Government’s push for a less-cash economy has brought several IT-related software, hardware companies back on investor’s radar.
ET Intelligence Group: The government’s push for a cashless economy, which could lead to a surge in digital transactions, has brought stocks of several IT-related software and hardware companies back into the limelight. Here are five companies that are back on investors’ radar. However, it may be too early to say whether if will see any meaningful gains from a less-cash economy.
It provides IT products and services and is also into products distribution. Its point-of-sale (PoS) system services typically include debit/credit card readers and, in some cases, monitor, receipt printer, customer display and a bar code scanner. It recently announced that as a strategy, it has shifted its focus to PoS products. This, along with a jump in sales and profits in the September quarter, has led to the company’s stock price more than doubling in the past one month.
QUICK HEAL TECHNOLOGIES
The Pune-based company provides internet security and antivirus products for computers, servers and mobile phones. With increasing number of transactions and sensitive data going online, the demand for Quick Heal’s products and services is expected to rise. The stock is up 18% in a month and is trading at 22 times FY17 earnings. The company has a robust business model with over 30% market share of the software security industry and has steady earnings and cash flows. Any correction can be a good opportunity for investors.
RS Software was awarded the contract to build and manage the digital payment platform for the Unified Payment Interface, or UPI, (similar to Paytm), by the National Payments Corporation of India. The UPI platform facilitates transfer of money from one bank to another using mobile phones. The company’s stock has gained 42% in a month as investors expect RS Software to benefit from the recent developments. However, one should note that the exact monetary gains from this contract is unknown. The business contributed around 10% to the company’s sales in the first half of the year. The company made heavy losses during this period.
Tata Communications services 14,000 points of sale already, and the number is expected to rise in the coming years. PoS and ATM management account for about 3% of its revenues at the moment, and may not provide any trigger for the stock price to go up. But with a pickup in digitisation and a surge in data, the demand for its services may go up. The company provides data, network and security management services, mainly overseas. But demand for its services can go up in India. It is trading at nine times its EV/EBIDTA.
The Hyderabad-based company provides barcodes, RFID, smart card and biometric technologies. It is also into financial inclusion as part of Jan Dhan Yojana, where it is helping two banks add accounts in the interior regions, which is currently not profitable. The company has been making losses for the last several quarters.