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Pickup in large travel deal wins from 2HFY21 Mindtree (2 deals), Coforge (2 deals), TCS (3 deals), HCLT (1 deal) IT services companies are likely to be major gainers from structural changes in travel industry post Covid. We believe emerging themes of contactless booking, check-in, improved safety standards will require extensive use of technology for a smooth experience. Although full recovery in travel industry is 1-2 years away, worst seems over given rising vaccination and increase in domestic travel across geographies. Since 3Q21, IT services travel vertical...
Pickup in large travel deal wins from 2HFY21 Mindtree (2 deals), Coforge (2 deals), TCS (3 deals), HCLT (1 deal) IT services companies are likely to be major gainers from structural changes in travel industry post Covid. We believe emerging themes of contactless booking, check-in, improved safety standards will require extensive use of technology for a smooth experience. Although full recovery in travel industry is 1-2 years away, worst seems over given rising vaccination and increase in domestic travel across geographies. Since 3Q21, IT services travel vertical...
CPI Inflation rose sharply to 6.30% in May 2021 compared to 4.23% in April 2021 and was higher than market expectations. Consumer Food Price Index rose to 5.01% compared to 1.96% in April 2021, core inflation rose to 6.32% against 5.11%, fuel and light was at...
The Reserve Bank of India (RBI) expectedly maintained its repo rate at 4.0%, reverse repo rate at 3.35% and MSF at 4.25%. MPC members voted unanimously on status quo and maintained an accommodative' stance. Several measures like TLTRO extension to contact-intensive sectors, enhancement of exposure thresholds under resolution framework and more were also announced by the RBI in today's policy. RBI announced that under G-Sec acquisition programme (GSAP 1), further purchase of G-secs worth | 40000 crore would be conducted on June 17,...
We remain positive in the automobile sector and expect a strong rebound in FY22E. We continue to prefer Hero Motocorp, Bajaj Auto, Escorts, and Ashok Leyland and expect them to do well.
Industrial credit growth was muted (0.4% YoY in Apr'21) post the run-up in March as large industrial credit, constituting ~82% of industrial credit, de-grew 1.9% YoY given the absence of a strong Capex cycle. Growth in credit to medium industries continued to surge, reaching an all-time high of 43.8% YoY, aided by disbursals under the ECLGS. However, credit to micro and small industries was benign at 3.8% YoY. Within industrial credit, credit for roads (~22% of infra credit) clocked healthy growth at 26.2% YoY. Segments such as metals, engineering, chemicals, telecom and construction witnessed persistent YoY de-growth. Non-food credit growth inched up marginally to 5.7% YoY in Apr21 (5.5% in Mar21), primarily as improvement in personal loan growth partially offset sluggish growth in services. Credit to Industry reverted to sequential de-growth (0.7% MoM), as large industries segment continued to de-grow (1.9% YoY). We continue to believe that while credit growth will bounce back in the near-term from the short-term second wave disruption, a sustained recovery in loan growth appears elusive until the Capex cycle revives.
Background: Page Industries is the exclusive licensee of Jockey International Inc (USA) to manufacture and distribute Jockey brand in India, Sri Lanka, Nepal, Bangladesh and UAE till 2040. They broadly operate in premium men's innerwear; women's innerwear and leisure wear segments. Jockey enjoys high brand recall and they spend ~5% of their annual sales for brand building and promotional activity, which enables them to dominate most of the segments in which they operate. They are also exclusive licensee of Speedo swimwear brand in India. Page has network in ~250 cities and ~760 exclusive brand outlets in India. They...
Key lead indicators remain strong with tier-1 IT deal TCV of USD 16.8bn in 4Q (book-to-bill ~106% which doesn't include all renewals), recovery in consulting (record bookings for Accenture and Booz Allen), slight improvement in deal market-share by TCS/INFY vs. global majors, and supply-side commentary from large global staffing. The flipside, however, is the slight moderation witnessed in the overall deal bookings (2% YoY in 4Q compared to 10% for FY21). The more apparent near-term challenge is supply-side impact in India and rising attrition, but we believe on anecdotal evidence that attrition has peaked and the taper will reflect with a lag from 3Q. In the interim, the supply-side crunch for highly-skilled talent (not a homogenous feature) will discourage price aggression in large deals. In this note, we hit refresh, evaluating IT sectors performance in the quarter gone by as well as reviewing the outlook. Over the past year, IT index re-rating (16x to 23x) and performance (>90%) have been supported by the increase in consensus earnings estimate of 20/30% for tier-1/mid-tier. FY21 closed with low single-digit revenue growth, 8/20% profit growth (tier-1/mid-tier), and an astounding 35/55% growth in OCF/FCF. The pandemic has not just accelerated digitisation but has quite evidently sharpened the operational engine (beyond the transient factors).
Our analysis (based on impairment assumptions for H1FY22) suggests that banks that raised equity capital during FY21 have built >50bps higher provisioning cushion than their peers (as % of RWAs). We reiterate our preference for strong deposit franchises and maintain ICICIBC and SBIN as our top large-cap ideas. Amongst mid-sized banks, we prefer CUBK and FB although both banks may need to shore up their capital buffers to ride this wave out. As the Q4FY21 earnings season draws to a close with SBIN, the last among the large banks, reporting its results last Friday, we offer a panoramic view of how banks performed after having navigated an extremely difficult pandemic year. Banks within our coverage universe (~43% loan market share) reported full-year slippages at 2.1% during FY21 (FY20: 2.5%) and ended the financial year with a provisioning buffer of ~1% of risk-weighted assets (RWAs). As large parts of the country continue to be in the throes of a devastating second wave (and in varying degrees of lockdown), we assess the portfolio strength for our coverage banks to identify the stronger franchises that could better weather the storm from potential second-order effects of the pandemic.
based demand environment characterized by (1) cost take-out and transformation led outsourcing or lift-shift-transform deals and (2) digital and cloud adoption led deals. Consecutive quarters of record hiring(freshers)...
