Software: 3QFY01 A success story - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Software: 3QFY01 A success story

Jan 29, 2001

As expected the software majors have shown brilliant performance in the 3QFY01. But the question is who was the best? It is a difficult question as the benchmark for evaluation differs according to perceptions. If we look at the top line growth on a sequential basis Visualsoft made up for its disappointing performance in the 2QFY01 with a huge 35.8% sequential growth. Hughes and Visualsoft both have the advantage of having a smaller revenues base compared to the majors.

Net sales (growth)
QoQ YoY
Infosys 20.4% 137.2%
Wipro 4.5% 35.7%
Satyam 20.2% 84.4%
Hughes Software 26.9% 86.0%
HCL Tech 18.3% 108.0%
Visualsoft 35.8% 125.0%

E-commerce drove the growth for Infosys and Satyam, whereas Wiproís focus is shifting to technology. Visualsoft grew on back of excellent performance of its products. Its revenue mix changed marginally in favour of products (51.7% of revenues).

Net profits (growth)
QoQ YoY
Infosys* 8.0% 125.4%
Wipro 22.6% **325.7%
Satyam 30.7% 142%
Hughes Software 40.0% 28.0%
HCL Tech 28.2% 175.7%
Visualsoft 36.5% 175.2%
*Considering extra ordinary write off, excluding which the figure would be 16.5% and 143.1%
**Considering extra ordinary losses in the previous year, excluding which the figure would be 120%

The write off for an investment of Rs 130.8 m hit Infosysí bottomlines which showed just 8% growth. The robust growth in net profit, on a QoQ basis, figures was led by Hughes despite a drop of 20% in other income figures. A general trend seen was that all the companies showed a drop in the other income figure, which figure had shot up last quarter due to forex fluctuations. Only HCL Tech showed a significant 336% growth in other income, which is to due its business model whereby it aims to grow through joint ventures and investments. Considering the fact that all the companies have shown strong growth in net profits, despite the drop in other income, is an indication of the sectorís robust performance in the third quarter.

But finally, Wipro stole the show with a significant improvement in its operating margins. Of course this is due to the fact that the contribution of software to its business portfolio is increasing. Operating margin for the Global services IT division was 35%. This gives an indication of the companyís bargaining power as the rise in billing rates drove the increase in operating margins.

Operating margins
2QFY01 3QFY01
Infosys 39.5% 40.5%
Wipro 24.2% 29.1%
Satyam 34.9% 37.8%
Hughes Software 33.4% 35.7%
HCL Tech 50.2% 52.1%
Visualsoft 51.1% 53.3%

Visualsoft recorded the highest operating margins. It will be interesting to see if the company can improve itís operating margins any further. The possibility is strong considering the fact that the company has a huge infrastructure that is yet to be fully utilized. Also, its products are slowly being recognised for quality and reliability.

Hughes too is slowly increasing the contribution of products in its portfolio. But this quarter its efforts were concentrated on de-risking business from parent Hughes Network Systems (HNS).

The sector saw massive recruitment across the board. This certainly gives an indication that similar performance will continue in the future, for sometime at least.

Who was the best? Take your pick.


Equitymaster requests your view! Post a comment on "Software: 3QFY01 A success story". Click here!

  

More Views on News

COFORGE at All Time High; BSE IT Index Up 3.3% (Market Updates)

Sep 25, 2020 | Updated on Sep 25, 2020

COFORGE share price has hit an all time high at Rs 2,287 (up 7.7%). The BSE IT Index is up by 3.3%. Among the top gainers in the BSE IT Index today are COFORGE (up 7.7%) and ORACLE FINANCIAL (up 0.6%). The top losers include L&T TECHONOLOGY (down 0.5%) and ZENSAR TECHNOLOGIES (down 3.5%).

COFORGE Share Price Up by 5%; BSE IT Index Up 2.5% (Market Updates)

Sep 25, 2020 | Updated on Sep 25, 2020

COFORGE share price is trading up by 5% and its current market price is Rs 2,226. The BSE IT is up by 2.5%. The top gainers in the BSE IT Index are COFORGE (up 5.3%) and TATA ELXSI (up 5.3%). The top losers is MPHASIS .

TATA ELXSI Share Price Up by 5%; BSE IT Index Up 2.2% (Market Updates)

Sep 25, 2020 | Updated on Sep 25, 2020

TATA ELXSI share price is trading up by 5% and its current market price is Rs 1,246. The BSE IT is up by 2.2%. The top gainers in the BSE IT Index is TATA ELXSI (up 5.2%).

More Views on News

Most Popular

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

My Top Stock to Buy in this Market Selloff (Profit Hunter)

Sep 22, 2020

The recent correction offers a great opportunity to buy this high conviction smallcap stock.

What Do the Charts Say About Buying Smallcaps Now? (Fast Profits Daily)

Sep 18, 2020

Everyone seems to be excited about buying smallcaps now...but is it the right thing to do? What do the charts tell us? Find out in this video...

How Much Money Do You Need to Be a Professional Trader? (Fast Profits Daily)

Sep 17, 2020

In this video I'll answer a question I get asked often: How much capital do I really need to trade the markets for a living? Let's find out...

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE IT


Sep 25, 2020 03:36 PM

COMPARE COMPANY

MARKET STATS