Stocks

Multi-million deal lends revenue visibility for Mahindra Satyam

K. Venkatasubramanian | Updated on March 15, 2011

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Recent agreements suggest customers ready to increase IT spends



Mahindra Satyam has strengthened its revival and growth path by bagging a large deal from a West Asia-based client.

The contract is a multi-million, multi-year one, thus lending significant revenue visibility for the company.

The deal involves Mahindra Satyam delivering application development and infrastructure services to a large, Qatar-based sports institute — Aspire Zone Foundation. This comes just days after the company has signed a project for Oracle ERP implementation with the Government of Oman.

With this deal, the region now holds considerable promise for Mahindra Satyam as the demand environment there covers a wide spectrum of the company's offerings. A potentially favourable service mix should ensure a reasonable margin profile.

That this contract involves delivery of application services and infrastructure services suggests that clients are willing to bet on the company's execution capabilities despite the scam, by entrusting it with deals for longer term.

The contract involves offshore and onsite support for the client, which means that costs too would be optimised by getting a significant portion of the project executed from India. Mahindra Satyam already has experience in event and venue management technologies thanks to its partnership with FIFA, which allowed it to deliver solutions to the World Cup in South Africa last year.

With Qatar set to host the football event in 2022, this deal would provide considerable opportunities for Satyam to mine the client further.

The stock, which was up 4 per cent intraday, closed up just marginally in a falling market.

From an industry standpoint, West Asia has emerged as a large technology spender. Subex too announced on Tuesday a multi-million dollar deal with a West Asian mobile operator. Players such as 3i Infotech have significant presence in the region. TCS announced a multi-million dollar, multi-year deal from a Dutch consultancy firm on Tuesday.

With deals coming in a flurry, the industry can take heart from the fact that customers across regions are now ready to increase IT spends.

Published on March 15, 2011

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