OPEN APP
Home / Market / Mark-to-market /  Growth slows at Mahindra Satyam

Satyam Computer Services Ltd (Mahindra Satyam) reported a mere 1% sequential growth in revenue for the quarter ended 31 March to $359 million. Coming on the back of the 0.1% growth in the December quarter, it’s evident growth rates have slowed down. In the December quarter, growth rates were affected owing to furloughs among some of the company’s manufacturing clients. In the March quarter, the manufacturing business bounced back and reported strong growth of about 10%. The company gets about 35% of its total business from this segment, so fluctuations here can impact its entire performance.

Last quarter, growth was pulled down by other segments such as banking, financial services and insurance (20% of revenue) and retail, transport and logistics (12%), both of which reported a drop.

Margins fell sharply as well, leading to a 6.5% sequential drop in earnings before interest, tax, depreciation and amortization, a key measure of profitability. It was largely due to one-off factors in December and March quarters. On a normalized basis, profitability seems to be under control.

Due to the company’s weak finish to the year, it will need to grow revenue at a compounded quarterly average of nearly 4% to reach the lower end of the industry’s targeted growth rate of 12-14% for fiscal year 2013-14. Even in the just-concluded year, its revenue growth rate of 8% has fallen short of industry growth rates of around 10%. What’s more, the company’s headcount dropped marginally on a quarter-on-quarter basis and has risen by only an annual 5%, holding out little hope for investors of a bounce-back any time soon.

Despite all this, its shares have outperformed peers by a large margin in the past year. This is thanks to its merger announcement with Tech Mahindra Ltd, which has been doing fairly well. Since the merger ratio has been announced, the company’s shares will continue to track those of its parent firm, unless the merger is called off.

Subscribe to Mint Newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Never miss a story! Stay connected and informed with Mint. Download our App Now!!

Close
×
Edit Profile
Get alerts on WhatsApp
My ReadsRedeem a Gift CardLogout