Hyderabad: Higher billing rates, growth in its European business and some long-term contracts helped Satyam Computer Services Ltd, India’s fourth largest software services company beat market forecasts to post a 28% year-on-year growth in net profit to Rs409 crore for the quarter ended September.
Revenues in the same period grew by 26.8% to Rs2,032 crore.
Chairman R. Raju said Satyam has managed to counter the effect of the appreciating rupee
On a sequential basis, the net profit for the quarter rose 8.13% and revenues by 11%.
Satyam’s results continue the trend of Indian software services companies shrugging off the effect of an appreciating rupee and exceeding or meeting analyst forecasts for their revenues and earnings in the three months to September.
Wipro Ltd and Tata Consultancy Services Ltd had earlier exceeded expectations while Infosys Technologies had met them.
Higher billing rates and growth in Europe helped the company counter the effects of the appreciating rupee and wage hikes, said B. Ramalinga Raju, chairman, Satyam. On the back of its strong performance, Satyam raised its guidance for 2007-08.
The company now expects a revenue of around $2.08 billion (Rs8,258 crore) in 2007-08, a growth of 41.5% over last fiscal. Its earlier projection was $1.96-1.98 billion, a growth of 34-35.5%.
“Satyam is seeing traction in last few quarters. Therefore, headroom for growth looks strong,” said an analyst who tracks technology firms at a Mumbai-based brokerage. The analyst did not want to be identified.
Ram Mynampati, Satyam president, said the company added 37 new customers in the quarter, including eight companies that are part of the Fortune 500 list.
Satyam has signed a sub-contract agreement with Fujitsu Services to provide IT services to Reuters. Fujitsu has a 10-year, $1 billion deal with the news service. Satyam declined to divulge details on its financial arrangement with Fujitsu. However, despite the growth, Satyam’s operating profit declined to 19.82% during the quarter from 22.42% in first quarter of this fiscal.
Harit Shah, an information technology and telecom analyst with Angel Broking, said while Satyam has managed to offset the impact of wage hikes and rupee appreciation during the quarter by better utilization of resources, improved billing rates and other income of more than Rs110 crore from forex hedging, “going forward the company could see pressure on margins on account of a higher wage bill.”
Satyam hopes to offset this through higher rates. It revised its guidance for an increase in billing rates to 4% year-on-year compared with the 2-3% it had earlier indicated.
Shares of Satyam rose 2.97% to close at Rs 461.75 each, even as the Bombay Stock Exchange benchmark 30-stock index rose 4.99% to 18,492.8.
Satyam announced that it had entered into an agreement to acquire, for $5.5 million in cash, a 100% stake in the UK-based Nitor Global Solutions Ltd, which provides infrastructure management services. Nitor posted revenues of $3 million for the year ended September. Raju said the Nitor buy would enable Satyam to achieve rapid growth in the IMS business. “We are pursuing many acquisition opportunities. We are looking at highly synergistic acquisitions either to reach out to new markets, enhance our vertical or technology presence.
“There is no limitation on the size of acquisition as well,” he added. Satyam has a war chest of Rs6,473 crore in reserves and surplus.
Satyam, which had a 75.5% stake in its business process outsourcing subsidiary Nipuna Services Ltd, announced that it had already bought out the 20% held by Olympus Capital Holdings Asia of Singapore and that it was in the process of acquiring the 4.5% held by Intel Capital of Singapore. The company said Nipuna would be renamed Satyam BPO Ltd.
Srinivas Vadlamani, CFO of Satyam, said the enterprise value of Nipuna was estimated at $184 million and that the company would spend around $46.5 million to buy the 24.5% holding of Olympus and Intel.