MINDTREE Equity Report

Disclaimer: MindTree Analysis and recommendation is purely for knowledge purpose and not to consider as any financial advice. Data are collected from various sources and analysed.For testing accuracy paper trading can be done

CMP as on 20.04.2017- 438

INDUSTRY

Information technology in India is an industry consisting of two major components: IT services and business process outsourcing (BPO).^] The sector has increased its contribution to India's GDP from 1.2% in 1998 to 9.3% in 2015. The earnings of the IT Industry has been growing at good pace currently earning 143 billion in year 2015-2016. The rate of growth in domestic and export business of IT sector promises of earning 200 billion usd revenue by 2018.

Indian IT's core competencies and strengths have attracted significant investments from major countries. The computer software and hardware sector in India attracted cumulative Foreign Direct Investment (FDI) inflows worth US$ 22.83 billion between April 2000 and December 2016, according to data released by the Department of Industrial Policy and Promotion (DIPP).
The recent H1B visa issues and union budget allocations has impacted on the industry.

Company Information

ISIN: INE018I01017     
52w High/Low: 755/399
Market Cap: 7486 crore
Regd Office: Bengaluru
MD and CEO: Mr. Rostow Ravanan
Sector: IT

Shareholding Pattern:

About the Company
Mindtree delivers digital transformation and technology services from ideation to execution, enabling Global 2000 clients to outperform the competition. “Born digital,” Mindtree takes an agile, collaborative approach to creating customized solutions across the digital value chain.
Collaborative Spirit, Unrelenting dedication and expert thinking are the core values of the company. 
The Company globally deals with more than 200 clients and offices in 14 countries including United States of America, United Kingdom, Japan, Singapore, Malaysia, Australia, Germany, Switzerland, Sweden, UAE, Netherlands, Canada, Belgium, France, Ireland, and Republic of China.. It specializes in ecommerce, mobility, cloud enablement,
digital transformation, business intelligence, data analytics, testing, infrastructure, EAI and ERP solutions. The
Company offers various services like: Application Development & Maintenance, Data Analytics, Digital Services, EAI BPM, Engineering R&D, Enterprise Application Services, Independent Testing, Infrastructure Management Services and IT strategy and consulting.
Source: Mindtree website

The Masala Bonds

The Growing Scope of Masala Bonds

Let me begin this blog with a screenshot that i shared (prediction) during the November 2016 on twitter.
This tweet was done 6 months ago and the masala bond market had started to do a steady run but unfortunately capturing less media attention.  From a "not so popular bond" to special treatment in Union budget, the importance of Masala bond has grown over years. 
Through this blog i am looking to show the major characteristics of these bonds and its importance in India.

"Masala Bond" the name itself may not be that familiar to you but since its inception ie, 2014 when IFC raised a 1000 crore bond to fund projects in India, this name started to capture some attention.

Despite being a new "thing" the overall buzz received by these bonds at beginning where pretty lower. Since having a higher scope and reduced risk  I was pretty sure that masala bonds will gain a lot of attention. Even though, if you  search "Masala Bond" or "Rupee Bond" in google, the chances of getting a well defined or flabbergasting articles saying about the various aspects or advantages regarding the same is comparatively very lower than from most celebrated asset classes.  

So,What and Why -Masala Bonds????

Meaning: "Masala Bonds are bonds issued outside India but denominated in Indian Rupees, rather than the local currency. Masala is a Hindi word and it means spices. The term was used by IFC to evoke the culture and cuisine of India. Unlike dollar bonds, where the borrower takes the currency risk, masala bond makes the investors bear the risk."
(source: Wikipedia)

In simple words, this is a mixed financial instrument where the external borrowings are done with reduced risk. 

Now lets try to answer why, these bonds:

The total borrowing by Indian corporate sector on 2016 stood around 15 billion US Dollars, which is comparatively much lower than that of previous years. Still the corporates external commercial borrowing is a major component and comprising 37 percent of India's External Debt. More alarming fact is that most of these are unhedged. Increased debts and currency fluctuations do create a big risk for the economy.

An article came on Bloomberg shows the same.

Another source showing statistics of ECB and Rupee bonds:
http://in.reuters.com/article/ecb-fccb-idINL3N1GY3ND

So it might be now clear to you why the masala bonds are useful.
In a country like India, where the currency is highly fluctuating and dollar being the largest indebted currency denomination, the scope of these rupee bonds are becoming more inevitable. The Importance of Masala Bonds are much higher in a country like India. If we see the past several months, rupee has been moved from 69 to 64 levels. Chances of a plunge in rupee is still possible at any point of time. Apart from that the recent geopolitical risks and economic events leaving the world in a VUCA environment which is not that healthy for our country.
We cannot claim that it is a easier source of finance but Masala Bonds are of greater safety than unhedged sources and in changing global conditions.

Masala Bonds and Union Budget

The Given below is a major excerpt from the article of Livemint on February 1 2017

" The rupee-denominated offshore bonds, popularly known as masala bonds, on Wednesday got a tax benefit boost with the Union budget exempting them from taxation for transfer among non-residents, while a low rate of 5% will apply for investors till 2020.

The decision to levy lower tax deducted at source (TDS) of 5% with respect to masala bonds would be retrospectively effective from 1 April, 2016."

Source: http://www.livemint.com/Politics/vVGQk2I3G11Ya8DUr9XvMM/Budget-2017-Masala-bonds-to-get-more-tax-benefits.html

Government taking steps regarding to popularise and inviting more companies to use cheaper source for raising funds. The Major advantages of Masala Bonds not only vest with investor but also to corporates and for the nation.

