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Wipro’s cloud business grew 2x average growth and strategizes strategic investment expansion in various key Hyperscalers.

by 5paisa Research Team 22/11/2021

The management in the recent conference meet commented on the sustained growth momentum, with stable margin and a strong and broad based demand environment in all industry verticals. 
Within geographies, the US reportedly continued to grow, while Europe (particularly continental Europe) has witnessed strong acceleration. The company presumes that trends like AI/ML, Big Data, Cloud, mixed reality, meta-verse, and tokenization, coupled with multi-Cloud infrastructure, Cyber Security, and 5G capabilities will support these trends, and drive demand over the next 3-5 years.

The company is now more focused to drive strong growth, with a large investment pipeline in both capability and sales. The company strategizes on reinvesting the margin earned from offshore, fixed price productivity, pricing, utilization, and pyramid in the business. 

The company expects the demand to continue to remain strong with a growing pipeline. The Cloud business has grown at 2x the company’s average growth rate in the past 2 years. Cloud-related pipeline is one-third the total pipeline. Deal TCV was up 80% in the past four quarters. The company has signed mega deals in both Americas and Europe geography, with a potential for both to reach a TCV of USD1b. The management is focusing on sourcing large deals from the market for the betterment of market share expansion upto USD200m and USD300m accounts.

WPRO restated its plan to invest USD1b in building its Fullstride Cloud Service as customers are no longer looking for just system integration, but also business transformation partners. The company plans to continue to invest in other high growth areas, and will continue to make strategic investments in Data, AI, and Cyber Security, and build industry-specific capabilities. Key hyperscaler alliances include AWS, Azure, Google, Salesforce, SAP, and Service Now. Order book in ACV terms is up 80% YoY across the top six partnerships.

The acquisition of Capco has visibly proved to be successful by winning 22 joint go to market deals Wipro. Wipro has been active in the M&A market, and has made six investments over the past one year, its largest ever acquisition being Capco. Combination of Wipro and Capco provides both consulting and domain technology capabilities which have strong demand in the market. This can be confirmed with the robust deal wins. Capco has won 120 deals in the first six months since the transaction’s closure. The management indicated continued appetite for inorganic investments, and said it will also not shy away from large acquisitions if they make business sense.

Investment in the sales channels lateral leadership hires (80% in market facing roles), a large deals team, and strategic partnerships, are expected to power growth. The company expects the supply environment to stay tight, and hence has reoriented its appraisal system to incentivize high performers, along with a large fresher intake (25k in FY23). While it expects employees to return to work, it will operate in a hybrid environment, with greater flexibility. It said its crowdsourcing platform Topcoder will add dynamic workforce capabilities.
 

 

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Cognizant Technology services held an investor meet nearly after 3 years, reported a revenue CAGR of 8-11% with highest attrition rate

by 5paisa Research Team 22/11/2021

Cognizant Technology services recently held their second investor meet after almost 3 years. It reported a revenue CAGR of 8- 11%, cumulative 3-year EBIT margin improvement of ~110bps over 15.4%, FCF being 100% of net income and allocation of 50% of FCF to M&A compared to 28% TTM, implying lower capital return to shareholders. 

In the near term, the digital segment is expected to grow in high-teens or low-twenties while the non-Digital segment is expected to grow at low-mid single digit levels. The company is anticipating growth on the non-Digital side while for the digital segment is expected to contribute 55%-60% to total revenue in 2024 vs the 44% in 3Q2021. CTS strategizes to focus not only on priority service lines, verticals and geographic markets, but also to de-emphasize those that CTS considers non-strategic. The company chalked out a near term action plan around rebranding and repositioning CTS, making CTS more global from delivery, revenue and management composition perspective, accelerating digital through a lot of bite sized M&A transactions and making CTS more relevant to customers by having client facing employees with greater domain knowledge and who are capable of interacting with CXOs beyond CIOs and CTOs and being in a position to suggest business solutions to customers. The dropping of content moderation services and exit from local businesses in Latin America and Africa also served as the company’s growth drivers.

