Newsletter - IT Sector

1 Mar 2011: Google backs climate-change weather insurance startup

Google was among investors pumping $42 million into a climate change inspired technology startup that calculates the chances of crops being ruined by weather. 

WeatherBill launched Total Weather Insurance in 2010 as a way for US farmers protect themselves against being devastated by weather, which the US Department of Agriculture blamed for 90 percent of crop losses last year.

28 Feb 2011: Baring puts MphasiS on billing rates

After being hammered on the bourses last Friday over issues of corporate governance, the pressure on Bangalore-based MphasiS has intensified. 

Baring Private Equity Partners (BPEP), the second largest shareholder in IT services firm MphasiS, said that it could be better for the company's management and owner Hewlett Packard (HP) to disclose pricing details of the outsourced work undertaken by the former since it was a related party transaction. 

Baring is not the only one. Some other restive minority shareholders, especially mutual funds, said that they are also looking at the option of putting pressure on MphasiS for a possible share buyback.

25 Feb 2011: Nilekani seeks to allay privacy fears surrounding 'Aadhar'

Allaying privacy fears surrounding 'Aadhar', the Unique Identification Authority of India Chairman Nandan Nilekani said the project would in no way put at risk citizens' security and rights. 

"The data collected of the individual by means of biometric system will only be for the sake of their identification and access to other facilities like availing bank loans, being part of the PDS system and others. There is no way other agencies or non-concerned parties having access to the Aadhar data base," Nilekani said. 

 24 Feb 2011: SAP seeks to discard Oracle copyright verdict

Oracle Corp should be paid no more than $408.7 million for copyright infringement carried out by a SAP AG subsidiary, the European software company argued in a court filing.

A Northern California jury awarded Oracle $1.3 billion last November over accusations that SAP subsidiary TomorrowNow wrongfully downloaded millions of Oracle's files.

24 Feb 2011: Tech Mahindra bags Vodafone contract

Tech Mahindra has won a multi-million dollar IT contract from Vodafone for the telco's operations in Qatar . The contract covers application development and maintenance, infrastructure management and other services.

"The value of the deal is not being disclosed at this point," said Krishna Gopal, Vice-President (sales), Middle East, Africa and Saarc, Tech Mahindra. Vodafone has around 700,000 subscribers in Qatar.

23 Feb 2011: MindTree inks two deals worth more than $70 mn

MindTree Ltd said it has won two orders worth more than $70 million over the next five years, sending the mid-sized IT services firm's shares up more than 10 percent. The company has inked deals with an information and communication technology service provider in Europe and a U.S.-based bank

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Newsletter - ITES / BFSI Sector

1 Mar 2011:  'Infosys could have non-Indian CEO in 2-3 years'

Infosys Technologies could have its first non-founder and non-Indian CEO in the next 2-3 years, according to a BNP Paribas report. The report speculates that Steve Pratt, present CEO of Infosys Consulting, could step into that role. This will break tradition at Infosys where the COO has always gone on to become CEO. 

On being asked about the possibility of a non-Indian like Pratt taking over as the CEO, T V Mohandas Pai, the head of HR at Infosys, said the company would not like to comment on unsubstantiated speculations.

28 Feb 2011: JP Morgan fund seeks stake in Twitter

JPMorgan Chase’s new fund aimed at investing in social-media companies is seeking to buy a minority stake in Twitter that could value the service at close to $4.5 billion.

The $1.22 billion JPMorgan fund appears to see Twitter as its beachhead in the highly popular social-media sector, much as Goldman Sachs established its presence in the category by raising $1.5 billion to invest in Facebook, an amount that included $1 billion collected from wealthy private individuals outside the United States. 

It is not clear whether the fund, known as the J.P. Morgan Digital Growth Fund, will invest directly in Twitter, or buy current investors’ stakes with the company’s consent, these people said. They cautioned that talks were continuing and might not lead to a deal.

25 Feb 2011: I-T Department slaps Rs 450 cr demand on Infosys

The Income Tax Department has slapped a tax demand of over Rs 450 crore on software giant Infosys Technologies for wrongfully claiming tax exemption on onshore services by declaring them as software exports.

Onshore software development is the practice wherein Indian companies send their software engineers on short assignments (3-6 months) to companies based in Europe, the US, and other nations. 

24 Feb 2011: TCS appointed technology partner to Garmin-Cervelo

TCS said it has been appointed as the official technology partner to pro-cycling team 'Team Garmin-Cervelo' for the racing season 2011. 

TCS will put in place an expert team to work with Team Garmin-Cervelo and determine how technology can be better leveraged to enhance the performance of the team, working hand-in-hand with the team's internal 

Sport Science group.

24 Feb 2011: Wipro hopes to garner $1 billion from hydraulics, defence business

India’s third biggest software firm, Wipro, plans to achieve billion dollar in revenues by selling hydraulic cylinders and manufacturing components for aviation and defence contractors in around 3-4 years, as the company seeks to grow its portfolio beyond software.

Having restructured its software exports business last month, Wipro’s Infrastructure Engineering division, which contributes less than 10% of the group’s business, has identified Brazil and China as new manufacturing hubs for its hydraulics business. 

23 Feb 2011: L&T Infotech eyes stake in EXL Service

Investors in back office firm EXL Service are in talks with mid-sized L&T Infotech to sell their stake in the Nasdaq-listed company.

Institutional shareholders such as Aviva Investors Global Services, Blackcock Advisors LLC, TimesSquare Capital Management, Wellington Management, with at least 12 other investors hold around 53% in the company. About 24% in the BPO firm is held by Mutual Funds. 

EXL joins its peers Genpact and WNS, whose investors are also looking for an exit for quite sometime now, since their investments have matured.

