Silverline: Analyst meet - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Silverline: Analyst meet

Aug 14, 2001

Recasting image
Silverline’s new man in charge Mr. Ravi Singh, Co-CEO, plans to change the way things have been with the company and therefore, recast the company’s image. According to Mr. Singh as the company had a US based management; there was a lack of communication with the investor community. Therefore, a divergence in perception (negative perceptions) regarding the company and this led to the company’s valuations being low (compared to what the management feels should have been). But now the management wants to change the perception and has promised increased disclosure in the future. The company has started an image building exercise and is trying to do away with it negative perceptions that people have hold in the past. As a part of the effort, Silverline disclosed separately figures for its projects and employee augmentation businesses. This is commendable for two reasons: firstly, not many companies admit to the fact that they are into the employee augmentation (body shopping) business and secondly, the company also gave operational details from this area.

Particulars Services Staff Augmentation
Revenues (Rs m) 1,358 763
% of total revenues 64% 36%
Gross Margin 40% to 45% 20% to 25%
Active clients 39 127
Billing rate/ per hour    
Onsite US$ 80 - 120 US$ 60-80
Offshore US$ 22 - 35 N.A

Future Strategy
To ally fears about the company’s growth, the management outlined strategy for the immediate future. Silverline plans to cash in on opportunities coming from maintenance and systems integration. In wake of the economic slowdown, companies are directing their IT spend towards keeping existing systems up & running and also increasing operational efficiencies. This means that maintenance and system integration are now getting a larger chunk of the IT spend. New application development has taken a backseat for the time being. As of June 30th 2001, 86% of Silverline’s revenues were from development, integration and maintenance. The company is expecting a growth of about 50% from maintenance in the near future. However, for FY02 the company forecasted about 30% growth in the topline.

Silverline also plans to de-emphasize its staff augmentation business that currently contributes 36% to its revenues. The company aims to bring down the proportion of this business to as low as 20% of the revenues in the next 12 to 18 months. As the business is at the lower end of the software value chain the operating margins are quite low compared to other offerings.

To manage cost, the company has laid off people. This was due to redundancy created after the merger of Sera Nova and Silverline. The people laid off were mostly from the HR and administrative functions. The company has also realigned salaries (pay cuts and hikes) of employees according to the billing rates the company quotes for their skill sets.

Valuations
At the current market price of Rs 43, the stock is trading at a P/E multiple of 5 times its 1QFY02 annualised earnings. This is significantly lower compared to other software companies in the software sector. It is probably due to this subsidy in valuations that the management has decided to be more transparent. The positives of the company are that it has the advantage of size (is seventh largest software exporter in FY01) and the company has an impressive client list.

The management is trying to do away with the negative perception or what it would like to term as divergence in perception. Therefore, it would be worth to wait for the management to deliver what it is promising.

Equitymaster requests your view! Post a comment on "Silverline: Analyst meet". Click here!

  

More Views on News

If You had Invested Rs 1 Lakh in TCS in 2011, this is how Much You Would have Today (Views On News)

Nov 30, 2021

Did TCS perform better than the market and its peers?

India's Top 4 IT Companies are Struggling. Here's Why... (Views On News)

Oct 22, 2021

As attrition rates are unbelievably high, top Indian IT companies are going for big-ticket raises, and much more hiring this year.

Infosys had an Exceptional Quarter Buoyed by Huge Deal Wins. Revenue Guidance Boosts Stock (Views On News)

Oct 14, 2021

Infosys raised its forecast for annual revenue growth to 16.5-17.5% from the earlier 14-16%, predicted in July 2021.

Info Edge: The Anatomy of an Indian Internet Behemoth (Views On News)

Oct 2, 2021

Info Edge is very popular in the Indian startup ecosystem due to its active participation in funding events.

This Indian Company is Tapping into the Huge Autonomous Driving Opportunity (Views On News)

Sep 14, 2021

Despite many challenges, Indian companies and startups have not shied away from entering this space.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

This Multibagger Stock Zooms 20% After Dolly Khanna Buys Stake (Views On News)

Nov 24, 2021

Shares of this edible oil company zoomed over 50% in three days after ace investor bought around 1% stake.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

How to Find Your Next 10-Bagger in this Market (Profit Hunter)

Nov 19, 2021

The #1 make or break factor in your portfolio you shouldn't ignore.

MobiKwik IPO Opens for Subscription Soon. Key Things to Know Before Subscribing. (Views On News)

Nov 20, 2021

The Rs 19 bn issue is set to hit the market soon.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

SILVERLINE TECH SHARE PRICE


Apr 19, 2012 (Close)

TRACK SILVERLINE TECH

  • Track your investment in SILVERLINE TECH with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MARKET STATS