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MOSL: Morning India (09/October/18): 1. Infosys; 2. Tata Motors (JLR announces two-week shutdown at Solihull); 3. Tata Elxsi (Revenue below estimate; Macro uncertain); 4. Metals Weekly

MOrning India (09/October/18): 1. Infosys (Revenue-margin duel may have to wait); 2. Tata Motors (JLR announces two-week shutdown at Solihull); 3. Tata Elxsi (Revenue below estimate; Macro uncertain); 4. Metals Weekly

 

Today’s top research idea

Infosys: Revenue-margin duel may have to wait…till stability in general, and attrition in particular, is addressed

• INFO's revenue trajectory may gradually be getting on track, with 2QFY19 set to be second consecutive quarter of USD1b+ deals, going by articles of USD (). But given the elevated attrition rates, the tailwinds from currency will likely be offset by efforts to bring down the employee churn through measures such as promotions, higher variable pays etc.
• Such (lack of) correlation of profitability with the direction of the INR-USD is not surprising, when trends of over past seven years are examined. Hence, we believe that the revenue-margin duel at INFO may have to wait.
• Revenue is the biggest lever for margins in the industry and in combination with a more stable house, should eventually augur well for profitability too. We maintain our Buy rating.

Piping hot news

Beleaguered IL&FS defaults on ICD payments worth Rs 1.72 billion

• Beleaguered infrastructure financier Infrastructure Leasing & Financial Services (IL&FS) has defaulted on interest and principal payments on inter-corporate deposits (ICDs) of Rs 1.72 billion due last Friday. In a statement to the stock exchanges, IL&FS said the interest default by the company on September 29 was set off by IndusInd Bank towards interest for Rs 164 million against interest service reserve account maintained by the company with IndusInd Bank.