Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
SSI: Investment concerns - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 28, 2001

    SSI: Investment concerns

    In 4QFY01, SSI has posted a loss of Rs 145 m compared to a net profit of Rs 309 m in 4QFY00. This was due a provision of Rs 200 m for an investment made in a subsidiary company Netfinex.com. The company however, has posted operating profits of Rs 155 m.

    Excluding the extraordinary item, SSI's profits have declined by 82% YoY. However, due to the slowdown in the US economy the software and education business saw a sequential fall of 14% and 8% respectively. Consequently, the company's operating margins declined significantly compared to 4QFY00. While the staff costs and course execution charges grew by 234% and 98% respectively, the revenues grew by only 33% in 4QFY01. The positive is that the company's operating margins are the best amongst the software education majors for the quarter ending June 2001. Aptech and NIIT reported more than 90% drop in profits.

    During the quarter the company has undertaken a restructuring exercise. Consequently, it has closed the Enterprise Support Division. Also, the company wrote of its investments as mentioned above.

    (Rs m) 4QFY00 4QFY01 Change FY00 FY01 Change
    Sales 675 898 33.1% 1,975 4,105 107.8%
    Other Income 155 142 -7.9% 168 361 114.4%
    Expenditure 398 744 86.8% 1,264 3,093 144.7%
    Operating Profit (EBDIT) 277 155 -44.2% 711 1,012 42.3%
    Operating Profit Margin (%) 41.0% 17.2% - 36.0% 24.7%  
    Interest 18 26 - 35 68 93.3%
    Depreciation 37 157 319.8% 149 324 117.0%
    Profit before Tax 376 114 -69.7% 695 982 41.2%
    Tax 67 59 -12.5% 126 196 55.4%
    Extraordinary Items - 200 - - 228 -
    Profit after Tax/(Loss) 309 -145 -146.8% 569 558 -2.0%
    Net profit margin (%) 45.8% - - 28.8% 13.6%  
    Diluted number of shares 66.1 13.5 - 13.486 13.5  
    Diluted Earnings per share* 109.9 - 4.6% 42.2 41.4 -2.0%
    P/E (x)   - - 4.1 4.2  

    For FY01 SSI recorded a growth of 108% in revenues and a 2% decline in net profits including extraordinary items. Excluding the extraordinary items the company's net profits grew by 38%. While 56% of the revenues came from education (66% in FY00), 40% came from its software business (24% in FY00). The contribution of the enterprise support division was 4%.

    OPM (%) 4QFY01 FY01
    Education 10.4% 22.2%
    Software 26.5% 30.7%

    For the education business the company had announced earlier that it will gradually adopt the franchisee model. This would effectively bring down the operational costs for the company.

    SSI like other software majors earned about 47% of its revenues from the banking, financial services and insurance industries. The other verticals that contributed to its revenues were telecom and healthcare. 74% of the software related revenues for FY01 came from the US, Europe 12% and rest of the world contributed the rest. One of the reasons for the decline in margins could have been the contribution to revenues from onsite business rising sharply from 19% in FY00 to 53% in FY01. Thus, to improve margins SSI will have to work towards increase offshore revenues.

    At the current market price of Rs 174, the stock is trading at a P/E multiple of 4x FY01 earnings. The valuation could see a further downside as uncertainly clouds the prospects of both its businesses.



    Equitymaster requests your view! Post a comment on "SSI: Investment concerns". Click here!


    More Views on News

    Tech Mahindra: Our Revised View (Quarterly Results Update - Detailed)

    Aug 2, 2017

    A better than expected turnaround in performance results in a change in view.

    Wipro: A Decent Start to the Year (Quarterly Results Update - Detailed)

    Jul 27, 2017

    Digital services drive growth for Wipro in 1QFY18.

    Infosys: A Decent Start to FY18 (Quarterly Results Update - Detailed)

    Jul 14, 2017

    Infosys starts FY18 on an encouraging note with a stable performance.

    TCS: Currency Volatility Plays Spoilsport (Quarterly Results Update - Detailed)

    Jul 14, 2017

    TCS starts FY18 decently despite an adverse currency impact.

    HCL Tech: Ends FY17 on Expected Lines (Quarterly Results Update - Detailed)

    Jun 29, 2017

    Volvo partnership caps a good year for HCL Technologies.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


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