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.




Bank Results season: SBI highlights NPA to 2.2% and Provisions of INR 8.9B


Gross NPAs for Q1 FY 2013 increased to 4.99% instead of estimated 4.7% and Net NPAs rose almost 20% to 2.2% from June 2011 in the just announced results the bank increasing provisions. Gross NPAs amount to INR74.9B and Provision Coverage for the Giant despite increasing are still much lower than the competitionand smaller public banks at below 65%

NII is just 111B, 5-8 B less than the street estimate and total provisions this quarter are lower at INR 24.6 B taking the bank to below 1900 in trades after the ires ran the shock up the market spine. Broader markets may survive this loss of confidence in the public sector as the market demands of removal of subsidies as part of deep seated reform also subside without the indices rerating below a 5200 bottom

More details as the bank management releases further details of their private massacre when the street expected that the income and loan related pown rovisioning had been completed by the bank in a surgical action last March and June and profits are expected to increase 128% but will still manage to outgrow a INR 25 B mark satisfying the requirement of a viable net margin with interest spreads under pressure

Deposits have grown to INR 11 T while the bank claims a revised CAR of 13+% as of June 30 while Total Net Income is 14.6B or less than $3 B th no growth in fees advisory and other income

Q4 NPAs were best in class at 1.02% doublling sequentially ( Net NPAs)


Deposits have grown to INR 11 T while the bank claims a revised CAR of 13+% as of June 30 while Total Net Income is 14.6B or less than $3 B th no growth in fees advisory and other income

Q4 NPAs were best in class at 1.02% doublling sequentially ( Net NPAs) Net Margins have infact improved as the bank manages a PAT of INR 37.5 B but we have derated the stock as it has shown an inefficiency in shooting NPAs and continuing pressures in sectors like Aviationa nd textiles apart from the industry wide press ure from Power, infracos and construction & Telcos which private banks have tyurned to their advantage.


Bank Results Season: A critical look at PSU Bank results >> Dena, Karnataka, PNB and BOB


The sector reported in unison on Friday and bad debts rose to an average of 3-4% at most banks that reported. However, first the two profitable ones that improved results, then prioritising the big ones BOB and PNB that have sizable profitability and asset advantages and then the rash of CBI, UBI and others. Global Capex slowdown will continue to affect the INR 6T in Power sector Loans (2010) which have already come to INR 4Tln in 2011 and are likely going downanother 25%

Uma Maheshwari and Nutan of CRISIL/S&P had a ok denoument of their cry wolf and as MOS suggested this could well be the last reported increases in NPLs but then I don’t know what MOS is saying right now.

Dena Bank

Dena Bank reported an NII of INR 612.24 Crs or INR 6.12 B, comparable to some of our food majors like Jubilant Foods (QSR) who reported INR 3.14 B selling pies in the same. Other income was characteristically subdued even at this profitable Mumbai based regional PSE at INR 1.41B

Jubilant’s net Profit margin was just 10% as Dunkin’ Donuts weighed in though the Pizza brand has 489 stores of its own. Dena’s operating profits of INR 4.57B or 60% and Net of INR 2.39 B or 31% underline the stable underlying growth in even public sector units though the preponderence of these inefficient beachheads of government donated welfare and 60s nationalisation dominating the Bank Nifty may still not be defensible

This bank counts 1% Net NPAs and 1.8% Gross NPAs. It counts 80% of its income from Treasury and Corporate thoughin this case Treasury independently contributes 28% of that combined income and a slightly better proportion in profits

The Bank has 0.91 Tln or 45% the size of an ICICI Bank. EPS 6.82 down yoy

Karnataka Bank

KTKBANK reported just INR2.26 B in Net Interest income and INR 0.91 B Other Income and a Net Profit of INR 0.83 Bln or 83 Crores on an asset book of 317B (FY2011)   Net NPAs even at the profitable unit are already 2% and Gross NPAs 3.31%

Treasury and Corporate (Lending and Bills) equally split the non retail business of 67%

EPS of 4.43 up sequentially from 4.42 and up 67% yoy

The Bank counts deposits of INR275B and Advances of 175 B last available for March 2011 The bank’s private sector advances do not count agricultural loans. Total Assets of INR 317B would be assumed to have grown only in single digits

Punjab National Bank

Gross NPAs are just INR 99.72B and Net NPAs INR 49B but 3.38% of gross and 1.68% of Net respectively. The bank has guided final NIMs of 3.5% so does not expect mrore than the mandated increase in provisions from here and recovery income is honeycoating the pot

Profits grew hardly in double digits below 15% for the megalith with INR 2.66Tln in non food loan assets that beats ICICI in loan assets by 20% and INR 6.7T in  “business mix” or balance sheet assets with Deposits of INR3.85 T and Loan assets of INR 4.59T, Credit and assets having grown 20%

NII is up a shade under 20% at INR3.7B and Other Income stable at INR1.2B, Net Profits growing 12% to INR1.25B Provisions grew from INR566Crs to INR900 Crores or INR16B incl Tax assets

Fee based Income is INR 549 Crores or 5.49 B and Net Interest margin despite a dip continues at 3.7%  ahead of all others the drop in NIMs having hit the third consequent quarter, still supersized from other competitors , the best NIMs being near 3.5% The Cost of funds for the bank is below 6% and Credit Deposit Ratio 77% to 76.4% in the current quarter. CASA is non standard at 35%

The banks retail assets are barely 10% of its loan portfolio, Power and Telco 8 and 2.6% an dthe bank holds INR 1.2T in investments This quarter’s restructured assets are just 5% of its total INR255B

The bank should hurt those going short at current levels

Bank of Baroda

Reported results today NIMs are don from 2.96% to 2.73% Restructured assets have however added only INR573 Crs or INR5.73B NII of INR27.98 B reasserts it is the top of the heap with PNB

BOB restruured assets have added INR7.5 B not in power and telco but in Textiles


IOB NPAs are up to 2.97% at the fag end of the results day. Allahabad Bank NII has gone up 12% to INR 13.7B.  IOB NII is 13.28B but provisions of INR5.2B may still be low with Gross NPAs half that of Canara and Union Bank at 44 Bln Allahabad Bank PaT is INR5.27 B and OBC at INR 3.94 Bln among others today


The retail consumption level off: Hero Honda perks up

Hero Honda rider
Image by Danny McL via Flickr

After sifting thru monthly Auto sales nos. ith great aplomb in 2010 and much muted in 2011, we did warn you that the Indian retail consumption story and the car sales are no longer tracking and are way behind the $5 Tln chinese economy where $2.5 Tln is the Consumer component. India’s $700 mln consumer consumption yet relies a great deal on two wheeler sales though and while Honda now sells 100k a month on its own, its partnership with Hero Honda was always the leader in the motorcycle segment since its advent in 1991.

Its quarter’s sales are up to $1.4 bln ( Rs 56.38 bln) up 33% yoy Profit Margins remained in the double digits (<10%, but almost there) with a Net of $139.5 mln. Its Apr-Jun sales were 1.31 mln motorcycles as reported earlier this week(BS Motoring) with June coming at 512k much a consistent 20% jumpp  year on year despite Honda moving on into an independent motorcycle producer, which terminates their active role in the JV later this year

Hero honda did give an ant i indication before the uptick when the markets opened and we will look for whats amiss here too as we adopt the Indian Auto and Motorcycle consumption story as a leitmotif of our India research here

Up ↑

%d bloggers like this: