The Hindu Business Line : Satyam aided by volume growth, stable pricing

BUOYED by good volume growth and stable pricing environment, Satyam Computers has turned in an encouraging performance for the second successive quarter ended March 31, 2004.

However, rupee appreciation towards the close of the latest quarter has pulled down the per share earnings of the company to Rs 4.46 from Rs 4.63 in the third quarter of 2003-04.

The key highlights of the performance in the latest quarter are:

On a sequential (quarter-on-quarter) basis, Satyam has recorded an 8.8 per cent growth in revenues in the latest quarter, marginally lower than the 10.7 per cent rise in the preceding quarter. Strong growth from the telecom and BFSI segment and continued ramp-up in revenues from package implementation appears to have contributed to the sequential growth.

The operating profit margin has improved marginally by 0.12 percentage points to 26.34 per cent on a sequential basis. But gross margins declined by nearly 3.5 percentage points on a sequential basis to 27.01 per cent. This is attributable mainly to rupee appreciation of nearly 4 per cent in this quarter which has led to Satyam factoring in a foreign exchange loss of Rs 21 crore in its books. The other income has dipped to Rs 4.99 crore vis-à-vis Rs 28.45 crore in the third quarter of 2003-04

The customer addition continues to remain strong, with the number of $1 million customers increasing to 89 from 77 in the third quarter. The contribution of the top five and top 10 customers declining steadily on a sequential basis is encouraging. Sending a positive signal for the future, Satyam has added a net of 1,695 employees in the latest quarter, though it has admitted that human resource challenges may put pressure on operating margins in the future.

Outlook: For the year 2004-05, Satyam has projected a revenue of Rs 3,097-3,146 crore and per share earnings of Rs 20.28 to Rs 20.62. The per share earnings growth is expected to be in the 15-17 per cent range.

This growth is lower than the 20 per cent EPS growth projected by Infosys.