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PSI: Posts losses - Views on News from Equitymaster
 
 
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  • Jul 24, 2001

    PSI: Posts losses

    PSI has posted a loss of Rs 48 m for the 2QFY02, a very dismal performance. However, the company has managed a topline growth of 5% (QoQ). The company posted losses due to its inability to contain costs. Many others from the software sector like Mphasis and Polaris, managed to avoid losses inspite of posting drop in topline due to their control over costs.

    (Rs m) 1QFY01 2QFY02 Change
    Sales 210 221 5.3%
    Other Income 1 4 477.3%
    Expenditure 182 260 42.5%
    Operating Profit (EBDIT) 28 (38) -238.1%
    Operating Profit Margin (%) 13.3% -17.4%  
    Interest 1.6 3 56.3%
    Depreciation 7.97 8 4.0%
    Profit before Tax 19 (45) -340.0%
    Tax (3) 3  
    Extraordinary item 11 -  
    Profit after Tax/(Loss) 33 (48) -247.6%
    Net profit margin (%) 15.5% -21.7%  
    Diluted number of shares 7.6 7.6  
    Diluted Earnings per share* 17.1 (25.3) -247.6%
    P/E (at current price)   -  
    *(annualised)      

    In 2QFY01, the company had posted profits of Rs 43 m. The growth in topline is 7% for 2QFY02 compared to 2QFY01. The factor that is single handedly responsible for the loss in the 2QFY02 is the cost of finished good and spares consumed that has jumped from Rs 7 m in 1QFY02 to Rs 41 m in the 2QFY02, a rise of 480%. Also, the miscellaneous expenses have grown by 122% to Rs 87 m compared to 1QFY02. The management has not offered any explanation for this inexplicable costs increases.

    The employee costs for the company have infact come down by 3% compared to the previous quarter.

    According to the company, the loss is due to the fact that it could not utilise newly added facilities as there was lower than expected business from the US. However, this does not explain why the cost of finished goods and spares consumed should shoot up in the light of the fact that its ATM business has been sold off. Also, PSI's portfolio is diversified in FY01, 47% of its business came from Europe, 30% came from the US and the rest from India.

    Groupe Bull SA of France sold off its 50.3% stake in the company to Indian Rayon, therefore it remains to be seen if the business from Groupe Bull is intact or it has shown a decline. Also, Indian Rayon has announced an open offer for 20% of the stock.

    The stock is likely to see a sharp drop after the dismal performance.

     

     

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