Mumbai: Tech Mahindra Ltd (TechM), the new owner of the fraud-hit Satyam Computer Services Ltd, on Tuesday reported a 44% fall in quarterly profit, caused in equal parts by the cost of debt taken for buying the software firm and declining revenues from its largest client BT Group Plc.
The firm’s profit for the three months ended September, its second quarter, declined to Rs169 crore from Rs302 crore in the same year-earlier period, slightly better than market expectations. Revenue fell 2% to Rs1,142 crore.
A Mint poll of five brokerages had estimated a profit of Rs152 crore on revenue of Rs1,126 crore.
TechM had a debt of Rs2,179 crore as of 30 September. During the September quarter, it refinanced Rs1,150 crore of debt, reducing the effective interest rate on its debt portfolio to 8.7% a year from 11% earlier.
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In April, TechM acquired Satyam, which was at the centre of India’s largest corporate accounting fraud, through a government-mediated auction. It outbid engineering firm Larsen and Toubro Ltd and private equity firm WL Ross and Co. to acquire a 51% stake in Satyam for about Rs2,889 crore.
Regarding the acquisition, Sanjay Kalra, TechM’s chief executive, said the firm is already making use of cross-selling opportunities provided by Mahindra Satyam, as it now known. “We have 500 of Satyam’s staff working with us and we go to market together to make the best use of our selling efforts,” he said.
BT Group, previously known as British Telecom, contributed nearly 60% of TechM’s overall revenue in the second quarter of 2008-09. In the latest quarter, BT contributed only 50% of the firm’s revenue.
Kalra said TechM has now got commitments from BT for more business. “We have gotten volume commitments from BT for the next four years,” Kalra said.
“The numbers are in line with our expectations. The management commentary seem to suggest that uncertainty in business environment, especially with BT has reduced,” said Yogesh Pareek, an analyst with Alchemy Share and Stock Brokers Pvt. Ltd.
While TechM’s quarterly performance declined on a year-on-year basis, its profit improved 21% over the preceding three months that ended June, mainly on better business growth in the West Asian and Indian markets. Revenue grew 2.6%.
The firm’s employee utilization rates too jumped from 71% in the previous quarter to 75%.
TechM shares ended Tuesday nearly flat, rising 0.37% to Rs941.40 on the Bombay Stock Exchange. The results were announced after trading hours.
Graphics by Ahmed Raza Khan / Mint