Satyam posts Rs 434 cr Q3 profit

Large outsourcing deals, high offshore utilisation lead to 29 per cent growth.

Riding on the back of large outsourcing deals and high-level offshore utilisation, Satyam Computer Services Limited, the country's fourth-biggest outsourcing company, has posted a 28.58 per cent growth in quarterly profit at Rs 433.63 crore for the three months ended December 31, 2007, as compared with Rs 337.23 crore in the corresponding period last financial year (as per Indian GAAP).

The company said it did not see any signs of a slowdown in demand from the US, despite growing fears of a recession in this key market, which accounted for 60 per cent of sales in the quarter, and raised its full-year outlook.

"As such, we are increasing our fiscal 2008 revenue guidance to $2.1 billion from $2.08 billion (from 42 per cent growth to 45.2 per cent)," said Chairman B Ramalinga Raju.

"We mitigated the currency appreciation through judicious rate increases - 2.4 per cent for onsite work and 2.3 per cent for offshore projects. These were our most significant increases ever," he said.

"Additionally, we raised the percentage of our offshore work from 50.4 to 52.1, which enhanced our operating margin." The volume of work Satyam performed for clients also jumped by 9.4 per cent.

Raju said the company was closely watching the US economic environment, which could have a bearing on its customers. "We, however, will be better prepared for the ground realities in the next financial year," he said.

Satyam shares fell as much as 11.4 per cent in early deals to Rs 330, its lowest level in 30 months, as it was caught in a broad sell-off. But they recovered well to close just 0.32 per cent (or Rs 1.20) down at Rs 371.40 on the Bombay Stock Exchange today.

Satyam, which specialises in business software and offers back-office services, said revenues stood at Rs 2,195.56 crore in the quarter, a 32.17 per cent increase from Rs 1,661.12 crore in the previous corresponding quarter.

The earnings per share (EPS) was Rs 6.48, a y-o-y increase of 26.1 per cent and a sequential increase of 5.9 per cent.

The EBITDA (operating profit) margin for the quarter under review stood at 21.46 per cent. Satyam recorded a sequential revenue growth of 10.5 per cent and 50 per cent on a year-on-year basis in dollar terms (US GAAP) during Q3.

"The highlight of the quarter was the continued improvement in all operating parameters. Increased productivity due to higher utilisation, increased billing rates and offshore shift resulted in an improvement in the margins to 165 basis points," said Chief Financial Officer V Srinivas.

During the quarter, Satyam added 32 new clients, eight of which are Fortune 500 companies. The companty now has 181 Fortune 500 companies as its clients.

"We have made good progress during the quarter, bagging four large deals in different verticals, each valued at $50 million. We are in pursuit of 21 such big-ticket deals, some of which are from Europe and the Asia Pacific," said Ram Mynampati, president (commercial and healthcare businesses).

The company hired 3,424 associates in the third quarter, with the attrition rate going down to 13.1 per cent on a trailing twelve months basis.

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To buy Chicago-based firm

Satyam Computer Services has entered into a definitive agreement to acquire Chicago-based management consulting firm Bridge Strategy Group for $35 million (around Rs 140 crore) in an all-cash deal.

"By absorbing Bridge Strategy, we gain an immediate influx of 36 strategy consultants, most of whom are alumni of the world's best strategy consulting firms and business schools. We also significantly bolster our ability to provide the entire spectrum of services to global customers. At the same time, Bridge Group clients gain access to Satyam's world-class business process and technology skills and global resources," Satyam chairman, B Ramalinga Raju, said.

To list on Euronext
Satyam Computer Services, will list its existing ADS on NYSE Euronext, making it the first company to list its shares on the NYSE, Euronext, National Stock Exchange and the BSE.