Satyam surprises with 43% Q1 net jump

Satyam Computer Services Ltd, today reported better than expected first-quarter results. Net profit for the quarter spurted to Rs 173.48 crore reflecting 42.78 per cent growth, compared with Rs 121.50 crore for the same period last year. Net profit rose 23 per cent over the immediate preceding quarter ending March 31, 2004.

Consolidated revenues under Indian GAAP for the quarter grew 37.85 per cent to touch Rs 771.50 crore as compared to Rs 559.65 crore that the company reported for the corresponding quarter last year. Revenues for the quarter were also up 7.05 per cent on a sequential basis.

Operating margins continued to slide at 25.77 per cent as compared to 29.02 per cent for the same period last year. For the immediate preceding quarter ending March 2004 operating margins were 26.34 per cent. Attrition also continued to be high at 17 per cent for the quarter, calculated on a trailing twelve month basis.

Revenues for the quarter at Rs 771.50 crore was better than the issued guidance of Rs 732 crore. Earnings per share (EPS) at Rs. 5.48 reflected a sequential growth of 22.87 per cent and was higher than the guidance of Rs. 4.78 that Satyam had issued.

For the next quarter the company has given a revenue guidance of between Rs 805 crore and Rs 810 crore with EPS for the quarter expected to between Rs 5.44 and Rs 5.48.

Riding on increased business volumes from existing clients and the depreciation in the rupee Satyam revised the revenue guidance for the full year.

Revenues for the full year are expected to be in the range of Rs 3,268 crore and Rs 3,312 crore, representing an annual growth of 28.6 per cent to 30.3 per cent. The earlier forecast for annual revenue growth was between 21.9 per cent to 23.8 per cent.

EPS for the fiscal is expected to be between Rs 21.71 and Rs 22.06, signalling a growth range between 26.2 per cent to 28.3 per cent over the previous financial year .The earlier forecast for annual EPS growth was between 17.91 per cent and 19.88 per cent.

Satyam added 25 new customers in the first quarter, of which three were Fortune Global 500 companies. These included a leading manufacturer of industrial and packaging coatings, a Fortune Global 500 European automobile manufacturer, and a large US-based insurance and financial services conglomerate.

Nipuna, the BPO subsidiary of Satyam, has added three new customers in the quarter and ended the quarter with 14 active customers. During the quarter, Nipuna more than doubled its manpower to 1060.

In Q1 the company has won orders from a leading chip manufacturer, a leading packaging and recycling company and a leading digital map information company.

Addressing a media conference B. Ramalinga Raju, Satyam's Chairman, said that the healthcare vertical and the telecom vertical did exceedingly well and grew 40 per cent and 19 per cent respectively.

The depreciation of the rupee against the US dollar has also helped the company add close to Rs 6 crore in net profits in the current quarter.

Satyam, among the first to approach pharmaceutical and health insurance companies with an offshore business case, has acquired domain knowledge by working for these clients, which it has subsequently leveraged for newer client acquisition. Six of the top 10 pharmaceutical companies and two of the three healthcare insurance companies are clients of Satyam.

A recent Goldman Sachs research report had indicated that the company was accelerating its H1-B visa application process in light of the emerging constraint of the annual visa cap of 65,000.

"Satyam is accelerating its visa application plans, so as to have enough numbers in the inventory (1,500 at present). Although the numbers may appear adequate, Satyam's main challenge lies in matching skill sets, especially in light of the fact that growth for Satyam is driven by package implementation business, where appropriate skill sets are in short supply," the report had noted.