Still too much reliance on external debt is also quite unpleasant. Masala bonds may give a better chance but the increased debt is still a problem even though it is in rupee denomination.

The Current Interest rate is below 7 percent which is more cheaper if it was issued domestically. HDFC currently holding the name for largest masala bond listed in London Stock Exchange, many companies like NTPC, Power grid and many other players has also raised find via these bonds.

Prediction:

The rate at which external debt is growing and the growth of companies and expansion plans is showing a positive outlook for Rupee Bonds. The recent currency appreciation and events can cause a drop in external debt but the corporate borrowings seems to be increasing through masala bonds. The Bonds are more likely to get invested by overseas players. Better credit rating for the nation and new policies are expected to get more fund flow which will boost the market. Unexpected external or internal events pose risk for the same. 

The latest upcoming issues include New Development Banks 500 million US$, HDFC planning to raise 3300 crore and Shriram Transport also in frontline, the rupee bond market is pretty alive. It is still too early to conclude but Masala Bonds are of greater advantage and sustainable instrument.

Thank you.

Follow me: EbbySpeaks

The Inter-Migration and Indian Economy

The Indian Economy has been changing drastically over the few years and when I am writing this blog, nifty has crossed 9000 levels and Sensex touched 30000 points.So over the past few years, what that exactly made our country apart is a relevant question. The major answers will be the newly elected Prime Minister of the nation.. or may be the attracting Indian market or even can be what we used to see as a dream is actually quiet working.


Through this blog, i am not pin pointing the reasons for the betterment of Indian Economy but a process that helped for the same. I named this blog as "Inter-Migration" because, this so called surprise of Migration was already happening in the background and may be we were not aware of  the intensity and how it helped to increase growth of our economy.

INTERNAL MIGRATION

These statistics are a bit old but it shows that the migration pace had good momentum and in a country like India, people were ready to move from their place of birth to other places. It is interesting to see that the reason for migration was not that forced. Some people were moving out permanently some other for temporary reasons and the whole shifting process of people is helping the country lots of ways. So as I said, the reason for migration was not forceful in nature, people in the country identified the opportunities awaiting in different parts of the nation and moved out from their birth places.

Work/ Employment factors being one of the major drivers of migration added up value whereas Business and Education where investing value for the country.  

1,338,783,343- Being the present Indian population, which is way ahead than 2001 population is pointing to the factor of increase in internal migration.

This is an excerpt from the economic survey 2016-2017.New estimates based on railway passenger traffic data reveal annual work-related migration of about 9 million people, almost double what the 2011 Census suggests

Let’s see an example.

In India, the students mostly migrated for purpose of studies where mainly for PG courses or for acquiring higher education or for research. At present, the fact is bit twisted. The need for migration for education was limited since IITs, IIMs, B-Schools, and many institutions which are specialised in nature are available in most of the states.  Apart from that increasing digital literacy and study from home is also making students acquire knowledge easier. Still the migration rate is increasing.

Why?

The answer is Simple. Value for Investment.

Students need value and they are keen to achieve the same. They need value for the money they spend and from being a student, they demand knowledge and experience. It is good for a country that people migrate internally for value and is helping in overall development of the country.

http://www.un.org/en/development/desa/population/publications/pdf/technical/TP2013-1.pdf

This is a report from the UN which gives more proof for the same. The number of people migrating within country is huge. Our migration is rising when we compare with other asian countries. Australia is one of the country where intensity is most seen. If we took the case of developed countries also the rate of migration is huge.

Migration of people is creating value and the scarcity of human skill and human resources are reduced. If i am not wrong, the number of people moved from northern part of India to southern had increased many times. Building works, workers for construction sites, likewise many jobs in southern India is done by north and western people of the country itself.

Migration Process and Indian Development

If we take the major sectors that contributed to Indian growth over the past many years, services has emerged as the main. 
http://statisticstimes.com/economy/sectorwise-gdp-contribution-of-india.php

If you visit the above link, the statistics of services to GDP of India can be seen. Services can be again be broke down into various kinds like.. 
Communication, financial services, hotel, transport, etc..
Many companies, state government, public enterprises are all using the advantage of skillful migrated people. A business process outsourcing or a company like Infosys will have diversified workforce all over from India.

We are in the middle of a time were resources are so abundant and for the development the needy thing is the people who can utilise it. So , this can again be viewed in another context that governments, or people who are against internal and external migration are actually doing a barrier to the same. Let us look the history, the migrants only brought variations which provided hybrid combinations of various products, services, ideas and what not.

Predictions
The Internal Migration in India is still a big topic to research. Agenices giving assistance to migration both in inter-nation and intra-nation basis are gaining importance. My blog about internal migration in India is a limited one. The whole process of migration is in its pace and intensity is still low,
Since India might cross the China in terms of population, my prediction is that Indian migration will intensify a lot more. There will be time when gaining right pace for safe and quality migration which solves a lot of problems like ageing population (even though our nation's average age population is still young), unskilled workforce and various organisational problems, The Cultural diversity will find a new dimension and the Hybrid nature will come into existence. In future, migration will be a lot easier process, since India is a free to travel anywhere country. 
Foreign nations who are putting lock for migrants is actually reducing their capacity itself. In this blog i have not talked much about external migration. But to a great extent internal migration complements external migration also.

So, while reading this blog am sure that some of you or your relatives are people who are enjoying a lots of benefits of migration.

Thank you.

Note: This writing is inspired from the talk of  Shri. Arvind Subramniam, regarding "Surprises of Indian Economy"

Follow me: EbbySpeaks