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Satyam 2-yr numbers disappoint

Satyam 2-yr numbers disappoint
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First Published: Wed, Sep 29 2010. 11 15 PM IST

Mixed response: Mahindra Satyam chairman Vineet Nayyar (left) and chief executive C.P. Gurnani at the joint press conference in Hyderabad. AFP
Mixed response: Mahindra Satyam chairman Vineet Nayyar (left) and chief executive C.P. Gurnani at the joint press conference in Hyderabad. AFP
Updated: Wed, Sep 29 2010. 11 15 PM IST
Hyderabad: Satyam Computer Services Ltd declared its financial results for 2008-09 and 2009-10, and while its revenue and loss numbers were largely along Street estimates, analysts said they would have to wait for November when the company will declare its results for the first and second quarters of 2010-11, before taking a call on its prospects.
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C.P. Gurnani, chief executive of Satyam, now controlled by Tech Mahindra Ltd, said it would take the company at least two years to completely recover. And chairman Vineet Nayyar said Satyam would be merged with Tech Mahindra after November.
Wednesday’s announcement—it came around 20 months after the country’s largest accounting fraud came to light at Satyam in January 2009—had no surprises for analysts: a net loss of Rs8,176.8 crore on revenue of Rs8,812.6 crore for the fiscal ended 31 March 2009, and a net loss of Rs124.6 crore on revenue of Rs5,481 crore for the year ended 31 March 2010.
Mixed response: Mahindra Satyam chairman Vineet Nayyar (left) and chief executive C.P. Gurnani at the joint press conference in Hyderabad. AFP
The company reported an Ebitda (earnings before interest, taxes, depreciation and amortization, a measure of profitability) margin of 3.4% for FY09 before exceptional items and -81.4% after these items. For FY10, it reported an Ebitda margin of 8.3% before exceptional items and 1% after exceptional items.
Rajiv Mehta, associate vice-president for research, India Private Client, IIFL, said: “While the revenue hike for FY10 and operating margin at 8% is mostly in line, the result is slightly negative going by the comments of the management that they would take one-and-a-half to two years to match the industry growth rate.”
“This does not match with the expectations of (the) Street, which factored in a 15% growth in line with industry trend. Now they will have to lower their estimates accordingly,” he added.
Satyam shares edged up 0.10% on the Bombay Stock Exchange to Rs98.90; the Sensex fell 0.74% to 19,956.34 points.
“At Rs99, Satyam was fully valued,” Mehta said. “As people tone down, we might see a correction in stock price of 5-10% towards a fair value. As an analyst, I am not reinitiating coverage.”
Satyam’s announcement on Wednesday also quantified the fraud at the firm disclosed in January 2009 at Rs7,855 crore following a rigorous forensic audit by 100 investigators.
Admitting that the figures arrived at through forensic audit were more or less in tune with what Satyam’s founder and former chairman B. Ramalinga Raju had mentioned in his confession in January 2009, Nayyar, however, differed on certain claims by Raju on investments in the company.
Raju, in the confession letter, said he had borrowed some Rs1,230 crore by pledging promoters’ shares and invested this in the company to keep the operations going.
In November last year, the new management of Satyam received legal notices from 37 companies promoted by the Raju family claiming Rs1,230 crore loaned to Satyam.
“These claims are untenable and there are no evidences in that regard,” said Nayyar after the board meeting.
He said the merger process with Tech Mahindra would begin after Satyam announced its first and second quarter results for the current fiscal on 15 November and it would take some 9-12 months for the merger process to be completed.
However, Nayyar said it had not yet been decided whether Satyam should merge into Tech Mahindra or vice versa.
As for the numbers themselves, while analysts are satisfied with the revenue figures, they are apprehensive about profit margins that are around 8%.
As Satyam has not disclosed details about its attrition levels, billing or utilization rates, many analysts are unwilling to take a formal view on the stock yet. Re-rating of the stock is expected once more data is released on 15 November.
Graphic by Ahmed Raza Khan/Mint
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First Published: Wed, Sep 29 2010. 11 15 PM IST