ST Eng’g unit debarment in India not a big deal: MayBank

India has never been a major contributor to its defence earnings but why is STE incessant in clearing its name?

STE’s defence-related subsidiary ST Kinetics was blacklisted by India’s Criminal Bureau of Investigation in connection with a corruption probe at India’s defence procurement agency. STE said there is no evidence implicating them.

However, with a reputation to protect, Maybank analyst Rohan Ruppiah says that STE’s insistence in clearing its name stems in the country’s potential as a major arms buyer.

“A clean reputation is useful in bidding for defence contracts globally,” he said.

Going forward, Maybank believes that negative press on its India defence issue will impact less to STE. “STE’s $12.3b orderbook supports earnings across the different divisions. It also has a healthy mix of commercial and military contracts. The company expects to achieve higher earnings for FY12, which is in line with our forecast of a modest 7% earnings growth,” said Mr Ruppiah.

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