21 Feb 2011: Mahindra Satyam BPO' contract renewed by NAVTEQ for 2 more yrs

Mahindra Satyam's today said that its business process outsourcing arm Mahindra Satyam BPO has renewed its contract with NAVTEQ, a Chicago-based global provider of digital map data, for a period of two more years. Mahindra Satyam BPO currently provides services like geospatial software applications and modeling along with data support services to NAVTEQ. 

21 Feb 2011: Wipro completes ten years in the Middle East

Wipro has completed ten years since it begun operations in the Middle East. Wipro, which commenced operations in the UAE and Saudi Arabia in 2001, today has a presence spread across Sharjah, Abu Dhabi, Kuwait, Qatar, Al Kobar, Riyadh, Jeddah and Bahrain. 

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Leadership Changes

1 Mar 2011: Cognizant's BFS head, Debashis Chatterjee quits 


Cognizant's banking & financial services (BFS) head Debashis Chatterjee has put in his papers. Cognizant, which competes with TCS, Infosys and Wipro earns maximum revenues from financial services. 


While Jaideep Poondhir is tipped to take over as the head of the BFS portfolio, there was no information available on where Mr Chatterjee could be headed. Mr Chatterjee has 20 years of experience in the IT industry, with over 14 years in Cognizant alone. 


This development also comes at a time when Cognizant is breathing down India’s third largest software exporter Wipro’s neck. It is widely believed that Cognizant’s scorching pace of growth was instrumental in triggering the recent re-structuring exercise in Wipro .




24 Feb 2011: Wipro's ex-CEOs Paranjpe & Vaswani get Rs 7 crore each as severance amount 


Ex- Wipro CEOs Girish Paranjpe and Suresh Vaswani have been offered severance packages of Rs 7 crore each. The joint CEOs stepped down on January 31, after being at the helm of the country's third largest IT company for over three years. Wipro decided to dismantle its joint CEO structure to go back to the single CEO model earlier this year. 

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BUDGET 2011 : Impact on IT/ ITES Sector

1 Mar 2011: Budget 2011 - Smaller IT cos to feel tax pinch more, take margin hit 

India’s small and medium-sized IT firms will be hit hard by the decision to end tax exemption for software units and impose MAT on SEZ units.

The budget did not extend tax exemption for units registered under the Software Technology Parks of India (STPI) making export income taxable for them from fiscal 2012. Software units in SEZs which were exempt from Minimum Alternate Tax, have now been brought under the tax’s purview.

1 Mar 2011: “US turnaround will revive indian IT's fortunes”: Jyotivardhan Jaipuria, MD, Bank of America-Merrill Lynch   

“The tax holiday for Software Technology Parks was not extended beyond March, as was anticipated by the smaller IT firms. Consensus estimates had factored in the expiry of the tax holiday. 

On the other hand, the Minimum Alternate Tax (MAT) on special economic zones will impact cash flow negatively. But IT companies will offset the earnings impact by creating MAT credit asset, which can be carried forward for 15 years, given that they expect their tax liability to be higher than this deferred tax asset during the period. 

We are overweight on the software sector due to its improving growth outlook. Our optimistic stance is driven by three key factors. First, the US recovery is helping provide a much better environment for software companies. The banking, financial and insurance vertical is witnessing demand driven by regulatory compliance, risk management, business rationalisation, etc. The energy vertical is also seeing regulation-related activity while the telecom vertical is seeing some growth led by cost cutting, modernisation and vendor consolidation-related spend. 

Secondly, global outsourcing continues to gain share in new areas like infrastructure management services (IMS), healthcare and public sector and new markets like continental Europe. IMS and BPO are forecast to grow at twice the average offshore market growth rate.

Thirdly, margins are likely to be maintained, helped by scale and pricing showing an upward bias.

Lastly, company-specific factors like higher productivity, broadening of the employee pyramid and investments beginning to pay off are also helping margins. We think the sector can see a top line and bottom line growth of over 20%, which should drive stock performance.”

28 Feb 2011: Union Budget 2011: MAT impact on India's $60 billion IT sector 

India's $60 billion IT sector is preparing to cope with impact of higher taxes after the finance minister proposed higher minimum alternat tax (MAT) for units operating in special economic zones (SEZ). 

The IT industry is expecting an impact after minimum alternate tax was introduced on special economic zones (SEZs). SEZs had a 100% tax exemption for a period of five years and 50% exemption for another five years. SEZs will not have to pay MAT at 20% on book profits. 

"There will be a significant impact on both SEZ developers as well as the units operating in SEZs. Earlier companies enjoyed a 30% tax break, imposing 20% MAT will reduce the saving of companies to 10%. The attractiveness of SEZ units will drop significantly," Hemal Zovalia Executive Director tax and regulatory service KPMG said. 

Large IT players such as TCS, Wipro and Infosys have moved a large part of their operations to SEZs. "To claim MAT on SEZs is conceptually wrong, this will have a cash flow impact. Also there is now MAT on development of SEZs and this will discourage the development of these zones," Rostow Ravanan, chief financial officer of Mindtree said. 

The IT industry had also been seeking a roll back in MAT after it was increased from 15% to 18% last year. This year’s Budget has increased this to 18.5%.

28 Feb 2011: Union Budget 2011 impact on IT sector: Angel Broking 

The Union Budget 2011-12 was a low key affair for the Software Sector . The Budget did not mention extension of fiscal benefits under the STPI Scheme for Export of Software Services, which is due to expire in FY2011. Plan allocation for School Education increased by 24% to Rs 52,057cr in FY2011-12. This would boost business opportunities for the IT-Education companies in terms of ICT and PPP in K-12 and Vocational Segments. viz. Educomp, Everonn and NIIT Ltd. Overall, the budget was Neutral for IT sector.

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