HCL Tech Falls 4% on profit-booking post-September quarter results
HCL Tech Falls 4% on profit-booking post-September quarter results
Shares of HCL Technologies on Friday slipped 4 per cent to Rs 821 on the BSE as investors booked profit after the company reported better-than-expected earnings for the quarter ended September 2020 (Q2FY21). The stock has fallen 8 per cent in the past two trading days and corrected 10 per cent from its record high level of Rs 911, touched on October 14, 2020.
HCL Technologies posted 7.4 per cent quarter on quarter (QoQ) rise in the September quarter net profit at Rs 3,142 crore. Its revenue grew 4.2 per cent to Rs 18,594 crore in the quarter under review, from Rs 17,841 crore in June 2020 quarter.
In constant currency terms (CC), the company recorded revenue growth at 4.5 per cent – higher than its estimate of 1.5-2.5 per cent sequential rise. The company has maintained its revenue growth guidance of an average of 1.5-2.5 per cent increase quarter-on-quarter in constant currency for the third and fourth quarter.
ICICI Securities had expected HCL Tech to report 3.5 per cent QoQ growth in revenues in CC terms. In rupee terms, revenues are expected to grow 2.9 per cent QoQ. EBIT margins are expected to increase 80 bps QoQ led by operating leverage and cost rationalization, the brokerage firm had said in an earnings preview.
The board of directors has declared an interim dividend of Rs 4 per equity share for the financial year 2020-21.
At 10:25 am, HCL Technologies was trading 3 per cent lower at Rs 832 on the BSE, against 0.36 per cent decline in the S&P BSE Sensex. A combined around 15 million equity shares were changing hands on the counter on the NSE and BSE. Despite the recent fall, the stock has outperformed the market by surging 81 per cent in the past six months, against 31 per cent rise in the Sensex.
UPL dips 9% post resignation of auditors of material arm
UPL dips 9% post-resignation of auditors of material arm
Shares of UPL slipped 9 per cent to Rs 458.85 on the BSE in the early morning trade on Friday after KPMG resigned as the auditor with effect from October 8 for the company’s material arm in Mauritius – UPL Corporation, to re-organise the Audit Process to improve productivity, at the request of the company.
“This is to inform you that the company has received the attached communication dated 14th October 2020 from UPL Corporation Limited, Mauritius, a material subsidiary of the Company,” the Company said in an exchange filing on Thursday after market hours.
As per the said communication, M/s. KPMG, Mauritius has resigned as the auditor of UPL Corporation Limited w.e.f. 8th October 2020, it said.
“In order to re-organise the Audit Process to improve Productivity, at the request of the Company, KPMG Mauritius has resigned as Statutory Auditors of UPL Corporation, Mauritius. M/s. BSR & Co. LLP, Chartered Accountants, continues to carry out the audit of Group Consolidated Financials of UPL, India which includes UPL Corporation Ltd, Mauritius, and its subsidiaries,” the company said in a clarification statement on Friday. BSR & Co. LLP is a sub-licensee of KPMG in India.
BSR & Co. LLP, Chartered Accountants, who were appointed as Statutory Auditors of the Company for the period of five years at the AGM held on July 8, 2017, continue to remain the Statutory Auditors of the Company, including for the consolidated financial statements of the Company, India, it said.
At 09:36 am, the Company was trading 7 per cent lower at Rs 473 on the BSE, as compared to a 0.77 per cent rise in the S&P BSE Sensex. A combined 5.5 million equity shares had changed hands on the counter on the NSE and BSE.
Cyient gains 5% as Q2 consolidated Ebit margin grows
Cyient gains 5% as Q2 consolidated Ebit margin grows
Shares of Cyient were up 5 per cent to Rs 383 on the BSE on Friday after the company reported 586 basis points (bps) expansion in consolidated EBIT (earnings before interest tax) margin at 11.0 per cent in September quarter (Q2FY21) on a sequential basis. The improvement in margins was led by higher utilisation, lower subcontracting cost, and lower restructuring cost. Consolidated revenue grew 1.3 per cent quarter-on-quarter (QoQ) in constant currency terms.
In rupee terms, revenue grew by 1.2 per cent QoQ to Rs 1,003 crore while EBIT grew by 116.2 per cent QoQ off a very low base to Rs 110.5 crore. The company’s profit after tax increased by 3.0 per cent QoQ mainly from higher operating income driven by higher volume and efficiency.
“While the company did post growth in revenues it was well short of the growth posted by larger companies like Infosys and TCS. This was largely due to the continued de-growth in the aerospace and defence segment which is amongst the worst impacted due to the Covid-19 pandemic and de-grew by 10.4 per cent QoQ. Markets will look forward to management commentary, especially, on the outlook for the aerospace and defence segment,” analysts at Angel Broking said.
