apart from this, the company is planning to bid for projects worth Rs 5,000 crore for supply of pipes in domestic and international markets.

The company’s latest order book stands at around Rs 2,000 crore.

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Bharti Airtel Stock Split + Dividend

April 29, 2009 · Filed Under business · Comment 

Bharti Airtel board in its meeting held on April 29, 2009 have approved sub-division (share split) of existing equity shares of Rs. 10/- (Ten) each into 2 (two) equity shares of Rs. 5 (Five) each, subject to the approval of its shareholders.

Board of Directors of Bharti Airtel has recommended a final dividend of Rs.2.00 per equity share of Rs. 10 each (20% of face value) for
financial year 2008-2009.

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Indian steel to reverse global trend

April 29, 2009 · Filed Under business · Comment 

In its near term outlook for global steel sector, the World Steel Association (WSA) has said that India’s steel consumption is expected to increase by 1.7% to 53.5 million tonne (MT) in 2009 against 52.6 MT in 2008. ‘India is projected to have a positive growth of (about) 2% for apparent steel use in 2009,’ said the WSA.

Although the association did not mention specific causes for optimism in the Indian market, experts believe demand from construction and automobile sectors will be the main drivers.

WSA has predicted a decline in global steel consumption from to 1,018.6 MT down 1,197 MT, representing a drop of 14.9% over the previous year. Demand is expected to stabilise in the latter part of 2009, leading to a minor recovery in 2010 according to the association.

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Greaves Cotton Automotive engine sales picked up from Feb 2009

April 29, 2009 · Filed Under conference call · Comment 

Key takeaways of the conference call

Sales for the quarter was lower by 23% to 262.26 crore and the net profit was lower by 53% to Rs 14.37 crore.

While the core engines business revenue for the quarter was lower by 5% (to Rs 223.78 crore) its PBIT was lower by just 2% (to Rs 30.74 crore) as its segment margin has expanded marginally by 40 bps to 13.7%. On the other hand the revenue of infrastructure equipment business was lower by 73% (to Rs 26.19 crore) and hit by sharp erosion in margin it turned red with its PBIT being a loss of Rs 4.88 crore compared to a profit of Rs 15.05 crore in the corresponding previous period.

The share of engines to total sales was about 85% for the nine month increasing from 71% in last fiscal. The increase in share of engines to total sales is largely on account of sharp fall in sales of infrastructure business which currently accounts for just 12-13% for nine months compared to 26% last fiscal. Of the total engines sales the automotive engines accounts for 66% of it and the agriculture engines accounts 20% and large engines for gensets etc accounts 15%.

The core automotive engines that contribute about 55% of the overall sales of the company currently is experiencing moderate pickup since Feb 2009 after a steep fall in November 2008-Jan 2009.

Sales volume of engines though dipped for nine month ended Mar 2009 the cost control/ efficiency methods are yielding fruits sustaining and improving margins in addition to lower material cost.

Engine realization has not improved during the quarter but the improved efficiency that is what has helped the company with marginally better margin.

There is definitely improvement in liquidity and the stimulus package has reduced the cost of the three wheelers. Moreover the price of fuel has come down bettering the cost of operation. The agriculture demand is least affected and this segment is showing healthy growth. All this augurs well for engine segment. However the steep fall in sales of infra equipment along with its high fixed costs has affected the profits of this business as well as overall performance of the company.

Interest is net of interest income on tax refund amounting Rs 4 crore. Total tax refund including interest on it amounts Rs 9 crore.

Both compactors and concrete machines were hit heavily on account of lower construction activity especially the slower road development for the former and slowdown in real estate for latter. The slow decision making as far as road infrastructure is hitting the compactor demand.

Introduced new series of engine (40-200 watts power) recently which is suitable for application in industrial, construction equipment etc.

Plant is fully flexible. More engines for single cylinder utilizing that capacity is not an issue. Secondly there is no debt related to that.

Capex incurred so far is around Rs 20 crore.

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