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SSI : 3QFY01 signs of strain?

Apr 30, 2001

SSI has posted a drop of 10% in revenues for the 3QFY01 on a QoQ (compared to 2QFY01) basis and a dip of 30% in net profit. However, on a YoY basis the company has recorded a rise of 95% in revenues and a jump of 68% in net profit. The company's operating margins have declined by a significant 470 basis points compared to 3QFY00. Compared to 2QFY01 too the operating margins have come down by about 20 basis points.

This could be due to the company's education business being under pressure as the demand for software courses might have taken a hit. The job scenario in the US being dim. NIIT, Aptech and SSI are the top branded players in the software education market. These companies offer education course mostly in the premium segment. However, to attract more students these companies provide scholarships and fee waivers. All this could have taken a toll on the operating margins.

(Rs m) 3QFY00 3QFY01 Change
Sales 533 1,037 94.7%
Other Income 5 18 251.4%
Expenditure 360 756 109.9%
Operating Profit (EBDIT) 173 281 62.9%
Operating Profit Margin (%) 32.4% 27.1%
Interest 10 12 27.5%
Depreciation 40 60 50.9%
Profit before Tax 128 226 76.6%
Tax 23 50 117.2%
Profit after Tax/(Loss) 105 176 67.7%
Net profit margin (%) 21.7% 17.0%
Diluted number of shares 13.4 13.4
Diluted Earnings per share* 31.3 52.6 67.7%
P/E (at current price) 10.4

The break up of expenditure included 25% towards staff costs, 29% towards course execution charges, 3% towards software purchase and 17% towards other expenses.The other expenses in 2QFY01 were just 9% of revenues.

At a current market price of Rs 545, the stock is trading at a P/E multiple of 10.4 times in 3QFY01 annaualised earnings.

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