Good Morning Toasters!

In today’s issue of the Morning Toast, we discuss

• Some good news on the IT front
• Food tech evolved during the pandemic
• News around the world
• An educational concept to keep you learning every day 🙂

Market Watch

Nifty 50: 17,063.25 | -28.95 (-0.17%)
FII Net Sold: INR 3,41716 crore

Sensex: 57,232.06 | -68.61 (-0.12%)
DII Net Bought: INR 3,024.37 crore

Industry News

Some good news on the IT front; what’s happening and what’s next?

• In Spite of a seasonally slow quarter, revenue growth momentum was strong, driven by a broad-based secular demand environment
• Other reasons include healthy deal intake and strong demand for digital, cloud, data analytics, 5G, IoT, cybersecurity and AI
• Tier-1 Companies (INFO, WIPRO, HCLT) saw flat margins on a YoY basis mostly because of supply side challenges (labour) with Tier-2 (PSYS, MPHL) outperforming

Some numbers please! (For sure my maan)

• While Tier-1  growth settled at 3%-6.7% QoQ USD (revenue), Tier-II companies reported 4.3%-9.2% growth; momentum is expected to continue
• On a YoY basis, Tier-I companies posted 13.8%-27.5% growth and Tier-II companies recorded 20%- 37.7% growth

Let’s dive into some details!

• INFO is poised to end FY22 to 19.5-20% CC from earlier 16.5-17.5%, while HCLT has retained its double-digit growth guidance for FY22
• Wipro is expected to report double-digit organic revenue growth in FY22 while FSOL has lowered its FY22 organic revenue growth guidance to 10-10.5% from 13.9-14.8%
• Most Tier-1 companies except HCLT reported a decline in margins, which floated through with a sharp rebound in the Products business

In conclusion?

• The robust demand environment is expected to continue for the calendar year with stable margins that should negate wage inflation and return of travel and other discretionary costs
• Not all things are good though with high attrition and shortage of skilled resources being key challenges

Around the World 🌎

Russia vs Ukraine seems to be the talk of the town now with implications manifold; what happened and what’s next?

• The S&P seems to have taken a major tumble down 1% (lowest in 4 months) at 4304 points (down > 10% from Jan. 3 high) and marking the first correction since the onset of the pandemic in Feb’20 post Russia’s deployment of soldiers into Ukraine’s Donbas region. More sessions like this are likely to play out as governments tweak sanctions and the selling seems to be far from over
• The biggest impact will most definitely be on oil prices – futures for Brent crude rose 1.5% ($1.45 a barrel) at $96.84 even climbing to their highest since 2014 of $99.5. Germany halting the Nord Stream 2 pipeline increased natural gas prices by 10% to $91.65. The US has also rolled out sanctions that target two Russian financial institutions, Russia’s sovereign debt and elite individuals
• Russia being the world’s fourth-biggest producer of wheat will also affect agriculture. Wheat futures rose 6% while corn prices gained 2.8%. At a time when inflation is already plaguing economies, countries like Turkey, Egypt and Lebanon which heavily rely on Russia and Ukraine for wheat may start looking elsewhere. Meanwhile, the benchmark U.S. Treasury yield edged to 1.947% while gold prices increased 0.1%

Food Tech News

Food tech evolved during the pandemic; here’s everything you need to know!

• The food requirements of many manufacturing plants (like Reliance’s Jamnagar Plant) needed to be completed even during the peak pandemic
• With lockdowns and supply chain disruptions, cafeterias were no longer an option – in stepped Food Tech firms like Daalchini Technologies with automated vending machines or Feastly with packaged food
• The business was down 75% for a few months for Hungerbox, with major layoffs with no revenue for ~six months
• For many, the corporate orders fell to nil while consumer preferences placed another hurdle (many thought the virus could spread through meat like chicken)

Was there a turnaround? (Yesss)

• While Daalchini Tech served Reliance, companies like Hungerbox managed to retain 95% of their clients and even added 50 new institutions reaching 60% of pre-covid revenue
• Through Safe Cafeteria Suite they digitised the cafeteria with contactless services that avoided congestion by monitoring visitor inflow and app notifications
• Daalchini also expanded to Hindalco’s 1056 acre Haryana plant, thus officially marking the shift from IT companies to manufacturing units

What’s next?

• These food tech companies are not willing to let their success die down like the wave – they fully intend on exploiting the hybrid working model
• Sodexo is looking to provide food to employees even working from home after top companies have invested heavily in employee’s health and well-being
• With end to end digitisation, institutional catering, kitchen functionality and employee well-being being the key USPS food tech are here to stay

What else caught our eye?👀

Indian Stocks may also bear the Russia vs Ukraine heat

• Shares with exposure to the European Union have come under pressure as the escalating tensions will most likely have an impact on business
• Tata Motors, Tata Steel, Dr. Reddy’s Laboratories among others declined 2-4% as they have significant topline exposed
• Auto Ancillaries will be hit the hardest as 30-60% of revenue for companies like Motherson Sumi, Endurance Technologies etc. comes from the EU

Centre to help the PSBs back on their feet

• The Centre might be looking to invest Rs. 15000 Cr into Public Sector Banks (PSBs) by end of March to help them meet the tighter capital reserve necessities
• Capital will most likely be provided to privatization candidate Indian Overseas Bank as well as Central Bank of India
• The original budget of Rs. 20000 Cr was reduced after PSBs recovered from dangerous debt due to higher recognition and provisioning along with increasing profitability

Like our news coverages?😍 Become a part of our fam, subscribe to our newsletter. Subscribe here

Educational Topic of the day

Call Protection:

Call protection refers to protection from investment risk to bond investors that exists by limiting the conditions under which a bond issuer may elect to call, i.e., redeem bonds before a bond’s stated maturity date.

Call protection are of two types: Hard Call Protection and Soft Call Protection

Hard call protection limits the time frame during which a bond may be redeemed early by the issuer.

Soft call protection requires the bond issuer to pay a premium when redeeming a bond before maturity.