Even while the Ex-UTI chief  continued to languish in jail for yet another week end, the investors in US 64 showed little urgency for redeeming their US 64 holdings when the re- purchase counters were recently opened. It was reported that UTI had made arrangements to open over hundred counters expecting a mad rush for redemption which never materialized. The reading is two fold. Either the small investor is not as uncomfortable with the suspension of repurchase as the media made them out to be. Or the fund has more of large investors than what is generally believed. 

The absence  of UTI from the markets was however exploited by  other Funds particularly the FIIs  who appeared to increase their activities in the Indian markets. As a result, the  Sensex f closed the week end at a relatively better looking 3325. The rally was on a wide front covering Technology stocks as well as select Pharmaceutical stocks and Media stocks. 

The turning point appeared to be the announcement by Intel that it is shifting some of its staff from US to Bangalore as a strategy to counter the effects of the US slowdown. This is a manifestation of what we have been predicting, namely that India can indirectly reap some benefits from US slowdown.

The sentiments were also aided by the recent publication of Gartner 2001 survey on IT spending which cleared some misconceptions about the future of IT industry. The survey conducted between March and June this year indicated that, in the year 2001, more than 56 % of the respondents plan to spend more for IT than they did in 2000. This trend is expected to continue in 2002 also. Only 21 % of the respondents indicated a possible cut in IT spending. Most of the respondents were from North America indicating  that the so called “Slow Down” is a thing of the past.  

The survey concludes that the global uncertainty on IT future  is over and in  particular the survey predicts that the Asia Pacific region will continue to grow at a compound annual growth rate of  more than 25 % till 2004.  The findings along with positive developments such as the strengthening of  Intel in India will infuse life to IT stocks in the coming weeks. While regular corrections cannot be ruled out, the medium term trend for tech stocks is expected to be positive.

Looking back at the stocks in IT sector once again, we find that there are several scrips which are trading at a fraction of their 52 week high and despite improved performances in the last few quarters they have not caught the attention of the investors. Rolta India is one such share. The share which is quoted around Rs 55 as against a 52 week high of Rs 1015 ,  deserves a second look because the latest quarterly results indicate an EPS of RS 18.8 indicating a good buying opportunity.
 

 Financial Highlights of Rolta India

Particulars	1999	2000	2001 (HY)
Sales (Rs cr)	99.79	253.16	156.97
Net Profit (Rs cr)	60.2	90.36	60.93
Equity (Rs cr)	54.88	63.69	63.69
EPS (RS)	11	14.3	18.8

Rolta specializes  in computer graphics, mapping and engineering software and is considered  as India’s No. 1 CAD/CAM & GIS solutions provider. It is also a noted Engineering Software Conversion & Modeling Service vendor worldwide. Further, It has also a significant and growing presence in the Internet infrastructure sector (RoltaNet is Mumbai’s leading private ISP) and is a major end-to-end e-business solutions provider. 

Rolta India recorded net sales of Rs 76.9 crore and a Net profit of Rs 30.2 crores for the second quarter of Y2001-2002 ended June 30, 2001. This represented a 30.7 per cent rise in sales and 41.7 % rise in profits compared to the corresponding quarter the previous year. 

 For the six month period ended June 30, 2001, net sales was up 33.5 per cent at Rs 157 crore. And  Net profit  was up by 45 %  at Rs 61 crore.

While more than 50 % of the Company’s current year earnings came from domestic operations, the Company has also taken steps to strengthen its international operations in Europe and USA by opening offices in key locations. This should help the Company participate in the growth phase during the reversal of the slow down in USA, as well as help it harness the growth in the Indian market itself.

Niche market specialization and strong domestic presence provide a good potential for the stock in the long run and at current low P/E discounting of around 2.5 the downside risk is low. Investors should therefore consider accumulation of the stock in the coming weeks.

Na.Vijayashankar
August 4, 2001