>TATA ELXSI (HEDGE EQUITIES)

Company Profile: Tata Elxsi Limited is engaged in providing systems integration and software development services in the information technology field. From Automotive to Aerospace, Enterprise to Consumer Electronics, Entertainment to FMCG, Media to Storage, Semicon to Telecom, Tata Elxsi provide customized design solutions to companies across the globe. The Company operates in four divisions: product design services, industrial design division, visual computing labs, system integration services Tata Elxsi ensure cost-effective, time-to-market solutions through a highly motivated skilled workforce driven by strong design principles, highest levels of quality and ethical business practices.

IT Sector in India
From a few million dollars worth exports in early 1990, today India becomes the major player in global software industry. IT-BPO exports (including hardware exports) grew by 16 per cent from US$ 40.9 billion in FY 2007-08 to US$ 47.3 billion in FY 2008-09. And the government expects to grow at an annual rate of 30 percent per annum, expect s US$ 80 billion export turnover by 2011. According to NASSCOM software and IT services contributed US$ 59.6 billion this year. Springboard Research expects the Indian IT services market to remain the fastest growing in the Asia-Pacific region with a CAGR of 18.6 per cent.

DESIGNING FOR GROWTH

Global financial crisis coupled with the severe pricing pressure has affected the demand for IT services in the first half of 2009-10. But , expecting an improvement in the second half of 2009-10, and believe to be pick up in the December 2009 and March 2010 quarters. Despite the drawbacks, it is believed that the Indian information technology sector continues to be one of the sunshine sectors of the Indian economy showing rapid growth and promise.

Outlook and Scope
After a sluggishness in the business due to the global financial crisis and sluggishness in the economy, now this sector has regaining the strength as the world economy is recovering from the crisis. this sector is still a multimillion dollar industry and it is still a growth engine for the Indian economy. And the Tata Elxsi has the creative leadership in hard-core technology and strength in design. It has the ability to provide point services and end-to-end solutions across the product lifecycle with Augmenting company’s expertise capabilities.

Major Investors: SBI Mutual Fund, Reliance Capital, Life Insurance Corporation of India

Valuations: Global financial crisis has muted the growth rate of the company. Since the world economy is recovering company getting newer orders and global growth in the sales of smart-phones and increased demand for the automotive electronics has amplified the possibility for increased outsourcing of design services. All these have paved the way for a better performance for the company in coming years. At the current market price of Rs.169.70 the stock trades at 9 multiple of its FY-09 earnings and 8 multiple of FY-10E earnings, and 7 multiple of FY-11E respectively.

To read the full report: TATA ELXSI