Satyam posts a pleasant surprise this time! - Views on News from Equitymaster

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Satyam posts a pleasant surprise this time!

Jun 10, 2009

The scam-hit IT company surprised the investors and analysts by posting better than expected financial results for the December 2008 quarter. As a matter of fact, the revenues stood at around Rs 24.1 billion and consolidated net profits were about Rs 1.6 billion. On extrapolation, this suggests an annual revenue figure of over Rs 80 billion. The results look much better than expected. In January 2009, company had revenue and profit of just Rs 6.81 billion and Rs 40 million respectively. For the month of February, these figures were around Rs 6.76 billion and Rs 520 million respectively. These abysmal figures can be seen as immediate aftereffects of the enormous accounting scam perpetrated by the defamed founder of the company.

It seems that the worst is over for the company as investors also welcomed the good results enthusiastically with stock hitting the 10% upper circuit on BSE on Tuesday. The stock closed at Rs. 66.85 on BSE and at $3.64 on NYSE rising 9.95% and 33.8% respectively.

This can be attributed to increased clarity about the company's true financials and investors' confidence on the actions of new board and owner. This brought good news to the new owner Tech Mahindra as it also saw its stock closing at Rs 744 gaining 25% on BSE. It is worth noting that Tech Mahindra's shares have risen by an extraordinary 111% in the past 4 weeks, which suggests investors are becoming more and more positive about the acquisition.

Amidst all the euphoria, the analysts looked wary about the unexpectedly great operating margins of the order of 9% to 19%. This is extremely good as compared to the about 3% fall in EBITDA margin that was reported by Ramalinga Raju in January this year. Some analysts believe this increase in margin was due to substantial decrease in head-count.

As a point of caution, it is important to note that company saw a 14.3% loss of revenue and 72% loss in profit on a sequential basis. The board disclosed that while the company has gained new business orders worth Rs 18 billion from 215 of the existing customers, contracts worth as high as Rs 9 billion from 66 customers were either terminated or expired. The legal liabilities from the US investor law suits and Rs 12.3 billion claims from former owners continue to plague the company. The company is still overstaffed to the extent of 10,000 employees though it already lost 9,457 employees in the first two months of this year. Most importantly, the new owner which disclosed all this information to the shareholders as a matter of good corporate governance has insisted that these facts and figures about the results are un-audited and actual results may be different.

In conclusion, though there appear some signs of recovery for the company, its is still too early to be bullish about the prospects, as a lot of unresolved issues continue to plague the firm, which was doubly hit, by recession on one hand and biggest Indian accounting scam on another.

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4 Responses to "Satyam posts a pleasant surprise this time!"

mathew

Jun 14, 2009

Dear Friends



Regarding Satyam Computer, I have the following feelings and if it is wrong please excuse or correct me



1. Those who have Brave hearts can buy Satyam at Rs. 80 now
2. Reason.
3. The open offer price is declared as Rs 58 by Tech Mahendra
4. There is a difference of Rs 22 now between OOP (Open Offer Price) with the CMP (Current Market Price)
5. If there is fall in CMP, you will loose only Rs 22 (to protect this put stop loss at appropriate level)
6. If there is an appreciation in CMP, that will benefit you
7. The interesting thing here is that, if the price does not come down below Rs 58, Tech Mahendra will not get any shares from market or from share holders.
8. In that event, they may have to enhance the OOP to Rs 80 or the price prevailing at the time of OOP which may be higher or above Rs 58
9. If Tech Mahendra does not increase the price to CMP, no body will offer the share at Rs 58 and Tech Mahendra’s open offer will fail and they may have to withdraw the take over bid (this has to be confirmed by experts)
10. Or, they have to run the show with 31% holding
11. That may not be possible without the help of FIIs or MFs who have 20% share (if any)
12. Then other contenders will jump in the ‘band wagon’ and the price will increase again (this has to be confirmed by experts)
13. In any way the buyer now has to keep a “stop loss” on every day below Rs 5 till this is sttled and the loss is limited to Rs 5 only
14. I have a feeling that others are already in the market, that is the reason why the CMP is hovering around Rs 80
15. If Satyam’s results are “true and fair” and the assets / Liabilities are correctly assessed, then the CMP is cheap, and If it is Vice versa then the price may fall



These are my views and any other views (if any) may be intimated

Happy investing



M. Mathew

96332 00329

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M K SHAH

Jun 13, 2009

worst is over, atleast its bottomed out, i feel the company can only look forward to better times ahead, with a trusted company tech mahindra. few years down the line it will ride toward 250 350 range

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B P Sinha

Jun 12, 2009

To-day Satyam closed at 80-00 and struggling in between 78-80, but solid hard resisting any further down fall. Now what should an investor should do with satyam? should we sell and re-enter below 60/- but it is looking very strong to fall that level.

Like 

yogesh prajapati

Jun 10, 2009

hi dear,
pls you sand me to message in satyam,june month`s target

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