The segments Healthcare, CMT, Products and Resources showed decent momentum, however, the Financial Services segment is lagging. Large global banks have been the trouble-maker for the company since the past 4 years now causing the company to lose out on market share as these clients because could not pivot quickly enough to digital and presumably were more focused on the technology side of things rather than proactively offering solutions to them. Even the lack of adequate automation skills probably did not fare well compared to the Indian peers or with Accenture. There is an expectation that over time these clients will start growing as the pivot towards digital has been quite material with US $2.5bn worth of Digital acquisitions done in 2019, client-facing teams were revamped, significant progress was made in both horizontal and vertical partnerships and automation capabilities were strengthened.

CTS has continued to sustain high attrition with LTM number at 24%, up QoQ from 18%, outperforming its peers in this aspect. The company reports these numbers as combined data factoring in IT and BPO services and trainees. Generally, India heritage peers’ attrition data focuses only on IT services and sometimes excludes trainee data. The company suggested that the attrition data will continue to be higher in the rest of 2022 as the company offers employment 50,000 freshers for 2022 vs ~30,000 in 2021 and higher than 45,000 offers during the 3QCY21 results. The high attrition numbers were achieved with great HR practices witnessed in 2020. 
 

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Ashok Leyland Q2 earnings grew 56% YoY with expectation of higher volumes and expansion in operating margins in near term

by 5paisa Research Team 22/11/2021

In Q2, Ashok Leyland reported a 56% YoY and 50% QoQ jump in net sales at Rs. 44,262mn primarily on account of recovery in volumes and revived economic and industrial activities. In exports, M&HCV volumes grew 63% YoY to 1,526 units, and LCV volumes grew 26% YoY to 701units. In the quarter, M&HCV volumes grew 71% YoY to 13,514 units and LCV volumes, 22% YoY to 14,029 units.

However, the PAT improved from a loss of Rs. 2823 to a loss of Rs. 830, and the PAT margins also saw improvement from -9.6% to -1.9%. The Q2 FY22 gross margin contracted 257bps QoQ due to higher RM prices and high discounts. The EBITDA stood at Rs. 1,347mn, up 67.5% YoY but down 196.1% QoQ. 

With strong economic recovery, in near future it is believed that a strong replacement demand would pick up in tillers and tippers in H2 FY22 and with shift from BS3-BS4 to BS6 technology and an expansion in operating-leverage-led margin supported by expected volume growth and effective cost-cutting efforts. Hence, 5% margin is expected in FY22, and 10% in FY23 An estimated growth in sales stands at 49%, in FY22, and 27% in FY23 and revenue growth of 19% YoY, and the margin to be11%; hence, we expect earnings to grow 44% YoY to Rs18bn and a revenue CAGR of 31% over FY21-24.
 

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India’s strong recovery is steadily pacing with GDP expected to grow at 7.8% In FY23 and 7.2% in FY24

by 5paisa Research Team 22/11/2021

Consumption is expected to pick up in a broad-based manner from 1Q22 as vaccination rates cover the entire eligible population. Improvement in end demand (consumption and exports) can push capacity utilization rates higher, along with a conducive policy environment which could increase private capex from 2H22. Thus, GDP is expected to grow at 7.8% in FY 2023 and 7.2% in F2024

Headline CPI is expected to increase around 5.8%Y in QE March 2022 as the base effect dissipates and the trailing impact of higher commodity prices feeds in. However, inflation is expected to decelerate from there on account of easing commodity prices on a sequential basis. Thus, CPI inflation is expected to remain steady at 5% YoY in 2022. A persistent cost-push increase related to the supply side and/or a higher increase in demand which creates risks of generalized price pressures all lead to upside risks. Core PCE inflation was 3.9% YoY at the end of FY2021. While core PCE inflation continues at 2.4%Y in December 2022(2.3%Y in 4Q22), the path between now and then is meaningfully higher. Core PCE inflation begins to glide off of its peaks after February next year, 3 before slowing sequentially. By May, core PCE is forecasted at 2.9%Y,2.3%Y, and 2.2%Y on a 12-month,3-month, and 6-month annualized basis, respectively. In 2023, core PCE inflation would moderate further to 2.0%Y by year-end.

The next step in policy normalization following calibrated management of excess liquidity would be narrowing of the policy rate corridor to pre-pandemic levels through a reverse repo hike (15-20bp) in the December and February policy reviews. In a bid to create a business-friendly environment, policymakers have initiated several structural and institutional reforms.

