Your Stock Queries

Mindtree

I am holding 75 shares of Mindtree purchased at an average price of Rs 850 per share. Should I continue to hold these or make an exit?
- Mohan Desai, Via Email

Mindtree, together with its subsidiaries, operates as an information technology consulting and implementation company that provides various business solutions primarily in India, the United States and Europe. It operates in two segments, viz. Information Technology (IT) services and Product Engineering (PE) services.

The IT sector players, especially the exporters, are currently on a high fuelled by the depreciation in the rupee. This reflects in the financial position of this company, whose revenues saw sequential growth of 5.8 per cent on a sequential basis in Q1FY14 to touch Rs 648 crore. While the EBITDA and EBIT margins of the company have declined by 60 basis points and 87 basis points on a QoQ basis to stand at 18.4 per cent and 15.6 per cent respectively, this was chiefly due to growth-directed operational expenses like higher visa costs, S&M investments, addition of around 460 freshers into the system as well as higher depreciation. The PAT stood tall at Rs 135 crore, up 71.6 per cent on a sequential basis. The growth in the bottomline (as against a loss of Rs 15 crore witnessed in Q4FY13) can be attributed to higher foreign exchange gains of Rs 62 crore.

The company’s management has indicated that it remains hopeful of a better FY14 than FY13 was in terms of revenue growth. It also expects to see the investments made through FY2013 to yield results and contribute to sales. The focus on the top 40 clients has been increased by appointing an additional sales team, and the company has invested in hunting for more resources in the US and Europe in anticipation of more business on account of this. We anticipate that the company will be able to post better revenues going forward. Hence, we advise you to hold on to your position till the Q2FY14 results are announced.

Tech Mahindra

I have 65 shares of Tech Mahindra bought at Rs 1010 apiece. Should I book profits now?
- Sushil Bhaiya, Via Email

Tech Mahindra provides IT, networking technology and business support solutions and services to the telecommunications industry in Europe, the Americas and internationally. The company offers enterprise solutions such as IT solutions to telecom service providers, operations support systems COTs/ISV vendors and telecom equipment manufacturers.

The company has performed well on the financial front in Q1FY14, reporting a revenue of Rs 4103 crore against that of Rs 1907.17 crore in Q1FY13. During the quarter, Tech Mahindra won three large deals in the ERP space, with a TCV of USD 50-60 million each. The EBITDA margins were at 21.1 per cent, up 60 basis points on a sequential basis. The margins were aided by a favourable currency impact (130 basis points QoQ), which although was partially offset by an 80 basis points negative impact from higher expenses (especially visa related). The consolidated PAT came in at Rs 686 crore, up 36 per cent on QoQ basis, aided by Other Income of Rs 207 crore as against Rs 38 crore in Q4FY13. The management indicated that Tech Mahindra remains confident of growth from the non-BT (British Telecom) business, with the company continuing to see a robust deal pipeline across geographies. The revamped sales team post consolidation of Satyam and increased focus on sales efforts have started yielding results. As of now, we suggest that you hold on to the counter if you are not in urgent need of cash.
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Bilcare

I am holding 150 shares of Bilcare but am sitting on a considerable loss. Should I hold these or make an exit?
- B D Sil, Via Email

Bilcare is a packaging solutions provider which partners with the pharmaceutical industry to improve patient healthcare outcomes. The company’s manufacturing facilities are spread over 11 different locations, with five dedicated R&D centres for Innovative Pharma Packaging Solutions spread across Europe, USA and Asia.

You are sitting on losses on your investment, and given its performance in the recent past, the counter isn’t look promising in the foreseeable future either. On the financial front, Bilcare’s numbers are not encouraging at all. In the recently concluded Q1FY14, its topline declined by 12.41 per cent on a YoY basis to stand at Rs 816 crore as against Rs 932 crore witnessed during the corresponding quarter last year. The bottomline has also disappointed, as the company posted a loss of Rs 40 crore in the quarter as against a profit of Rs 30.45 crore witnessed during Q1FY13. The burden of interest payout to its creditors has also grown, and it has paid interest of Rs 58.65 crore for this quarter, higher 39 per cent on a YoY basis.

There is no clear visibility from the management side about the growth prospects of the company either, at least in the public domain. This makes it all the more difficult to take an optimistic call on this counter. Therefore, even though you have already seen a fair amount of losses, it is better to exit your position to avoid further damage to your portfolio.

City Union Bank

Should I buy this stock at the current market price?
- Prakash Agrawal, Via Email

City Union Bank (CUB) offers a host of banking products and services to individuals and corporate clients in India. City Union Bank operates 375 branches and 788 ATMs. The company was formerly known as The Kumbakonam City Union Bank and changed its name to City Union Bank in November 1987. This is the oldest private sector bank in the country, and the points that follow will tell you why it is a worthy pick for investment in the current scenario.

CUB’s results for the quarter ended June 2013 were healthy. Its NII growth came in at a robust at 35.8 per cent on a YoY basis to stand at Rs 187.3 crore. The NIMs improved by 37 basis points on a YoY basis and 14 basis points sequentially to 3.55 per cent. The bank’s asset quality, which is a key measure of performance in this sector, was stable as the Gross Non-Performing Assets (GNPAs) increased by Rs 19 crore sequentially to Rs 192 crore. This especially stands out given the scenario in the recent past, where the NPAs of banks have been a blight on their overall numbers. The Net Non-Performing Assets (NNPAs) remained flat on a QoQ basis at Rs 97 crore, as the bank has made NPA provision of Rs 20 crore in Q1FY14. The tax rate in the said quarter was high at 36 per cent but this may again trace back to its usual run rate of 23-25 per cent.

In spite of making adequate NPA provision and paying higher taxes, CUB managed a healthy PAT growth of 22 per cent on YoY basis to stand at Rs 90.3 crore. What’s more, we expect the bank to be able to maintain its stable asset quality for the forthcoming quarters.