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Mastek widens loss; salary hikes, project costs hurt

Mastek widens loss; salary hikes, project costs hurt
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First Published: Wed, Oct 19 2011. 07 54 PM IST

Fareed Kazani, Group chief financial officer, Mastek
Fareed Kazani, Group chief financial officer, Mastek
Updated: Wed, Oct 19 2011. 07 54 PM IST
Mumbai: Software services firm Mastek’s September-quarter widened its net loss mauled mainly by increased wages, a project transition cost of Rs 2.5 crore and forex exposures hurt by volatile markets, a top official told Reuters on Wednesday.
The IT firm reported a standalone net loss of Rs25.08 crore for July-September quarter, compared with the year-ago net loss of Rs14.77 crore.
Fareed Kazani, Group chief financial officer, Mastek
“We had given salary increases from July, which is this quarter, and the impact of salary (hike) is the major reason for the drop in the EBITDA,” chief financial officer Farid Kazani told Reuters over the phone.
Mastek raised wages by about 11% for the offshore employees and 3% for onshore employees, Kazani said.
It also incurred a transition cost of about Rs 2.5 crore for a new project in the UK, he said.
The post-tax earnings during the quarter included a mark-to-market loss of Rs 7.3 crore on forex exposures, it said in a statement.
UK revenues have increased, while US revenues increased in rupee terms but dropped marginally in dollar terms, Kazani said.
However, anlaysts said the company could have stayed away from a salary hike and effected better cost management.
“Given the challenges the company has, a better cost management would have been appreciated,” Abhishek Shindadkar, sector analyst with ICICIdirect said.
Mastek, which follows a July-June financial year, saw operating EBITDA for the quarter shrink by Rs 11.6 crore compared to the previous quarter, it said in a statement.
According to a Reuters’ poll, mid-cap IT firms are likely to witness a muted growth in net profit and a squeeze in margins in July-September due to wage hikes, lateral hiring and the crisis in Europe.
Shares of the firm, which the street values at $52.75 million, closed down 1.46% at Rs4.40 in the Bombay Stock Exchange.
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First Published: Wed, Oct 19 2011. 07 54 PM IST