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Mahindra Satyam winning new deals, but hurdles remain

Mahindra Satyam winning new deals, but hurdles remain
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First Published: Mon, Aug 03 2009. 05 17 PM IST
Updated: Mon, Aug 03 2009. 05 17 PM IST
Bangalore: Indian IT services firm Mahindra Satyam is winning new outsourcing deals, but business is yet to see a total turnaround as some cautious clients wait for stability to return to the company before loosening their purse strings, an official said.
While there have not been any major client losses since April, some customers continue to keep Mahindra Satyam on their “watch list” to track its performance for about six months, said Atul Kunwar, head of operations in Europe, Asia Pacific, the West Asia, Africa and India.
Mahindra Satyam was earlier known as Satyam Computer Services. Satyam was acquired by Tech Mahindra in an auction in April after the firm was hit by India’s biggest corporate fraud that was revealed in January.
“Definitely, there is a sense of optimism that has started to come back but it isn’t something that’s windfall kind of a situation right now,” Kunwar told Reuters in a phone interview from his Mumbai office on Monday.
“I won’t say that we have crossed the hump,” he said. “The momentum is starting to build (but) it is not that it has reached critical mass kind of a thing.”
Shares in Mahindra Satyam, which counts General Electric Co, Citigroup and Cisco Systems Inc among its clients, fell 1.2% to Rs103.35 in the main Mumbai market that rose 1.6%.
While the stock is down 39% in 2009, it has more than doubled since 13 April when Tech Mahindra -- majority owned by Mahindra & Mahindra -- won a competitive bidding to acquire fraud-hit Satyam.
However, brokerage CLSA said in a report on 23 July that the assumption about customer losses being over was “overly simplistic” and that stabilising operations amid a challenging global economic environment was tougher than thought earlier.
“In fact, until clarity emerges on Satyam’s financials, we would refrain from valuing Satyam as a going concern itself since client losses can linger on for several quarters,” it said.
Mahindra Satyam is in the process of restating its accounts.
New Outsourcing Wins
Kunwar said Mahindra Satyam was seeing good business momentum in the geographies excluding the United States, with the company “actively participating” in some deals in Europe that could bring in revenues of about $50 million over four to five years.
“Europe is actually, from the point of view of looking at all these terrains, moving faster towards getting the momentum.”
The company has also won new deals in Africa in the last couple of weeks, Kunwar said, but declined to give details as the information was not public yet. In India, the company is bidding for a “large number” of government deals.
Non-US regions bring in about 50% of Mahindra Satyam’s revenue and the firm expects a sharp surge in India, Africa and the West Asia businesses in about two years, Kunwar later told Reuters TV in an interview, but did not give details.
In June, Satyam had announced a “virtual pool” programme under which about 8,500 employees, who had not been working on any outsourcing project for three months, were sent home for up to six months on a reduced salary structure to cut costs.
About 1,200 employees from the programme have already been asked to return following new outsourcing wins, Kunwar said.
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First Published: Mon, Aug 03 2009. 05 17 PM IST
More Topics: Satyam | Mahindra Satyam | Growth | Profit | IT |