Silverline's net surges by 90% in 2QFY00 - Views on News from Equitymaster

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Silverline's net surges by 90% in 2QFY00

Jul 18, 2000

Silverline Technologies Ltd. (STL) has shown a YoY 91% jump in net profits in 2QFY00 to Rs 278 m. However quarter over quarter the profits increased by 7%. The contribution from e-business to total revenues increased to 33% in the 2QFY00 compared to 21% in the corresponding quarter in the previous year. This has also led to improvement in its profit margins to 27.3%. The company's top two customers First Data and SCI contributes 30% to its total revenues, which has been reduced from 46% in FY99. During the six months period Jan-June 2000, the company has added 27 new customers.

(Rs m) 1QFY00 2QFY00 Change
Sales 1,369 1,452 6.1%
Other Income (13) (16) 30.5%
Expenditure 1,001 1,056 5.5%
Operating Profit (EBDIT) 368 396 7.6%
Operating Profit Margin (%) 26.9% 27.3%  
Depreciation 41 53 27.6%
Profit before Tax 314 327 4.0%
Tax 54 49 -10.5%
Profit after Tax/(Loss) 260 278 7.1%
Net profit margin (%) 19.0% 19.2%  
No. of Shares (eoy) (m) 64.9 64.9  
Diluted number of shares 64.9 64.9  
Diluted Earnings per share* 16.0 17.2  
*(annualised)      

STL sees phenomenal growth opportunity in its e-business and CRM (Customer Relationship Management). Since billing rate of the company in e-business are high (both offshore and onsite), it focuses on enhancing processes and methodologies in this area. It targets to achieve revenue growth of 40-45% which will be achieved through its focus on emerging area of e-business.

At the current market price of Rs 438, STL is trading at a PER of 26 times its 2QFY00 annualised earnings. The company's profit margins are comparatively less compared to its peers. The lower valuations of the company are due to comparatively low value added services provided by its. As the company moves up its value chain, it will be reflected it its market valuations.


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