India Looking Good at Start of 2007: Considering Sify
Goldman Sachs is projecting a +6.9 pct compounding annual growth rate to the economy, which would put India ahead of the UK by 2015 and the U.S. by 2042. That means if you are an American with a newborn son or daughter, by the time they are 35, they will be a citizen of not even the second most economically powerful nation on earth. As we already know, China will surpass America as an economic power long before 2042.
Today, Deepak Lalwani sent me the past two research pieces he did on India for London broker Astaire & Partners. Download India Report dated Feb 7 (.pdf) and Download India Report dated Jan 31 (.pdf).
The Central Bank of India has recently lifted their lending rate by 25 basis points to 7.5 pct. Credit growth is a problem in India with loans for real estate, capital markets and consumer purchases growing at about +30 pct a year. The Central Bank is starting to tighten, which will filter through the banking system.
The Central Bank has raised its estimate of GDP growth for the year ending March 31, 2007 to 8.5 to 9.0 pct. Revision to estimate for the prior year went from +8.4 pct to 9.0 pct. But the Government Central Statistics Office is forecasting a +9.2 pct growth rate. So, India is now growing at close to the China rate.
Services and manufacturing are likely to grow at least by +11.0 pct this year, while agriculture is lagging at about +2.7 pct. The economy and the sovereign credit ratings of the country are both in great shape now that S&P has joined Moody’s and Fitch rating services to bestow an investment grade rating. So high-yield government debt instruments may be attractive.
How do we play the stocks? Well, as you know I have Infosys (INFY) in the Cara 100.
I would like to add a second India company to the Cara 100 and have considered Wipro (WIT) and the two major banks ICICI (IBN) and HDFC (HDB).
An idea that came to me this weekend is SIFY (SIFY), but the financial metrics of that up-and-comer are not to my liking yet. Fund manager Michael Cahill likes it as a restructuring story. He is quoted in an interview as saying:
SIFY is a play on the Internet and Internet infrastructure of India. It is a restructuring story. The last couple of quarters have been a little choppy, but beginning in June, they hope to see some acceleration in earnings. That said, they still doubled their Ebitda from '05 to '06. They figured out a long time ago that most people in India don't have a PC, so they built Internet cafés. They have 3,552 Internet cafés. The No. 2 player is Reliance with 240 cafés, and there is no No. 3. Sify has leveraged their Internet cafes to create several portals like SifyMax.com, which is the leading broadband portal in India, and Sify.com, which is an e-commerce and mobile-game portal.
Beyond that, they started building data centers to host their own data, and now they are providing the service to some big companies. They also have 208,000 broadband subscribers. They are one of the largest broadband providers in India, and they do that by working with the cable companies, which are highly fragmented in India. They are getting into travel and have a pact with the Indian railways to sell and distribute tickets through their cafés.
They have also announced a deal with Western Union for money transfers. This is an important service, because very few people in India have credit cards.
Maybe the readers (especially from India) have some ideas for a Cara 100 company headquartered in India, poised to take advantage of the country’s rapid growth?
For the Cara 100, I look at a company with proven management, in a growth industry, with a strong balance sheet, and operating performance that has a high Return on Equity. Current share price or market capitalization is not important. In fact, I try to diversify the 100 list across the large, mid and small cap range (but not micro-cap).
The India market has a few ETF’s worth considering, plus several high-quality mutual funds if that is your interest. As you know, I monitor the IFN ETF on a weekly basis. The IFN has struggled since mid-November, and it has actually lost -7.2 pct over 12 months.
So, please let me know your long-term views on India, and the best-looking stocks there.
Related Articles
|
- Free E-Newsletters
- About Seeking Alpha
- About Us
- Contact Us
- What's New
- Readers Feedback
- Advertise With Us
- Contributors
- Contribute an Article
- Feature Your Book
- Our Contributors
- Anonymous Contributions
- Dispute an Article?
- Legal
- Terms of Use
- Privacy
- Copyright
This article has 3 comments:
-
Nova Law
-
60 Comments
Feb 13 08:35 AMThough he suggests buying here, Cara was quite emphatic in calling a top in the Indian market way back in August 2005:
<b>Bill Cara Calls a Top in the India Closed-End Funds (IFN, IIF)</b>
"I’m going to forecast that the closed-end Morgan Stanley India Investment Fund (NYSE: IIF) has reached a peak, and will now either decline or sidetrack for many months from this point. I think the enthusiasm has been overdone...", wrote Bill Cara on Aug 12 2005."
etf.seekingalpha.com/a...
IFN closed at 43 yesterday. So if you took Cara's advice when he advised selling at 38, you would have lost out on not only five points of upside, but also $6.12 in dividends. In other words, IFN is up 29% since Cara called a top and advised selling. Now IFN did top out over 60 in May 2006 - and did Cara have anything to say about it then?
Let's check his archives - for this is where it really gets funny. On May 10, 2006, just as IFN was reaching its multi-year top, he advised (with some hedging) that people ought to buy it.
www.billcara.com/archi...
This man's tin ear and lack of investing foresight is humorous for me, because I don't invest according to his recommendations. Instead of laughing, if you followed his advice, you could well be crying.
-
M Mansinh
-
6 Comments
Feb 14 11:09 PMTheir shares are not listed in India as I guess they do not think they'd be much followed and invested in by Indians - only exchange they are listed on is in US where guillable investors don't know just how popular they are (not)!
Sure, India has potential of 1-billion more potential Internet users but in the next 20 years more than half are unlikely to get anywhere close to a computer as they are more interested in lifting themselves above the poverty-line.
Also, most important, unlike a country like China, almost 99% of the Internet/Computer using users in India are reasonably fluent in English and use sites such as Google and Yahoo much more than any of SIFY's sites...
Consider investing in the Indian outsourcing plays such as INFY & WIT, the new India Index-tracking ETN by Barclays (INP) or even the Indian banks ICICI & HDFC that trade as ADRs in the US.
-
Paul Meyer
-
3 Comments
My Website
Feb 25 01:47 PMI'm a backer of SIFY. I think you should do a little more research. Currently SIFY is like starbucks in India and it is a known name. Maybe the company is still small to be traded on India markets, but with added capital the company can grow more becoming more dominant.
-the finance ninja
financeninja.wordpress...