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SSI's spectacular performance

Oct 31, 2000

SSI reported more than 300% jump in profits on year on year basis for the first quarter ended September 2000. However, compared to previous quarter the profits of the company have shown a de-growth of 11%. The company's operating margin declined sharply due to higher expenditure on infrastructure set up and higher staff cost.

(Rs m) 1QFY00 1QFY01 Change
Sales 344 1,015 194.9%
Other Income 6 121 1961.5%
Expenditure 226 753 233.3%
Operating Profit (EBDIT) 118 262 121.5%
Operating Profit Margin (%) 34.4% 25.8%  
Interest 3 17 388.7%
Depreciation 36 51 42.0%
Profit before Tax 85 316 271.1%
Tax 18 40 128.1%
Profit after Tax/(Loss) 68 276 308.2%
Net profit margin (%) 19.6% 27.2%  
No. of Shares (eoy) (m) 11.9 12.8  
Diluted number of shares (m) 12.8 12.8  
Diluted Earnings per share* 21.1 86.1  
P/E (at current price) 101 25  

During the quarter, the financial services verticals (banking and insurance) contributed to 21% of revenues, the securities and telecom contributed 15% each and healthcare contributed 1%. The company earned about 32% of its revenues from providing e-business related services to large clients, It has added 18 new customers during the quarter taking the number of active clients to 36. Four clients each contributed to over 5% of revenues and the revenues from top 5 clients accounted for about 38% of total revenues. Thus the company faces the risk of high client concentration.

The company's software solution business contributed 35% of total revenues. The operating margins of the company is expected to improve with the increasing proportion of software services business.

At the current market price of Rs 2,130 SSI is available at a P/E multiple of 25 times its 1QFY01 annualised earnings.

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