“Going forward, the company expects communication, transportation, and medical segment to drive revenue growth and believes aerospace revenues have bottomed out in Q2FY21. Hence, Cyient expects QoQ improvement in revenues in the coming quarters,” ICICI Securities said in a note.
In terms of margins, the company believes it can sustain 11 per cent EBIT margins as seen in Q2FY21 and expects Q4FY21E margins to be higher. Hence, we believe revenues will improve in the coming quarters while margins will improve to at least 12 per cent in FY22E. This coupled with reasonable valuation prompt us to be positive on the stock, it said.
In the past month, Cyient has underperformed the market by falling 13 per cent, as compared to 1.5 per cent rise in the S&P BSE Sensex till Thursday.
At 12:40 pm, the stock was up 4 per cent at Rs 381 on the BSE, against 0.61 per cent rise in the Sensex. The trading volumes on the counter jumped over 6-fold with a combined 2.27 million equity shares changing hands on the NSE and BSE.
Difference between Primary and Secondary market
Difference between Primary and Secondary market
The term market in the finance world usually refers to both – primary market and the secondary market. Both markets are part of the capital market. Primary Market is a part of the capital market in which entities like companies, governments and other institutions obtain funds through the sale of debt and equity-based securities.
With raising an Initial Public Offering (IPO), when a company decides to go public for the first time, it is done in the primary market. It is also called the New Issue Market (NIM) as the securities are sold for the first time in the primary market.
The secondary market is the place where investors and traders trade in securities. This is done after the Initial Public Offer (IPO) is over and the shares are sold in the primary market.
Primary market vs Secondary market
| Basis of Comparison | Primary Market | Secondary Market |
| Meaning | A platform that offers security for the first time is the primary market. | The market where investor’s trade already issued securities is known as the secondary market. |
| Another name | New issue market (NIM). | Aftermarket or share market. |
| Type of product | Products are limited, and mainly include IPO and FPO (Follow-on Public Offer). | Many products are available such as shares, warrants, derivatives and more. |
| Purchase type | All the purchases in this market happen directly. | The issuer (company raising capital) is not involved in the trading. |
| Frequency of selling | Security can be sold to the investors just once in this market. | Here the traders can buy and sell the shares as many times they want. |
| Parties involved | Company and the investors are involved in buying and selling the security. | Here investors buy and sell the securities among themselves. |
| Beneficiary | Company | Investor |
| How to identify investment? | Investors primarily rely on prospectus and word-of-mouth publicity to pick an investment in the primary market. | Several tools are available to the investors to help them pick good investments, such as price to earnings (P/E), price to book (P/B), price to sales (P/S) and more. |
| Intermediary | Underwriters are the intermediaries in the primary market. | Here the intermediaries are the brokers. |
| Purpose | Help new and existing companies to raise capital for expansion and diversification. | Does not provide funding to companies; rather help investors to make money. |
| Price | The company sells the shares to the investors at a fixed price. | Both buy and sell-side investors work towards finding the best price for the trade. |
| Presence | There is no organization set up for the primary market | There are a geographical setup and organizational presence for the secondary market. |
| Rules and Regulations | The company issuing securities goes through a lot of regulation and due diligence. | Here investors and brokers need to follow the rules set by the exchange and the governing agency. |
Indo Count Industries extends rally, stock zooms 230% in 3 months
Indo Count Industries extends rally, stock zooms 230% in 3 months
Shares of Indo Count Industries continued at their northward movement, hitting a fresh 52-week high of Rs 135, up 8 per cent on the BSE on Thursday in an otherwise market. The stock was trading higher for the fifth straight day and has rallied 26 per cent during the period.
In the past three months, the market price of the company engaged in textiles business has zoomed 230 per cent, as against 12.5 per cent rise in the S&P BSE Sensex. In the six months, it has surged 402 per cent, as compared to 35.6 per cent gain in the benchmark index.
Last week, on October 5, 2020, ELM Park Fund had acquired an additional 121,666 equity shares or 0.06 per cent stake in the company through open market purchase. Post-acquisition, ELM Park Fund’x stake increased to 5.05 per cent from 4.98 per cent, Indo Count Industries said in the exchange filing.
In a separate development, CARE Ratings last month reaffirmed the long and short term rating on bank facilities of Indo Count Industries. “The reaffirmation in ratings assigned to the bank facilities of the company continues to derive strength from its robust capital structure, comfortable debt coverage metrics, strong business profile – being one of India’s leading home textile suppliers and exporters of bed linen, experienced Promoters in home textiles segment and reputed clientele profile,” the rating agency said in rationale.
