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Tech Mahindra: Mahindra Satyam spoils the show - Views on News from Equitymaster

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Tech Mahindra: Mahindra Satyam spoils the show
May 28, 2011

Tech Mahindra has announced its fourth quarter results for the financial year 2010-2011 (4QFY11). The company has reported a 4.2% QoQ growth in sales and a whopping 64% QoQ decline in its net profit. Here is our analysis of the results.

Performance summary
  • Net sales grew by 4.2% QoQ on the back of improved demand from the telecom sector. For FY11, revenues grew by 11.1% YoY.
  • Operating margins fell marginally by 0.1% to 20.5% as compared to 20.6% in the previous quarter (3QFY11). This was on account of higher employee costs (as a percentage of sales).
  • Bottom line declined by a whopping 64.1% QoQ mainly due to losses on account of its associate Mahindra Satyam as compared to the gains seen during the previous quarter (3QFY11). Excluding share of associate company's loss, net profit was up marginally by 0.5%.
  • The company's employee base stood at 38,333 as at the end of December 2010, which means that about 4,125 employees were added during the quarter.
  • Added around 2 new clients during the quarter, taking the total number of active clients to 128.
  • The company has recommended a dividend of Rs 4 per share (dividend yield of 0.6%).
Consolidated Financial Snapshot
(Rs m) 3QFY11 4QFY11 Change FY10 FY11 Change
Sales 12,111 12,615 4.2% 46,254 51,402 11.1%
Expenditure 9,613 10,025 4.3% 34,928 41,369 18.4%
Operating profit (EBITDA) 2,498 2,590 3.7% 11,326 10,033 -11.4%
Operating Profit Margin (%) 20.6% 20.5% -0.1% 24.5% 19.5%  
Other income 522 318 -39.2% 754 1,175  
Interest 252 213 -15.7% 2,184 999 -54.3%
Depreciation 348 387 11.3% 1,339 1,435 7.2%
Profit before tax 2,420 2,308 -4.6% 8,558 8,774 2.5%
Tax 359 226 -37.1% 1,440 1,316 -8.6%
Minority interest (6) (16)   (28) (20)  
Profits from associates 99 1,521   - 3,172  
Exceptional income / (losses) 416 (2,665)   (85) (4,168)  
Profit after tax/(loss) 2,570 922 -64.1% 7,005 6,442 -8.0%
Net profit margin (%) 21.2% 7.3%   15.1% 12.5%  
No of shares (m)         126.0  
Diluted earnings per shares*#         49.3  
P/E ratio#         13.4  

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