IT Stocks Underperform

Mon, 22 Aug 01:30 pm

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Indian Indices drifted lower this afternoon, tracking weak global cues. Sectoral indices are trading on a mixed note with stocks from the FMCG & realty sectors witnessing buying interest while auto & IT stocks are bearing the maximum brunt.

The BSE Sensex is trading lower by 107 points (down 0.4%) while the NSE Nifty is trading lower by 44 points (down 0.5%). The BSE Mid Cap index is trading down by 0.3% and BSE Small Cap index is trading flat. Gold prices, per 10 grams, are trading at Rs 31,216 levels. Silver price, per kilogram is trading at Rs 44,553 levels. Crude oil is trading at Rs 3,253 per barrel. The rupee is trading at 67.17 to the US$.

As per an article in The Economic Times, Tata Power's South African joint venture Cennergi started commercial operations at its 95 MW wind farm project in South Africa's Tsitsikamma Community. The wind farm comprises 31 Vestas-make turbines with a generation capacity of 3.075 MW.

As the preferred bidder, Cennergi was selected for two wind projects under the second window of the Renewable Energy Independent Power Producer Procurement Programme by the South African government.

Notably, with the commissioning of the Tsitsikamma project, Cennergi's operational portfolio has increased to 229 MW.

On the other hand, the deal has also bolstered Tata Power's renewable portfolio outside India. This further demonstrates its commitment to enhance non-fossil based generation portfolio up to 30-40% of its total generating capacity, the reports noted.

Considering power sector's several headwinds, we have discussed the challenges faced by Tata Power (Subscription Required) in one of our premium editions of The 5 Minute Wrap Up.

Tata Power was trading lower by 0.5% while writing.

Moving on to the news from software sector. According to an article in a leading financial daily, The Competition Commission of India (CCI) has cleared HCL Technologies' equity swap deal to buy the business of Geometric Ltd. The pact excludes Geometrics' 58% stake in 3DPLM Software Solutions Ltd, a joint venture with Dassault Systems.

An equity swap deal occurs when shareholders' ownership of the target company's shares is exchanged for shares of the acquiring company as part of a merger or acquisition. As part of the transaction, HCL would issue 10 shares to shareholders of Geometric for every 43 shares held by them in the company. Both the companies reportedly signed an agreement for the deal in April this year.

Further, the CCI has approved acquisition by HCL of certain undertakings of Geometric and merger of remaining undertaking of Geometric with 3DPLM. Effectively, HCL Tech will issue 15.6 million shares to Geometric shareholders.

Moreover, the business that HCL is acquiring has more than 60 global clients in the US and Europe in order to drive greater synergies. So far, 2016, has not been too great for HCL as topline growth has remained sluggish and there is uncertainty with respect to how margins will pan out. However, will the recent deal with Volvo and the acquisition of Geometric Ltd (Subscription Required) further dampen or boost the margins is the key thing to watch out for going forward.

HCL Technologies was trading down by 1.78% at the time of writing.

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