Accumulate IT: TCS, Sasken, Patni

I would like to take a contrarian view to the IT Stocks. They seemed to have fallen out of favour, and nobody knows the reason why.

Some lame excuses:
1. Rupee appreciation: Other export sectors worse hit, This sector has dealt well, esp. INFY and TCS

2. Energy sector has better outlook: Yeah, but nobody seems to attach a risk premium to the execution risks. Besides if X does well, gives no reason why you push down Y.


Buy rationale:

1. TCS:
a. Looks poised for growth with entry into the multi-billion dollar deal arena after the Neilson Deal
b. Better handling of hedging options as compared to other IT firms
c. Productization(Bancs), Alliance based solution offerings(eg, with Siemens and Airlines Solution) will lead to quicker non-linear growth adoption
d. A company with 30% per annum growth Rate and 20% + operating margins post tax, cannot be expected to trade at less than 20 PE, especially in a market which itself is trading 26 PE.


2. Sasken, Patni
a. Sasken has shed more than 50% on disappointing earnings
b. Product based offerings, should pickup in next quarter as Cellphone Co's ship in more products(quantitywise)
c. Already corrected by almost more than 40%

d. Patni: Correct largely, accumulate below 310.
e. For people with high risk appetite, favourable trigger in terms of acquisition in queue


PS: A min. requirement that all these 3 companies fufill is good quality management demonstrated over time.