Indian home furnishings comprise of bedspreads, furnishing fabrics, curtains, rugs, durries, carpets, placemats, cushion covers, table covers, linen, kitchen accessories, made-ups, bedspreads, bath linen and other home furnishings accessories. “The demand in the home textile market is governed by the rise in disposable income of the households and improvement in the living standards. The United States and Europe are the two major markets in the segment; with India, China, Turkey, Pakistan and Bangladesh being the major suppliers,” it said.
However, the company’s sales dipped in the April-June quarter (Q1FY21) to Rs 335.97 crore from Rs 518.46 crore in Q1FY20 as the production was stopped due to lockdown. The manufacturing facilities resumed partial operations from last week of April 2020. However, supply chain and logistics could gradually start operations from June 2020.
EBITDA (earnings before interest, taxes, depreciation, and amortization) margin contracted 220 basis points to 11.6 per cent from 13.8 per cent. The company said performance could have been better but production and sales impact on account of lockdown due to Covid-19 pandemic resulted in lower absorption of fixed costs in Q1FY21 thereby impacting EBITDA performance.
Rane Brake advances 12% as board approves buyback at Rs 825 via open market
Rane Brake advances 12% as board approves buyback at Rs 825 via open market
Shares of Rane Brake Linings moved higher by 12 per cent to Rs 715 on the BSE in the intra-day trade on Thursday after the company’s board approved buyback of shares at Rs 825 per share via the open market.
In the past three days, the stock of the auto ancillary company has rallied 23 per cent after the company announced the share buyback plan. At 01:11 pm, it was trading 9 per cent higher at Rs 696, as compared to a 1.1 per cent decline in the S&P BSE Sensex.
“The board has approved buyback of the company’s fully paid-up equity shares of Rs 10 each, from the open market through stock exchange mechanism, for a maximum price of Rs 825 per equity share up to an aggregate amount not exceeding Rs 22 crore excluding transaction costs and applicable taxes,” Ranke Brake Lining said in an exchange filing.
Meanwhile, the company reported a strong performance for the quarter ended September 2020 (Q2FY21), as net profit increased by 54.7 per cent at Rs 11.5 crore on a year-on-year (YoY) basis. Total revenue; however, grew 3.9 per cent at Rs 108 crore over the previous year quarter. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin improved to 21.0 per cent for Q2FY21 as against 13.6 per cent in Q2FY20, an increase of 743 basis points (bps).
The favourable material price movement and product mix helped margin improvement. While there was also a one-off selling price increase recovery from customers during the quarter, the company said.
With the gradual opening of the economy, the management saw a pickup in the demand, and OEMs production levels gained momentum anticipating festive sales.
“The plant operations team effectively handled the production ramp-up despite the supply chain and labour availability challenges. The cost reduction measures and lower material prices helped in margin improvement. We remain cautiously optimistic about the sustenance of the demand post-festive season,” said L. Ganesh, Chairman, Rane Group.
Tata Elxsi surges 5%, hits record high
Tata Elxsi surges 5%, hits record high
Shares of Tata Elxsi rallied 5 per cent and hit a record high of Rs 1,533.55 on the BSE on Thursday after reporting 56 per cent year on year (YoY) growth in profit before tax (PBT) at Rs 110 crore in the July-September quarter (Q2FY21). The company’s operational revenues grew 11.5 per cent YoY at Rs 430 crore. On a sequential basis, revenues and PBT jumped 7.4 per cent and 17 per cent, respectively.
The company’s growth was driven by both its key businesses – Embedded Product Design (EPD) and Industrial Design & Visualisation (IDV).
The management said it is seeing some recovery in the automotive market. The company has closed some large deals, including a multi-year deal with a European Tier1 supplier for vehicle electronics and software. The company has also added new automotive customers including a new OEM (Original Equipment Manufacturer), it said.
“We are going into the second half of FY21 with a strong deal pipeline across rows and verticals, and a significant number of large deals that we are pursuing. We are back to our pre-Covid momentum and expect this momentum to continue into H2 FY21”, said Manoj Raghavan, CEO and Managing Director.
Tata Elxsi is amongst the world’s leading providers of design and technology services across industries including automotive, broadcast, communications, healthcare and transportation.
At 10:07 am, the stock was trading 4 per cent higher at Rs 1,513 on the BSE, as compared to 0.07 per cent rise in the S&P BSE Sensex. A combined around 1 million equity shares have changed hands on the counter on the NSE and BSE, so far.
FPIs hike stake in SBI Cards for second quarter in a row
FPIs hike stake in SBI Cards for second quarter in a row
Foreign portfolio investors (FPIs) increased their stake in SBI Cards and Payment Services for the second quarter in a row, buying an additional 16 million shares during July-September quarter (Q3CY20).