 In addition to the measures taken over the last few years with the implementation of Goods and Services Tax, the Insolvency and Bankruptcy Code, and an inflation-targeting framework include approval of production-linked incentive schemes for all 13sectors, abolition of the retrospective tax on indirect transfer of assets, the national infrastructure pipeline, national monetization pipeline, etc.
Further, with growth recovery gaining traction, it is anticipated that the RBI will hike the repo rate in 1Q22 in base case. It is expected that the RBI will follow up with rate hikes (25bp) in each of the subsequent meetings in 2022. Risks to a delayed start hinge on the pace of growth recovery. The improvement in growth in gross tax collection has been marked by the onset of economic normalcy from pandemic blows. In this regard, it is expected that the fiscal deficit is to be in line with the government's estimate of 6.8% of GDP, as higher tax revenues could provide some offset to potentially lower divestment receipts and loss of revenue from recent fuel tax cuts.

Risks are expected to emanate from management of Covid, the pace of reaching full vaccination for the adult population, threats from new variants, and/or vaccine efficacy. Prolonged supply-side disruptions leading to a further surge in global commodity prices may accentuate upside risks to the inflation outlook, which may in turn impair growth projections. On the external front, apart from Covid-related disruptions, risks could emerge from a slowdown in global growth, and risk aversion in capital markets in response to faster-than-expected changes in global inflation and the monetary policy trajectory.

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F&O Cues: Key support & resistance levels for Nifty 50

F&O Cues: Key support & resistance levels for Nifty 50
by 5paisa Research Team 22/11/2021

Today the Nifty F&O action for November 25 expiry shows support has come down to 17,000 now from 17,500 earlier.

The Indian equity market closed in red for the fourth consecutive day in a row. The frontline equity indices though opened in green, but soon slipped into the red. Nifty 50 saw the biggest single-day drop in the last seven months. At one point in time, Nifty 50 had even breached 17,300 level, however, the last hour of buying helped Nifty to recoup some of the days' losses. The main culprit for today’s action was negative news flow for Reliance Industries and FIIs selling on the back of higher valuations.

Activity in the F&O market for the weekly expiry on November 25, 2021, shows 18,000 to continue as a strong resistance. The highest call option open interest (164637) for Nifty 50 stood at a strike price of 18,000. In terms of the highest addition of open interest in the call options front, it was at 17,600 in the last trading session. A total of 90,900 open interest was added at this strike price.The next highest call option open interest stands at 17,800 where total open interest stood at 131,855.

In terms of put activity, the highest put writing was seen at a strike price of 17,000 (26,711 open interest added on November 22), followed by 15,500 (21,217 open interest added on November 22). The highest put open interest unwinding was seen at a strike price of 17,500 (9094 open interest shed on November 22).

Highest total put open interest (80,894) stood at a strike price of 17,000. This is followed by a strike price of 17,400, which saw a total put option open interest of 69,030 contracts.

Following table shows the difference between call and put options at strike price near to max pain of 17600.

Strike Price  

Open Interest (Call option)  

Open Interest (Put option)  

Diff(Put – Call)  

17,300.00  

17363  

55516  

38153  

17,400.00  

41664  

69030  

27366  

17,500.00  

67369  

51620  

-15749  

17600  

95557  

30904  

-64653  

17,700.00  

99714  

30191  

-69523  

17,800.00  

131855  

47473  

-84382  

17,900.00  

92715  

16964  

-75751  

 The Nifty 50 put call ratio (PCR) closed at 0.50 compared to 0.68  in the previous trading session. A PCR above 1 is considered bullish while a PCR below 1 is considered bearish.

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Rising demand lifts refined soya oil futures

22/11/2021

New Delhi, Nov 22 (PTI) Refined soya oil prices on Monday rose by Rs 5.1 to Rs 1,240 per 10 kg in futures trade as speculators raised their bets.

On the National Commodity and Derivatives Exchange, refined soya oil for December delivery moved up by Rs 5.1, or 0.41 per cent, to Rs 1,240 per 10 kg in 46,730 lots.

Analysts said widening of positions by traders mainly helped refined soya oil prices to trade higher in futures market.PTI SRS SHW SHW

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