Looking back at the week ending August 11th, it appears that the stock
market is hesitant to break out of the band 3250 to 3330. The UTI issue
is getting down to a longer term battle of wits between the accused Subramanyam
and his political mentors. The investors have not shown any panic to redeem
the units mainly because there are no other alternate sources of investment.
While the operational managers of different economic wings in the country
like the UTI Chairman may be blamed for bad investment decisions, we need
to also focus on the fact that the fall in US 64 was a reflection of the
economic scenario. Infact during the period when Cyber Space shares dropped
from Rs 930 to Rs 1, there were many industry leaders including NIIT, Infosys
and others who lost more than Rs 1000 in absolute terms and 60% to 90 %
in relative value. The net loss to US 64 is therefore a cumulative effect
of the losses suffered by all the stocks and IT stocks in particular.
The stock performance being itself a reflection of the economy, the
ultimate blame for the kind of debacle we have seen in the stock markets
has to be borne by the managers of the Indian economy itself. If we continue
to adopt policies which are forced on us by International vested interests,
there is no way the industry can progress.
Our political masters seem to have not still recognized the dangers
of economic invasion in the guise of globalization. Instead of globalizing
the opportunities for Indian entrepreneurs, our policies are globalizing
the Indian opportunities for exploitation by the global players. While
a certain amount of “Give and Take” compromise is logical, the success
of Political management of economy lies in the balance between this “Give”
and “Take”. Unfortunately, we seem to have failed in this respect.
Yet another warning to the Government has now come in the form of the
publication of the Index of Industrial Production for the quarter ending
June 2001. It is observed that the the index for
industrial production growth slipped to 2.1 per cent for April-June in
2001-02, against a high of 6.1 per cent in the same period last year. According
to data released by the Central Statistical Organisation, all key
sectoral determinants of IIP mining, electricity and manufacturing
witnessed a poor show in the first quarter. This trend can soon turn
negative if the Government continues to remain complacent and also percolate
to the service industries.
If the IT sector despite its tainted image is still the only sector
where positive growth is seen, it is because some of the companies have
on their own “Globalized their Opportunities” and have held on their own
against global predators. Looking at opportunities to invest in the short
term therefore drives us back to the IT sector where there are still companies
like HCL Technologies who keep turning out over 100 % annual growth
of profits under the present gloomy scenario. Even though the stock
market still reacts negatively to the share in reaction to the projected
growth rate being put at less than 30 % pa, the share which has bucked
the declining profit trend is a share to watch since in a revival phase
this may gallop ahead of others.
The shares of HCL Tech is presently quoted around Rs 228 (Face value
of Rs 2).
This company belongs to the Shivnadar group which started off in 1975
as Hindustan Computers Limited and later went through some restructuring
in 1990 to give birth to HCL Technologies along with HCL Infosystems and
NIIT with different business focus.
HCL Tech is focusing on technology solutions directly and through its
subsidiaries namely HCL Perot Systems and HCL Comnet Systems and Services
Ltd.
During the quarter ending June, 2001, the revenues of the Company jumped
up to Rs 369 crores from Rs 274 crores for the corresponding period last
year. The net profit after tax also jumped up from Rs 93 crores to Rs 132
crores in the same period. The annual net profit for the year ending June
2001 was Rs 488 crores which was 106% higher than the last year’s Rs 243
crores. A dividend payment of 50 per cent has also been recommended (Re
1 per share on every share of Rs 2 each) for the year ended June 30, 2001.
With the EPS around Rs 16.18 the present stock price represents a P/E
of 12. The company has announced that the outlook for the next year remains
positive and a growth rate of around 25 to 30 % in gross revenue is forecast.
In view of the international presence of the Company’s operations and
its demonstrated ability to make profits even under difficult circumstances
prevailing in the last year, the share should be considered good for investment
upto a P/E of 20.
Na.Vijayashankar
August 11, 2001
