MASTEK: Gain in the Long Term

Mastek is one of the major software services companies in India providing a
range of software services such as software maintenance, systems integration,
application development, and product implementation, including customer
relationship management implementation. Mastek’s performance in the last two
quarters of the full year ended June 2001 was dismal even though the company
performed relatively better in the fourth quarter. Mastek’s global revenues
stood at Rs 259 crore in June 2001 compared to Rs 252 crore last year.

Mastek has six subsidiaries and 18 offices with operations across the globe.
These are in the US, the UK, Germany and Asia, with focus on the South-East
Asian market. The US subsidiary, which contributed a major part to the overall
revenues, saw a fall in earnings in the year ended June 2001 due to the slowdown
in the CRM segment. The subsidiary primarily focused on the CRM market in the
US. US revenues stood at Rs 116 crore, those from Europe Rs 128 crore. Revenues
from APAC, excluding India, stood at Rs 11 crore, while domestic sales were Rs 6
crore.

The company plans to focus on its offs hore capabilities and is taking
steps to focus on long-term outsourcing relationships.

Apart from strengthening its marketing set-up by opening offices in the US,
Japan and other emerging markets, Mastek plans to enter into alliances and joint
ventures to utilize its offshore facility. The company has formed a JV with
$3-billion Deloitte Consulting wherein Mastek will hold 50.1% stake. The JV will
provide offshore services to customers of Deloiitte Consulting and the JV aims
to grow into a 500-person company in the next three years Mastek’s performance
has taken a beating in the past 18 months due to a number of reasons. First, it
lost a major client and then was affected by the slowdown. This has forced
Mastek to rework its strategy and focus on long-term outsourcing projects.
Mastek’s group revenues stood at Rs 259 crore in June 2001, against Rs 252
crore. Net profit declined by 74% to Rs 8 crore in the same period. The US
subsidiary saw a 42% drop in revenues in June 2001, and the one-time write-off
of its Rs 5.6-crore investment in Varstreet.

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