The Hindu : Flat growth in Satyam Q4 profit

Online edition of India's National Newspaper
Friday, Apr 25, 2003

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Business

Flat growth in Satyam Q4 profit

By Our Special Correspondent

HYDERABAD APRIL 24. Satyam Computer Services, the last of the IT giants whose results were anxiously awaited, announced a 14.7 per cent growth in income at Rs. 553 crores and an almost flat net profit of Rs.115.79 crores for the fourth quarter ended March 2003.

Of this, income from software services was Rs. 538.43 crores, exceeding the guidance of Rs. 525 - 535 crores. It reflects a year on year growth of 17.66 per cent and a sequential growth of 3.10 per cent.

For the full year ended March 2003, total income crossed the Rs. 2,000 crore barrier to reach Rs. 2,051.51 crores, an increase of 13.78 per cent over the previous year. Software revenues, which were Rs. 2,023 crores, however, grew by 16.84 per cent. The net profit for the full year was Rs. 459.88 crores (Rs. 490 crores).

The EPS for the whole year was Rs.14.62. EPS for the Q4 was Rs. 3.68. During the year, the company had lowered earnings guidance from Rs.16 to Rs.14.57 - 14.66. Software revenue guidance for the year was Rs. 2,010 crores-Rs. 2,020 crores.

A final dividend of 110 per cent (Rs. 2.20 per share on par value of Rs. 2 per share) has been recommended, taking the total dividend for the year to 150 per cent.

The results are in tune with the guidance of a `flat growth' for Q4 issued at the end of Q3. It reinforces observations that the IT sector is settling down to a lower but more realistic level of growth rates. Accordingly, it has issued a revenue guidance of 15-17 per cent growth for March 2004 in dollar terms, while EPS is projected in the range of Rs. 15.65 to Rs.16.

As B. Ramalinga Raju, Satyam Chairman, himself said at the press conference here on Thursday, the projections for 2004 are `realistic rather than being conservative.' At the same time he was optimistic of opportunities, given the trend towards increasing reliance on offshore providers. The company will also vigorously pursue growth strategies, both organic and inorganic.

Mr. Raju announced that the company decided to make a provision of Rs.152 crores and to discontinue the operations of VisionCompass. The amount written off on account of VisionCompass alone is Rs.126 crores, while the rest is on account of investments written off in several other companies like the U.S. based Cormed (Rs. 9.50 crores), Avanti, McKenna Ventures (Rs. 2.50 crores each) among others.

Intellectual property of VisionCompass will be with Satyam. The main reason for discontinuing operations was the `overall environment' which was not conducive to attracting new investors in the post dotcom and IT slowdown period. He conceded they could not find a right partner for it, and did not want to get into development and marketing of products (VisionCompass).

Mr. Raju also conceded that billing rates have softened somewhat and growth came from volumes. The year 2004 will be the first full year of operations for its BPO subsidiary Nipuna, but a revenue guidance is not being issued as it is `too premature.' Satyam will be adding 1,500-2,000 people this year to its existing manpower of 9,759.

The company added 100 customers during the year, including 23 Fortune 500. During the last quarter, new customers were 26, of whom five were Fortune 500 companies.

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