Satyam Warns Of Further Drop In Billing Rates

Hyderabad: | Updated: Jun 27 2003, 05:30am hrs
IT major Satyam Computer Services Ltd warns of a continuing soft pricing pattern and a possibility of a further drop in billing rates during the current fiscal owing to various factors, including rupee appreciation vis-avis the US dollar, in its latest annual report.

The economic downturn, intense competition among the big companies, appreciation of the rupee against the US dollar, pressure from cyclical downturn and the proposed sharp reduction in the H1 B visas by US authorities are some of the major issues bound to affect the financial performance of the company, Satyam said in the report.

Brand Value, EVA Decline
Satyam Computer has suffered a setback as both its brand value and economic value added (EVA) have fallen sharply for the first time during the last fiscal in the last six years due to factors including fall in net operating income and lower net profit. The brand value during 2002-03 has been pegged at Rs 2,704.87 crore as against Rs 3,199.65 crore during 2001-02 fiscal, a fall of close to 15 per cent. The brand value had grown from a level of Rs 139.86 crore in 1997-98 to Rs 3,19.65 crore in 2001-02.
Likewise, the EVA also came down sharply. The EVA during the fiscal 2002-03 was lower at Rs 93.76 crore as against Rs 170.11 crore during fiscal 2001-02, a decline of 45 per cent. The EVA during the previous five years had seen a continuous growth from Rs 4.08 crore during FY 1996 to Rs 170.11 crore during FY 2002.
The company also faces slower than expected recovery in the global economy, especially in the US and Europe, and enhanced concerns on the geo-political front and rising non-tariff barriers of customer countries to protect own players and jobs, the report said.

The company witnessed a drop in the average billing rates during last year. The pricing environment continues to be soft on account of the economic downturn and intense competition. Consequently, there is a possibility of a further drop in billing rates for the current fiscal, the report said.

In view of the companys business proceeds largely denominated in the US dollar, the further appreciation of rupee is bound to affect the financial performance. Also, Satyam is not sure that this trend would reverse over a period of time as there are too many factors influencing this variable for the company to take a call on it.

The US move to reduce H1 B visas from the current limit of 195,000 to 65,000 from October 1, 2003, has created concerns on operations of Indian IT companies. Satyam hopes Nasscom would take initiatives to sort out the issue, the report added.

Satyam is getting ready for the next step and move towards recently adopted corporate slogan What Business Demands.