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What is your investment theme?

The reporting season is in full swing and Value operations platform has updated so far almost 300 businesses results of the NSE market.

One of our themes of investments in India is in regards to its IT sector. It is very hard to believe any investors in India not having an exposure to IT sector. Almost half of the GDP contribution is through service sector and IT sector holds majority of its contribution to it.

India is one of the biggest exporters of IT services to the world and is the leader in that field. We think this industry has bright future prospects. As internet is changing the way we do business now, the demand for its related products will keep growing. There was a report that I was reading and it says that by 2017 there will be approximately 50 billion devices connected to the internet!

We think the businesses that can cater or are specialist in any of its IT related field will keep growing their business. There will be a great demand for their services in the market.

We found that Value operations platform has updated its results for 12 IT businesses who had reported their results. They are as follows:

CMC

Geometric

HCL Tech

Infosys

Infotech Enterprise

Mastek

Mind Tree

Persistent System

Polaris financial Technology

Tata Consultancy Services

Vakarangee Software

Zensar Technologies

We thought to filter this list and look for the businesses that has net cash on its balance Sheet, high Returns on Equity, Earnings growth of more than 15% and lastly businesses trading at discount to our intrinsic value calculations.

We don’t like businesses that are highly leveraged on its balance Sheet. So after the Net cash filter we found the following companies :

CMC

Geometric

HCL Technology

Infosys

Infotech Enterprise

Mastek

Mind Tree

Polaris Financial Technology

Tata Consultancy Services

Zensar Technologies

So we had now 10 potential companies to look into. My next filter is high returns on equity, we are looking for businesses with minimum of 20% returns on equity and after filter we found following businesses survived this test:

CMC

Geometric

HCL Technologies

Infosys

Mind tree

Tata Consultancy Services

Zensar Technologies

Our next filter was that at least there expected earnings to grow by 15%. Following are the companies that survived this filter:

CMC

Geometric

HCL Technologies

Mind Tree

Tata Consultancy Services

The list has come down from twelve to five now. My last filter was which businesses are trading at discount to its expected intrinsic values and they are:

Geometric

HCL Technologies (June 14)

Mind Tree

I keep doing this every week and spend quality time investigating all about them. Thought to share with you my following analysis and find out what you think about these 3 businesses.

Disclaimer: Value Operations private fund owns shares of Mind Tree and Geometric.