India 3.0 – Results Season reestablishes Bharti, Cognizant

A 17% rise in revenues helped Bharti establlish some glowing recommendations for its 2013 and 2014 future

English: Logo of Bharti
English: Logo of Bharti (Photo credit: Wikipedia)

even as a INR 7.7B Dividend Distribution tax and increased losses of INR 5.4 B from Africa stopped net margin to a measly 2.4%. Before the Indus Towers dividend and losses from Africa, the INR 202.73 B revenues bent a margin of over 5% excluding the INR 2.39 B from a court judgment in the company’s(industry’s) favor on interconnection charges.

The company can probably not try and push pricing to Direct margins of near 50% as any self respecting industry might want but apparently hopes to regain pricing power if industry gives it a hearing even as the CCI has tightened up its regime and ‘cartelisation’ may not be welcome in any of its market. Telecoms, like its precursor in switching technologies and business telecoms, seems to be hurtling towards, trundling dowwn to a depth of losses regime of pricing and profitability that has already taken out a few segments incl examples like Nortel and Juniper to Sycamore and others at the height of the Telecoms global roll out.

Bharti did produce a viable model of profitability for the industry and would try to reclaim that leadership and is probably the best placed for that war with overall operating margins of 32% and Africa Op margins of 27%. it has been able to use pricing to maintain a virtuous cycle in its earlier avatars despite large Capexand resulting hit on Interest and Depreciation

On the other side of the globe, NASDAQ listed Cognisant cocked a snook at leading lady TCS with US revenues of $1.504 B matching TCS revenues of $1.509 B while overall revenues of $1.89 B continue to have a distinctly anemic spread outside the continental United States which remain the juggernaut strategy’s focus in the IT services market even as Europe tries to review and rebuild sustainable busines s models for a unified Euro led future out of the current recession

NASDAQ Panelists
NASDAQ Panelists (Photo credit: Think London – connecting business to London)

A revenue guidance of $7.34 B is definitely something to be proud of despite the 18% cap on margins and annual growth of 20% on the Topline seems to be a good enough benchmark for this company (at these rarified heights) even as it disregards the 30% growth in profits benchmark we also concurrently keep. The resulting increase in attrition took data on employees attrition to 13% even as Financial Services continue to make a 42% share of pie and the US Financial services market remains lucrative yet now almost closed off to other Indian players including mid caps that may not be welcomed by larger IT strategy offices finally hoping to make a mark on consolidation and giving TCS consistent account wins till 2010.  Industry sales int he US and indeed those of retail lifestyle exports from India are likely to be hit by Hurricane Sandy in the Fourth quarter.




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