Prajna Capital - An Investment Guide

THE mark-to-market accounting rules are being brought a little closer to economic reality — accompanied by misplaced howls of outrage. True, the ostensibly independent Financial Accounting Standards Board agreed to alter a portion of the rules only under extreme pressure. Still, the standards have forced many financial institutions to overstate losses on trillions of dollars worth of assets, intensifying the global financial crisis. Defenders of the rules say they protect bank investors and changing them will allow institutions to hide future losses. To the contrary, they have helped drive down the value of bank stocks, made shorting the shares much easier and caused bank stockholders to lost hundreds of billions of dollars in such companies as Citigroup Inc. and Bank of America Corp. William M. Isaac, a former chairman of the Federal Deposit Insurance Corp., told a House Financial Services subcommittee “MTM accounting has destroyed well over $500 billion of capital in our financial...

IT Firms will see their EBITDA margins plunge below 20% over the next 3 years TOP Indian tech firms such as TCS, Wipro and HCL will see their EBITDA margins, a measure of operating profit, plunge below 20% over the next three years, as these companies move more information technology projects to India, and align their operations with rising wages apart from the currency fluctuations. Leading outsourcing customers such as General Electric, Royal Bank of Scotland and Bank of America plan to increase their offshore outsourcing in order to lower their cost of managing IT in the US and UK, where billing rates are more than twice of what can be achieved by sending work to offshore locations such as India. It’s going to be growth vs margin dilemma for us — till now, we have protected our margins and fared better than the likes of IBM and EDS. However, in the long run, I would say that even 15% of EBITDA will stand much better than our rivals who hardly achieve 10%. EBITDA (short f...