[Reader-list] On the business of E-Governance.

[Taha Mehmood]

Dear All

Below is an excerpt of a report filed by NDTV on the impact which the
expected budgetary allocation, if realized, will have on the industry
with respect to software technology parks and e-governance projects.

Regards

Taha

http://profit.ndtv.com/2009/07/01182951/IT-sector-seeks-STPI-extension.html

IT sector seeks STPI extension, higher spending on e-governance projects
Anand Rathi Securities
Wednesday, July 01, 2009 (New Delhi)

The Software Technology Parks of India (STPI) clause may be extended;
this would be positive for Indian IT. This would also provide relief
to tier-II players, who are cash-strapped and not prepared for SEZs.

Expectations – STPI extension

EoU benefits may be extended. Tax relief for export-oriented units is
likely to be taken up in the budget to extend the sunset clause from
March 31, 2010 to  March 31, 2013.

Impact on sector

No sharp rise in tax rates in FY11, if implemented. The full tax rate
on offshore profits would be deferred by three years – from FY10 to
FY13. If the proposal is implemented, tax rates would be at 16 per
cent in FY10, then at 16 per cent in FY11 (down from the earlier
estimated 18-20 per cent). Clearly, there would not be much of an
increase in tax rates in the next three years starting Mar ’10. This
would give companies another three full years to increase exposure to
SEZs.

This would be positive for Indian IT companies. While this would be
beneficial for the sector, companies that are relatively less prepared
(SEZ strategy) and that have higher revenue growth would benefit more.
Tier-II players not yet prepared for SEZs would benefit. The EPS CAGR
would increase and hence would be taken positively. Tier-II players
would probably benefit more, but most of them are struggling
operationally in a difficult macroeconomic environment.

Companies impacted

Positive impact on IT Services – Infosys, TCS, Wipro, HCL Tech, Tech
Mahindra, Mphasis and other outsourcing companies.

Expectation - Introduction of MNIC (Multi-purpose National Identity Cards)

The government is committed to having a central data base and has
planned to implement the Multi-purpose National Identity project,
currently in pilot mode in 12 districts. The project is expected to be
completed in three years, with more than 1bn cards to be supplied. We
expect the tender to be divided among three or four players, with each
having to supply at 60 million – 80 million cards p.a. Average
realizations here would be much higher than SIM cards. The realization
for 2G SIM cards is at Rs 30 each whereas MNICs can cost anywhere
between Rs 50-75 each. Hence, we expect a positive impact on
Bartronics.

Expectation – Increased spending in education

The Sarva Shikshan Abhiyan (SSA) allocation is expected to be
increased from Rs 13.1 billion to Rs 15 billion, a 14.5 per cent y-o-y
rise (last year, 23 per cent increase). This would be in line with the
pending “The Right to Education Bill, 2008”. This seeks to provide
every child of six to fourteen years with the right to free and
compulsory education in a neighbourhood school until completion of
elementary education. We feel this would open the road to more
public-private partnership in education.

Companies impacted

Positive impact on Educomp, Everonn, NIIT, Aptech and Core Projects.

Expectation – Use of IT/ITES for e-governance

We expect the budget to throw up a roadmap to convert physical land
records to electronic form over a period of time. The Right to
Information (RTI) Act, 2005, makes it mandatory for all government
departments to digitize physical documents so that information
required by citizens could be provided to them within the stipulated
time.

Using ITES for scanning, digitalization, retrieval of documents would
prove to be beneficial to companies in the government vertical and
provide document-management services. Companies in the geo-spatial
arena present across verticals and providing services like imaging,
photogrammetry, map-making and finishing services to government would
also benefit.

Companies impacted

Positive impact on companies providing geo-spatial services (Rolta,
Infotech Enterprises) and document-management services (Vakrangee
Software). For Infotech Enterprises, geo-spatial services provided
34.8 per cent of its FY09 revenues. Rolta obtained 44.3 per cent of
its TTM revenue from geospatial services.

(The report has been prepared by Tarun Sisodia, Naushil Shah and Atul Thakkar.)