Equity Weekly Research Report By Ways2Capital 19 Jan 2015

INDORE, India - Jan. 22, 2015 - PRLog -- Stocks of SpiceJet on Friday surged nearly 10 per cent after the company returned to original promoter Ajay Singh for its revival in a multi-layered deal worth up to Rs 1,500 crore. Shares of the cash-strapped firm rallied 9.92 per cent to Rs 20.50 — its highest trading permissible limit for the day on the BSE. Sun TV Network also jumped 12.87 per cent to Rs 423.90. Cash-strapped SpiceJet's original promoter Ajay Singh returned to the airline with a long-term plan entailing an investment of up to Rs 1,500 crore, as Maran family agreed to cede control with transfer of over 53 per cent stake in the carrier. Singh, who is in talks to rope in more investors including foreign entities, would get 53.48 per cent stake, currently worth about Rs 500 crore, in the airline from the Maran family as part of the deal approved by the SpiceJet board yesterday. Kalanithi Maran-led Sun Group would also infuse Rs 80 crore in the loss-making airline following conversion of their warrants, which would give them a 10 per cent minority stake. Marans would remain invested with this stake in the airline, which they acquired over four years ago, as a public shareholder although they would cease to be its promoters.

✍ TCS Q3 PAT at Rs 5,444 crore versus Rs 5,288.3 crore, up 2.9% QoQ

Tata Consultancy ServicesBSE -0.51 % (TCS), the country's largest IT services exporter on Thursday reported Profit After Tax (PAT) of Rs 5440 crore for the third quarter of the current financial year, versus an ET NOW Poll of Rs 5,462 crore. This is a rise of 2.9% QoQ.Sales for Q3 were reported at Rs 24,500 crore versus an ET NOW Poll of Rs 24,534.1 crore. The Q3 margin stood at 27%. For the quarter ended December 31, TCS posted revenue of $3.93 billion, compared to $3.92 billion in the second quarter. On a constant currency basis, revenue rose 2.5%, in-line with expectations. Profit after tax rose 0.1% sequentially to $873 million in the same period.The company's operating margin rose 20 basis points to 27%.

✍ Things to watch out for

Growth - Analysts expect the company to post around 1.5% revenue growth quarter-over-quarter in dollar terms, below Infosys' 2.6% growth. The third-quarter is seasonally weak due to ramp-downs and furloughs around the holiday season.
Margins and Utilization - TCS is expected to post marginally stronger margins on the back of the weaker rupee, but cross-currency headwinds are expected to hurt. With utilization already above 85% few see that as a lever the company could use to push margins higher. Analysts expect the operating margin to come it at about 27% for the third-quarter.
Deal wins and Pricing - As about $100 billion worth of deals come up for renewal this year, the street will be keeping a close watch on the number of large deal wins - the bread and butter for IT companies. TCS has always maintained a razor -sharp focus on big contracts and has had greater success winning them. But analysts also want to hear about pricing, and realizations.
Client Budgets and Discretionary Spending - Analysts will be looking for guidance on client budgets and discretionary spending after Infosys said verticals such as banking and financial services, oil & gas and telecom would likely not see budget expansion and was cautious on discretionary spending as well.
The Law of Large Numbers - With over 300,000 employees, TCS has always said its scale is an advantage. But after the compay dialled back growth expectations for FY15, analysts are looking to see if the company's industry-beating growth days are behind it or whether this year was just an aberration.

✍ RBI cuts repo rates by 25 basis points

Encouraged by softening inflation, the RBI on Thursday decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth.The decision to reduce repo rate comes a fortnight ahead of the scheduled date of monetary policy announcement on February 3.“It has been decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 8.0 per cent to 7.75 per cent with immediate effect,” Reserve Bank said in a statement on Thursday.The RBI has been keeping the benchmark interest rate at elevated level at 8 per cent since January 2014.The RBI, however, has decided to keep the cash reserve ratio (CRR), the portion of deposits which the banks are required to have in cash with the central bank, unchanged at 4.0 per cent.Following reduction in the repo rate, the reverse repo rate has been adjusted to 6.75 per cent and the marginal standing facility (MSF) rate and Bank Rate to 8.75 per cent.The RBI said that the Consumer Price Index (CPI) has been easing since July 2014 and was below the expected trajectory and the government has reiterated its commitment to adhering to its fiscal deficit target.

✍ Federal Bank net profit up 15% in Oct-Dec quarter
Private sector lender Federal Bank has reported a 15 per cent rise in net profit to at Rs 264.69 crore in the October-December 2014 quarter, compared with Rs 230.13 crore in the corresponding quarter of 2013-14, aided by other income growth and improved lending to small and medium enterprises (SME) and retail business net interest income, the difference between interest income and interest expenditure, grew 7.62 per cent to Rs 587.16 crore in the quarter under review, compared to Rs 545.57 crore in the year-ago quarter.