Indian companies placed at medium-to-low risk by Credit Suisse study
Source : MI
Sep 2, 1999, 8:58:55 AM
A section of blue-chip Indian companies have found kudos from unexpected quarters for their Y2K preparedness. A study, done by Credit Suisse First Boston (Europe) Ltd covering 21 Indian companies among 250 worldwide, has ranked them having a 'medium-to-low' risk in terms of their Y2K compliance.
On the basis of the study, the agency has recommended investors to either 'buy or hold' the stock of most of these companies in contrast to 'sell or hold' recommendation for companies located in several South-East Asian countries.
Surprisingly, among the Indian companies the agency has recommended holding on to includes the name of Reliance Industries, besides Ashok Leyland, Cummins India, IPCL, Nalco and Telco.
Among the companies whose stock Credit Suisse has recommended buying are BPCL, EIH, Castrol, BSES, GAIL, HDFC, ICICI, Madras Cements, SBI, Tata Steel and TVS Suzuki.
In terms of Y2K expenditure, GAIL has spent a whopping Rs 700 crore, followed by BoB with Rs 210 crore. The picture of expenditure among Indian corporates is one that varies from such highs to unimaginable lows such as in the case of Telco, which is stated to have spent only Rs 5 lakh. Overall, the Y2K-related expenditure among Indian companies was found to be on the lower side vis a vis other countries which could be due to lower level of IT penetration in mission-critical operations in India.
On a scale of 1 to 5 with 5 indicating the lowest risk, India's business environment risk has been put at 3 which is better than Russia, China, Indonesia, Malaysia and Thailand, but poorer than Mexico, Brazil, Hong Kong, Singapore and Korea.
Most banks are expecting higher cash withdrawals and major industrial companies expect a stock-up of inventory. Against a background of rising corporate spreads in the developed markets, this drain on liquidity could spark another credit scare in the emerging markets, according to the study.
The agency has identified East European and South-East Asian countries as the markets at maximum risk from critical systems' failure out of a total 18 markets surveyed. The transportation sector and utilities appear to be the least prepared global emerging market sectors, the report has revealed.
The companies were surveyed in July and August. "The threat is likely to dampen investor enthusiasm for several emerging markets. These problems are difficult to quantify and several companies are certifying themselves as compliant. However, economy/system-wide risks, emanating from mission-critical government and market systems remain," said the study. (FE) Credit Suisse, Economy, Y2K
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