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SATYAM COMPUTER SERVICES: Rough Road Ahead

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DQI Bureau
New Update

Despite one of the toughest times facing the Indian IT

sector, Satyam Computer Services managed to meet its targets for the second

quarter ended September 2001. While revenues were up 57% to Rs. 426.63 crore,

net profit jumped 100% to Rs. 134.08 crore. Compared to the immediate previous

quarter, Satyam’s revenues were up 4% and net profit was up 10%. The company

achieved 52% of the revenues from software development, 32% from maintenance,

12% from packaged software implementation and 4% from engineering services.

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Fact

Sheet
  • Website: www.satyam.com
  • Address: Tel and Fax Mayfair Centre



    SP Road, Secunderabad 500003
  • Tel: +91-040-484 3222
  • Fax: +91-040-7840058
  • Area of specialization: Software

    development, maintenance, IT Consulting, package implementation, ERP

    & Engineering services
  • Revenues (March 2001) Rs 1219.99

    crore
  • Total Employees 8397
  • Offices: India, US, UK, UAE,

    Singapore, Japan
  • Listing (stock exchanges): Bombay

    Stock Exchange National Stock Exchange Hyderabad Stock Exchange
  • Current Market Price: Rs 145
  • 52 Week High/Low: Rs 430/ Rs 111
  • Face Value: Rs 2 per share
  • BSE Code: 500376
  • NSE Code: SATYAMCOMP

Satyam added 24 new clients during the quarter, which

included Novartis, Hitachi Data, Unocal, H&R Block, IEC-Thailand, Emirates

Bank International, Holden (GM) — Australia as well as Applera. While revenues

from existing clients increased from 81% to 85%, the overall growth in revenues

were aided by a 3.5% jump in volumes and 0.8% decline in billing rates.The

company’s operating margins dipped from 36% in the first quarter to 34.50% in

the second quarter.

Moreover, the onsite business grew from 41% to 45% with a

corresponding decline in the offshore business. The fall in the billing rates

(the company has indicated further fall given the current business environment)

is a cause for concern. Moreover, the company’s employees have declined from

8582 in the previous quarter to 8397 in the second quarter.

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On the positive side, it bagged a US$ 45 million order from

TRW for running its global data center in India. It expanded its relationship

with US based Healthaxis Inc and also partnered with Computer Sciences

Corporation as an offshore vendor.

Satyam’s NASDAQ listed, 52.54% subsidiary Satyam Infoway (Sify)

closed the quarter ended September 2001 at US$ 10.90 million. Going ahead,

Satyam is open to divesting its entire stake in Sify after buying out Sify’s

software services business.

Satyam’s share currently trades at Rs. 145 discounting the projected March

2002 EPS by 11 times and March 2003 EPS by 10 times. While Satyam has so far

managed to outperform its peers, the next two quarters would be very

challenging. We believe the negative news emanating from the US and the poor

expected performance would keep the share price under pressure.

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Financials

(All figures in Rs crore)

  2000 2001 2002* 2003*
Sales 672.8 1220.1 1653.0 1768.6
Other Income 6.2 21.7 61.0 65.0
Operating Profits 246.6 438.8 540.6 518.6
OPM (%) 36.7 36.5 32.1 29.3
Net Profit 134.9 316.2 430.9 473.6
Equity 56.2 56.2 62.9 62.9
EPS (Rs.) 4.8 11.2 13.7 15.1
*Projected

Year ended March 31

Sushanto Mitra is

the founder of Technology Capital Partners

The views reflected here are of the author and not of this

publication. No liability is accepted for losses based on the information

presented here

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