After almost six months of acute uncertainty over the financial health of Satyam Computer Service, the company?s figures for the quarter ending December 31, 2008, and for January and February released on Tuesday by new owner Tech Mahindra has brought back some confidence into the functioning of the fraud-hit company.
Despite the fact that numbers released by Tech Mahindra are based on a lot of estimates like doubtful debtors, forex losses and are not audited, the company?s revenue numbers, especially its operating margin, was above market expectations. ?The financials put Satyam?s revenue run rate at around $1.6 billion for the full year, which is fairly good. Also, considering the crisis the company went through, an order book of $380 million is very positive,? said an IT analyst with IIFL.
Market analysts also see Satyam?s bank balance, which was Rs 373 crore at the end of March 31, 2009, against outstanding loan of Rs 469 crore, as a confidence booster. Shares of Satyam hit the upper limit, surging 10% on the Bombay Stock Exchange to close at Rs 66.85.
Assuming that Satyam continues to generate revenues as per the January and February levels, the Tech Mahindra and Satyam combine will be ranked as the fourth largest Indian software company. ?Tech Mahindra needed Satyam?s scale and size to be among the top tier Indian IT companies, the good financials of the company are an icing on the cake,? said Diptarup Chakraborti, principal research analyst, Gartner Research.
For the quarter ending March 31, 2009, Wipro, the third largest Indian IT firm reported revenues of Rs 4,932 crore. HCL Technologies, which is the fifth largest software company, had revenues of Rs 2,861 crore during the quarter. On the other hand, Tech Mahindra reported revenues of 1,051 crore during the quarter. Considering that Satyam?s revenues for March remains the same as February, the total revenue of the Satyam and Tech Mahindra combine would be Rs 2,982 crore for the quarter.
Despite the better-than-expected performance of the company, analysts are not ruling out further drop in revenues and operating margins. ?There is still no information about the company?s present client base. Also, more client losses can?t be ruled out in the future,? said Harit Shah, IT analyst, Angel Broking. As per its statement, the company lost around $183 million worth of business as of March 26, 2009. The company won new contracts worth $380 million from 215 customers most of whom were existing customers.
Shah added that the rupee?s present appreciation against the dollar could further act as a spoilsport and hurt the company?s profitability.
Acoording to the reported numbers, the company?s net profit for the quarter ending December 2008 was Rs 181 crore on the back of a revenue of Rs 2,194 crore. Its operating margin was 15.87% for the quarter. It may be interesting to note that in his confession, Satyam?s disgraced founder B Ramalinga Raju had said that the company?s operating margin was around 3% for the quarter ending September 31, 2008. ?Looking at the present numbers, it seems like a hogwash,? said an IT analyst.
