Satyam: Meets expectations - 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?  

Satyam: Meets expectations

Apr 24, 2002

Satyam has reported a 4% sequential decline in net profits for FY02. The company has posted a 5% sequential growth in revenues. This translates to a YoY growth of 3% in net profit and a rise of 18% in topline. While the net profit numbers are marginally above market expectations, the revenue growth is way ahead of market estimates.

(Rs m)3QFY024QFY02ChangeFY01FY02Change
Sales 4,358 4,577 5.0% 12,200 17,319 42.0%
Other Income 102 249 143.4% 217 712 228.1%
Expenditure 2,908 3,176 9.2% 7,750 11,508 48.5%
Operating Profit (EBDIT) 1,450 1,401 -3.4% 4,450 5,812 30.6%
Operating Profit Margin (%)33.3%30.6%36.5%33.6%
Interest 5 3 -38.1% 345 96 -72.2%
Depreciation 306 346 12.8% 965 1,175 21.8%
Profit before Tax 1,241 1,301 4.8% 3,357 5,253 56.4%
Extraordinary income/(expense) - (408)1701 (408)-124.0%
Tax47149217.4% 196 351 79.5%
Profit after Tax/(Loss) 1,194 744 -37.7% 4,863 4,494 -7.6%
Net profit margin (%)27.4%16.3%39.9%25.9%
Diluted number of shares 314.5 314.5314.5314.5
Diluted Earnings per share* 15.2 9.5 15.5 14.3
P/E (x) 28.3 18.8
*(annualised)

However, the company has incurred an extra-ordinary expense of Rs 408 m in 4QFY02. Considering the extra-ordinary expense, 4QFY02 net profits have declined 38% sequentially. On a YoY basis, this translates to a drop of 33%.

The company has initiated work to close down its wholly owned subsidiaries Satyam Europe Limited, Satyam Asia Pro. Limited and Satyam Japan KK. The existing business of the subsidiaries is being transferred to the parent company. The extra-ordinary write off Rs 407 m has been provided for investments and the non-recoverable trade and other receivables. While this is a positive step considering the fact that the company is now cleaning its books, shareholders will have to bear the brunt of the managementís adventures.

For the full year FY02, the company has reported a 55% rise in net profits and a 42% growth in revenues. This is the highest amongst the software majors. The net profit growth does not include the extra-ordinary expense of Rs 408 m in FY02 and the extra-ordinary income of Rs 1,701 m in FY01. After considering extra-ordinary items for both the years, net profits have declined by 8%.

RECONCILIATION BETWEEN INDIAN GAAP AND US GAAP
(Rs m)3QFY024QFY02ChangeFY01FY02Change
Net profit as per Indian GAAP 1,194 742 -37.8% 5,059 4,577 -9.5%
Deferred Stock Compensation charges (148) (97)-34.3% (2,100) (508)-75.8%
Amortization of Goodwill (51) (51)-0.2% (214) (209)-2.2%
Loss of Susidiaries & Joint Venture (290) (233)-19.7% (2,140) (4,182)95.4%
Gain on sale of stake in Sify 1,687 - -100.0% (1,780) 1,705 -195.8%
Charge off for put options in TRW (279) (276)-1.0% (128) (492)285.8%
Others (14) 51 (23) (42)86.8%
Provision not required under US GAAP - 407 - 407
Total US GAAP Adjustments 905 (200)-122.1% (6,384) (3,321)-48.0%
Net Income as per US GAAP 2,099 542 -74.2% (1,326) 1,256

Based on the numbers reported as per US GAAP, Satyam reported a net profit of Rs 1,256 for FY02. This was due to sharp decline in deferred stock compensation expenses. However, the losses on account of subsidiaries also grew by 95%. For 4QFY02, the losses on account of subsidiaries declined by 20% sequentially.

The companyís bottomline growth for FY02 has been higher than the growth in revenues due to a significant other income component and steep decline in interest costs.

Satyam expects the topline to grow by 21% to 23% in FY03. The rise in net profits is expected to be in the range of 20% to 22%. The company has factored in a further decline in operating margins and expects operating margins for FY03 to be around 32%.

At the current market price of Rs 267, the stock is trading at a P/E multiple of 18x its 4QFY02 annualised earnings. The managementís outlook being in line with others from the sector itís likely to keep the stock price range bound in the near future. However, the sale of stake in Sify could be a trigger for the stock price. Considering the fact that its valuations are the lowest among the software majors, the stock price could witness swift improvement by the end of the fiscal.

However, before considering the stock as an investment option, the investors need to reckon that the management has written off Rs 407 m in 4QFY02 due to investment in subsidiaries. Previously Rs 1,219 m (US$ 26 m) was written off from Sifyís books as provision for decrease in value of investments in Indianworld.com and Cricinfo.com in FY01. Another write off was made in 2QFY02, which amounted to Rs 5,296 m (US$ 110 m). In FY01 and FY02, Satyam has written off nearly Rs 7 bn (US$ 143 m). Moves like this will not help stakeholders, no matter how brilliantly the company performs.

Equitymaster requests your view! Post a comment on "Satyam: Meets expectations". Click here!

  

More Views on News

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

This Indian Company is Tapping into the Huge Autonomous Driving Opportunity (Views On News)

Sep 14, 2021

Despite many challenges, Indian companies and startups have not shied away from entering this space.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

MAHINDRA SATYAM SHARE PRICE


Jul 3, 2013 (Close)

TRACK MAHINDRA SATYAM

  • Track your investment in MAHINDRA SATYAM with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MARKET STATS