Hyderabad: Software services provider Mahindra Satyam’s net profit rose 73.2% in the three months ended 31 March on a sequential basis as the company won more business from retail and manufacturing clients.
Chairman Vineet Nayyar said the company’s turnaround had been completed within the three-year deadline he had set after Tech Mahindra’s purchase of Satyam Computer Services Ltd.
The company earned a net profit of Rs 534.21 crore in the fiscal fourth quarter, up from Rs 308 crore in the three months ended 31 December, it said on Thursday. The profit was boosted by the writeback of Rs 109.4 crore in provisions made previously. The writeback more than offset a Rs 58 crore forex loss. In the year-ago March quarter, it had made a loss of Rs 326.98 crore.
“By any standard, by any measure, given the turmoil that the global economy is seeing I think these are good results… The three-year transformation has been completed, and completed successfully,” said Nayyar, who last year compared the company to a patient recovering from a near-death experience.
It’s the first financial result posted since the company announced in March that Tech Mahindra was merging Satyam Computer with itself, buying the remaining stake in the Hyderabad-based company in an all-stock transaction worth Rs 5,150 crore. The Mahindra Group company had bought a 43% stake in Satyam at an April 2009 auction, and rebranded it Mahindra Satyam. The auction, overseen by government-appointed directors, was ordered when the company plunged into a crisis with a flight of clients and an exodus of employees after its founder-chairman B. Ramalinga Raju’s January 2009 confession that he had misstated accounts to the tune of Rs 7,136 crore over several years. It’s India’s worst case of financial fraud.
While declaring the company’s turnaround to be complete, Nayyar sounded a cautionary note, citing the uncertain global market conditions that have forced companies in the US and Europe to pare technology budgets. “Economic prognosis at this point of time is uncertain,” Nayyar said. “Nationalism is overtaking prudent economic management and this could have very serious impact not only in these economies but globally... It is in this context and in this situation that one must view the results of Mahindra Satyam and its impact going forward.”
Chief executive C.P. Gurnani said the software and services industry lobby Nasscom’s forecast of 11-14% growth for the industry as a whole this fiscal year could be achieved.
Mahindra Satyam’s revenue rose by 21.1% on a year-on-year basis to Rs 1,665.84 crore in the three months ended 31 March.
For the full year to 31 March, net profit was Rs 1,306.06 crore against a loss of Rs 147.23 crore in the previous year. Full-year revenue was up 24.3% at Rs 6,395.56 crore.
“The performance meets predictions,” said Hansa Krishnamurthy Iyengar, a senior analyst at research firm Ovum’s market intelligence research and advisory service. “PAT (profit after tax) is slightly higher than anticipated.”
“Overall view shows that they have been winning a variety of business and their infrastructure management services seem to be doing better than applications, which was how the revenues slanted previously,” Iyengar said.
The company has 235 active customers. Manufacturing makes up the bulk of its revenue (32%), followed by banking, financial services and insurance, and technology, media and entertainment.
Mahindra Satyam, which had 33,353 employees on its rolls at the end of March, is speeding up the process of integration between the operations of Tech Mahindra and Satyam Computer. “As I speak, we are aligning our processes and are ensuring a seamless integration between the two companies,” Nayyar said. He identified “huge synergies” between the two companies and set a new three-year timeframe to excel in some business segments just the way Tech Mahindra has done in the telecom sector.
“In terms of strategy, it is fairly simple,” said Nayyar. “We will, in our chosen verticals, be in the top three technology companies. We will be Tier-I. We don’t want to mirror what other traditional Indian companies have done in terms of doing a bit in every vertical. We will select verticals of our choice as we go along, as opportunities evolve, and we will be the leaders in that.”
Satyam’s stock fell 3.61% to Rs 66.80 a share on BSE on a day the benchmark Sensex rose 0.25% to close at 16,070.48 points. The results were announced after market hours on Thursday.