Hyderabad: Software services provider Mahindra Satyam signalled it remains on the recovery track by beating analyst estimates with a 10-fold jump in second-quarter profit, powered by the addition of new clients and a depreciating rupee that helped boost exports.
Net profit surged to Rs 238.2 crore in the three months ended 30 September from Rs 23.3 crore a year earlier, the Hyderabad-based company said on Thursday. The profit was notched up on a 27% rise in revenue to Rs 1,578 crore. On a sequential basis, profit rose 5.7% and revenue increased 10% from the quarter ended 30 June.
Mahindra Satyam beat the profit estimate of RS 198 crore in an analyst survey by Thomson Reuters/IBES, with the banking, financial services and insurance segment accounting for 20% of the revenue in the quarter during which the company added 36 clients.
Satyam Computer Services Ltd was bought by Tech Mahindra Ltd at an April 2009 auction overseen by government-appointed directors and rebranded as Mahindra Satyam. A January 2009 confession by founder B. Ramalinga Raju that he had misstated the company’s accounts to the tune of Rs 7,136 crore over a period of several years plunged Satyam into a crisis, triggering an exodus of employees and a wave of client defections.
“This company had a near-death experience two-and-a-half years ago,” chairman Vineet Nayyar said, referring to the disclosure of the fraud that had threatened the existence of what was then India’s No. 4 software services exporter.
“By the results which we are giving today, I think it would be safe to assume that the period of convalescence is now almost over and we are back to health,” said Nayyar, who has previously set a June 2012 deadline for the company’s full recovery.
“We have maintained our path in terms of our stated goals. The quarter has been of steady growth in revenue. We look forward to the next phase of our journey with somewhat greater confidence.”
The depreciation of the rupee contributed to revenue growth in local currency terms. The rupee fell 6% against the dollar in the second quarter.
Stock markets were closed on Thursday for a public holiday. Stock in the the company, which has a market value of $1.7 billion, is up 10% this year, outperforming a nearly 17% fall in the sector index and 15% decline in the Mumbai market.
“They have done a good job of bouncing back from the turmoil,” said Hansa Iyengar, a senior analyst at research firm Ovum’s market intelligence research and advisory service. “The main challenge for them will be to continue to win new business and expand existing contracts, especially in the current economic scenario where spending has become even more cautious.”
Nayyar cautioned that the euro zone debt crisis could dent demand for outsourcing for the company. Europe is the largest market after the US for India’s $76 billion information technology industry.
“We are living in uncertain times. The current euro zone crisis has the potential to significantly impact the market conditions,” Nayyar told reporters. He said the troubles in Europe could hit the near-term outlook for outsourcing demand from overseas clients, but spending on technology services in the long term was expected to remain strong as global corporations look to cut costs.
Reuters and PTI contributed to this story.
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