| Mastek had said in the beginning of the year that revenues this year would grow 21 per cent to around Rs 450 crore and net profit would fall 31 per cent to Rs 34.5 crore. |
| Moreover, it said that the first half would account for 40 per cent of the year's revenues and 20 per cent of the year's profit. In the first half period ended December, the company achieved exactly that - revenues of Rs 181.65 crore or 40.36 per cent of the estimated revenues for FY04, and a net profit of Rs 7.13 crore or 20.65 per cent of the profit figure according to the guidance. |
| The problem, however, is that Mastek's performance in the previous two quarters has been completely out of sync with the rest of the IT industry. Most players have seen a high growth in revenues and a stabilisation of billing rates. But Mastek has reported a 1.16 per cent year-on-year decline in revenues in the first six months. |
| Besides, it looks like pricing pressure has continued, since net margin is just 4.4 per cent. Excluding the share of profit of the joint venture with Deloitte, the company reported a marginal loss in the first six months. |
| The saving grace is that performance in the December quarter was slightly better compared with the September quarter. Sequential revenues growth stood at 5.2 per cent compared to a growth of just 1.3 per cent last quarter. |
| Besides, operating margin improved from 6.12 per cent to 7.97 per cent. As a result, sequential growth in net profit stood at a healthy 35 per cent. Besides, it received a $50 million contract spread over 10 years. The order book has increased 27 per cent sequentially to Rs 197 crore. |
| Nevertheless, achieving its full-year guidance seems a rather uphill task - on an average, sequential growth in revenues should be 27 per cent and sequential growth in earnings should be 114 per cent in order to meet the FY04 guidance. |
| Moreover, the order book of Rs 197 crore is for work to be executed in the next 12 months, while the company needs to clock revenues of Rs 270 crore in the second half of the year to meet its guidance. It will indeed be a tall order for the company to meet its guidance. |
| Sop hit for ONGC, GAIL |
| The price of Brent crude recently hit a nine-month high of $31.50, but with elections around the corner, the government is not too keen to raise the prices of petroleum products once again. |
| This has resulted in mounting oil subsidies each passing day. Due to the government's subsidy sharing mechanism, ONGC and GAIL will take a hit on their profits in the December quarter. |
| International crude prices have risen 19 per cent over the last nine months, but domestic petrol and diesel prices have risen only about 8 per cent. And with crude imports meeting about 60 per cent of the country's petroleum needs, the subsidy losses for the industry was around Rs 5000 crore between April-December 2003. |
| As per the government's subsidy sharing mechanism, the subsidy bill had to be shared equally between the oil marketing companies (OMCs), ONGC and GAIL, and through higher marketing margins on motor spirit (MS) and high speed diesel (HSD). |
| Analysts point out that for ONGC and GAIL, the subsidy provisions for the first half of FY04 would have to be made in Q3FY04. At GAIL, a surge in revenues is expected to make up for the oil subsidy provision and no drop in profits is anticipated in Q3FY04. However, in the case of ONGC, the subsidy bill is expected to bring about a reduction in the company's net profit in the December quarter. |
| The OMCs had made provisions for 100 per cent of subsidy losses in the first half of FY04. They would now be able to make a part write-back of the provisions they made during the first half of FY04. This move is expected to boost the profitability oil marketing companies in Q3FY04. |
| What's more, a hike in product prices last quarter has resulted in a jump in refining margins, which will benefit companies like IOC, HPCL and BPCL. |
| With contributions by Mobis Philipose and Amriteshwar Mathur |
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