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Mr Anand Mahindra, Chairman of Mahindra group, Mr A.S. Murty, Chief Technology Officer, and Mr Vijay Anand, Head (Corporate Strategy) of Mahindra Satyam, were all taken aback on Monday after seeing market's reaction to the company results.
“Perhaps at first glance (markets have) not understood that results pre-exceptional items are exceptional” Mr Mahindra tweeted on Monday afternoon, seeing the poor show by the stock.
He was responding to a follower, who commented that “somehow markets seems to be disappointed” by the results.
Seems like the markets have realised the company's healthy performance a day later, pushing the stock up by 10.7 per cent to close at Rs 81.45 on Tuesday on the BSE. On Monday, the scrip fell 4.17 per cent.
Though the company registered a net profit of Rs 245 crore, a growth of 118 per cent over preceding quarter's figure, the exceptional items that included payouts to settle class-action suites and settlement with the Securities and Exchange Commission in the US pushed the company into the red.
“But for the exceptional items, we showed a good performance. Our EBIDTA levels have doubled to 13 per cent quarter on quarter,” Mr Vineet Nayyar, Chairman of Mahindra Satyam, said.
It, however, was not a one-off quarter or financial year, where it could shrug off further pressures from exceptional items.
Another class-action suite involving Aberdeen is still pending in the US.
Analyst Report
Standard Chartered, which came out with ‘outperform rating with a target price of Rs 100,' said: “We expect utilisation expansion, pyramid normalisation and realisation growth to drive margin expansion and sustain double-digit margins.”
However, Citi said: “While Satyam's Q4 growth is encouraging, the company needs to demonstrate sustainability going forward.”
According to Emaky Global, “While March'11 margins caught us by a surprise, we believe that Mahindra Satyam has limited room to improve margins further given that Mahindra Satyam's non-manpower expenses are already in line with Tier-1 peers Infosys and TCS and the company has already leveraged non-manpower expenses meaningfully over FY-11.”
It may be recalled that many brokerages including Credit Suisse, Religare, India Infoline and Emkay Global Financial had dropped coverage on Satyam Computer following the disclosures by the management on the accounting irregularities.
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