Bangalore: The technical computing arm of the Tata group, Tata Elxsi Ltd, suffered a setback after two of its largest clients cut down on project deployment, impacting the city-based software vendor’s earnings in the quarter to June.
Tata Elxsi reported a 41% decline in net profit for the quarter at Rs7.11 crore, compared with Rs12.10 crore a year ago. Revenues grew 5% to Rs97.37 crore from a year ago.
Compared with the March quarter, revenues declined 14% and net profit fell 60%. The two unnamed clients contributed to one-fourth of Tata Elxsi’s revenues, it said.
After the results were announced, the firm’s shares fell 6.72% to Rs176.95 on the Bombay Stock Exchange Tuesday, on a day when its benchmark Sensex rose 1.84% and the BSE IT index gained 1.89%.
Managing director Madhukar Dev estimated the revenue loss from the top two clients at Rs10 crore for the June quarter over the March one.
“We are waiting for that hold to be restored, which may happen anytime,” he said on the sidelines of the company’s annual general meeting.
Tata Elxsi, which offers services such as embedded product design, industrial design and systems integration services, besides providing computing graphics, animation and special effects service, added 28 customers in the quarter, including eight from Japan.
“We are reasonably optimistic about the outlook in the medium term and are aggressively planning to meet the growth objectives,” Dev said, adding that the firm was expanding its sales force overseas in markets such as the US.
Indian technology services vendors are facing uncertain times as their customers in the key market of the US, hit by a credit crisis, have cut down, or delayed, their spending. “Mid-sized companies are more vulnerable than larger companies to a slowdown,” said Apurva Shah, analyst at brokerage firm Prabhudas Liladhar Pvt. Ltd.
Tata Elxsi’s chairman Syamal Gupta said the company’s business was largely unaffected due to the current economic conditions as the firm operated in hi-tech businesses. “We are very positive about the prospects,” he said, adding that it planned to hire more people during the year, without disclosing actual numbers.
The company hired around 600 employees in the year to March, increasing the headcount to 3,500 after it expanded its facilities in Bangalore and Thiruvananthapuram, besides opening new development centres in Hyderabad and Coimbatore.
Gupta also said there was no proposal at this time to merge Tata Elxsi with larger group company Tata Consultancy Services Ltd. The Tata group owns a 43.64% stake in Tata Elxsi through holding companies Tata Sons Ltd and Tata Investment Corp. Ltd.