FPI holding in the company increased to 5.93 per cent in Q3CY20 from 4.23 per cent at the end of June quarter (Q2CY20), according to shareholding pattern disclose by the company. Foreign investors held 4.07 per cent holding in SBI Cards at the end of March quarter (Q1CY20) and 3.53 per cent as on listing day March 16, 2020. In the past six months, SBI Cards has rallied 81 per cent, as against 34 per cent rise in the S&P BSE Sensex.
Shares of SBI Cards and Payments rose 3 per cent to hit a new high of Rs 918.60 on the BSE on Thursday in an otherwise weak market. In comparison, the S&P BSE Sensex was down 0.37 per cent at 40,639 points at 11:01 am.
The stock has rallied 7 per cent in the past two trading days after SBI Card on Tuesday said it has kick-started festive season offers in line with the changing shopping trends where customers will be offered discounts as well as cashback across a host of brands.
“With over 1,000 offers across 2,000 cities, SBI Card endeavours to bring customers rewarding shopping experience on their festive season purchases”, the company said in a release.
SBI Cards is a non-banking financial company that offers extensive credit card portfolio to individual cardholders and corporate clients which includes lifestyle, rewards, travel & fuel and banking partnerships cards along with corporate cards covering all major cardholders’ segments in terms of income profile and lifestyle. Presently, the brand has a wide customer base of over 10 million.
WHAT IS THE PRIMARY MARKET AND ITS FUNCTIONS?
WHAT IS THE PRIMARY MARKET AND ITS FUNCTIONS?
What Is the Primary Market (PM)?
When you are a beginner in the stocks market, one of the common terms you might come across is: ‘Primary Market’. Well, let’s have a look at what it is and what it’s functions are.
It is a part of the capital market in which entities like companies, governments and other institutions obtain funds through the sale of debt and equity-based securities.
With raising an Initial Public Offering (IPO), when a company decides to go public for the first time, it is done in the primary market. It is also called the New Issue Market (NIM) as the securities are sold for the first time in the primary market.
During an IPO, the company sells its shares directly to the investors in the primary market. Underwriting is the process of raising investment capital by selling new stock to investors through an IPO.
Once the shares are sold, they are bought and sold by traders in the secondary market.
Functions of PM
New issue offer
Securities are sold for the first time in this market which had not been traded on any other exchange earlier. Hence, it is also called a New Issue Market. Organising new issue offers involves a detailed assessment of project viability, among other factors. The financial arrangements for the purpose include considerations of promoters’ equity, liquidity ratio, debt-equity ratio and requirement of foreign exchange.
Underwriting services
Underwriting is an essential aspect while offering a new issue. Purchasing unsold shares if it cannot manage to sell the required number of shares to the public is the main role of an underwriter in a primary marketplace. A financial institution may act as an underwriter, earning a commission on underwriting.
Distribution of new issue
A new issue is also distributed in a primary market. Such distribution is initiated with a new prospectus issue. It invites the public at large to buy a new issue and provides detailed information on the company, issue, and involved underwriters.
Infosys m-cap nears Rs 5-trillion ahead of September quarter results
Infosys m-cap nears Rs 5-trillion ahead of September quarter results
Shares of Infosys m-cap hit a fresh record high of Rs 1,164.70, up 3 per cent on the BSE on Tuesday, on the expectation that the company may raise its FY21 revenue growth guidance while announcing its July-September quarter (Q2FY21) results in tomorrow. The information technology (IT) bellwether is set to become the fifth company to touch market capitalisation of Rs 5-trillion.
At 02:46 pm, the market capitalisation (market-cap) of Infosys stood at Rs 4.95 trillion, 1 per cent away from the Rs 5-trillion mark. Currently, Reliance Industries leads the pack with Rs 15.4 trillion market cap, followed by Tata Consultancy Services (Rs 10.61 trillion), HDFC Bank (Rs 6.6 trillion) and Hindustan Unilever (Rs 5.02 trillion), BSE data shows.
In the past month, Infosys has outperformed the market by surging 23 per cent, as compared to 4.5 per cent rise in the S&P BSE Sensex. In the last three months, it has rallied 46 per cent, against 11 per cent gain in the benchmark index.
IT companies are expected to post healthy numbers for the second quarter of the fiscal year 2020-21 (Q2FY21) owing to multiple tailwinds such as strong deal flow, traction in digital technologies, and resolution of supply-side issues as the quarter witnessed easing of Covid-19-induced lockdowns in many countries.
Further, encouraging management commentary by Accenture recently as well as HCL Tech’s mid-quarter upward revision in revenue and earnings before interest, and tax (EBIT) margin guidance, also points towards a strong performance by the IT companies. That apart, cost rationalisation, lower travel cost, cross-currency benefits, according to analysts, are also expected to drive operating margins of the companies for the quarter under review, Business Standard reported.
