Rolta India: Gaining India advantage

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FIIs sell shares worth Rs 910 cr

While the IT companies are expected to take a hit on the earnings based on the rupee appreciation and a possible slowdown, if not a full blown recession in the US, Rolta India might be one of the few to weather this storm. It has gained 20% over the past month even when the IT Index has touched an all time low. The reasoning is that around 60% of Rolta India’s revenues are from the domestic market and hence are not affected by the rupee appreciation. Then again, the company has focussed largely on sectors like the geospatial information systems and engineering design, which are likely to see tremendous opportunities in India, as experts reckon 28% compounded growth in the refining capacity addition and ten times more power capacity addition till 2011. The company has also been concentrating on developing strengths in the defence software sector. The fact that it operates in a niche segment enables it to have a 10% attrition rate, the best in the industry, and this augurs well for the company. Its margins remain steady, while the concerns about accounting norms are improving. The striking fact however is that the FII holding in the company is low, at around 37%, as against the limit of 75% allowed and is expected to see favourable momentum.

BPCL: Still worried

The BPCL share price, which was seen gaining for the past one month, spiked up 22% on the news that the company, along with Premier Oil, had hit the largest onshore oil reserve. But the management was quick to deny this rumour and the share price climbed down; however, it closed higher by 11% over the previous day’s close. Trade experts remain concerned about the outcome of the company’s plans amidst rising crude oil prices and government’s insistence on not raising product prices. The management has also mentioned a slowdown in expanding its retailing activities. The rupee appreciation has been some solace, but won’t be for long. Even oil bond issuances would assuage some pain but does not remain a long-term remedy. Analysts therefore await some fructification of its plans to grow its earnings three-fold by 2010 before re-rating. The quarter that ended however saw some optimism in form of better profitability.