Mahindra Satyam - Despite losses, well-positioned as a strong mid-tier company
Abhishek Marwah
There may be much to look forward to for Satyam Computer Services' (Mahindra Satyam) shareholders, though the company has reported a loss of Rs 124 crore for FY10. By reporting Rs 5,481 crore in revenues, it has managed to meet expectations on this front. It is now a strong mid-tier IT company and is still among the top six-seven players in the listed space.
Size
At its present scale, Mahindra Satyam is of the size of Mphasis, which has a similar revenue profile, but is larger than Patni Computer. The company gave very limited disclosure as far as operating metrics pertaining to its various segments of operations are concerned.
But what should be heartening is that Satyam has demonstrated better employee productivity. While at about $1.1 billion in revenues (nine-month numbers annualised), Mphasis has over 38000 employees and Mahindra Satyam has to contend with just 27,000 resources. With a lower employee headcount, the company has seen a reduction of 34 per cent in the employee costs over FY09. Operating and administrative expenses have fallen by over 57 per cent in the same period.
With a nimble strength in terms of manpower and lower operating costs, the company may be expected to post about 15 per cent EBITDA margin going forward. Mphasis has an EBITDA margin of over 20 per cent.
Clients
While 350 clients, including as many as 44 new ones added in FY10, are still intact, this has reduced from about 500 in FY09. But even at these levels, the number of clients compares favourably with peers. That without exceptional items, the company has managed profit suggests that FY10 may have seen a considerable turnaround in the fortunes of the company. Now with much of the operations stabilised and several deal wins announced, especially the multi-million ones from clients such as GE, GlaxoSmithKline, OC Tanner and Saab, Mahindra Satyam appears well placed to scale up. Also, the company has as much as Rs 2,117 crore in cash and cash equivalents currently — higher than and Mphasis and close to Patni.
Most large and mid-tier IT companies reported strong volumes growth and have seen a revival in IT spending in the US and BFSI segments this fiscal and it may not be wrong to expect that a rejuvenated Mahindra Satyam could emulate this feat.
Merger
A call on the timeframe to the merger with Tech Mahindra is yet to be taken. But once this is done, the merged entity would have the scale to participate in large deals. Many global clients are embarking on a vendor consolidation exercise and towards this end, are tightening the number of vendors that they work with to about three-four global majors and two-three top Indian IT players. A merged entity would make it well positioned.
Source - BL Research
Sent from my BlackBerry® smartphone
Varun Puri
--
You received this message because you are subscribed to the Google Groups "thinkandtrade" group.
To post to this group, send an email to thinka...@googlegroups.com.
To unsubscribe from this group, send email to thinkandtrad...@googlegroups.com.
For more options, visit this group at http://groups.google.com/group/thinkandtrade?hl=en-GB.