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.
Silverline: Impressive results but… - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 1, 2000

    Silverline: Impressive results but…

    Silverline has recorded an impressive 94% growth in profits for the 3QFY01. The profits growth was mainly driven by higher other income (through forex gains and ADS related income). Although, on a quarter on quarter basis the company's operating margins improved, they have actually declined 130 basis points on a year on year basis.

    (Rs m) 2QFY01 3QFY01 Change
    Sales 650 718 10.5%
    Other Income 13 213 1492.4%
    Expenditure 385 414 7.6%
    Operating Profit (EBDIT) 265 304 14.7%
    Operating Profit Margin (%) 40.8% 42.3%  
    Interest 2 4 60.0%
    Depreciation 24 24 1.4%
    Profit before Tax 252 488 93.9%
    Tax - 7  
    Profit after Tax/(Loss) 252 482 91.3%
    Net profit margin (%) 38.8% 67.1%  
    Diluted number of shares (m) 68.6 68.6  
    Diluted Earnings per share* 14.7 28.1  
    P/E (at current price)      
    *(annualised) 21 11  

    The company currently derives 43% of its revenues from e-business and 7% from CRM while the balance 50% of revenues come from low value added work (30% from legacy and 20% from client-server). 35% of its revenues are from offshore development and the balance from onsite. The company's future operating margins will depend on its ability to move up the software value chain.

    During the quarter Silverline has acquired the US based e-business solutions company SeraNova for US $ 99 m in an all stock deal. The acquisition is expected to build strong synergies between the e-business capabilities of SeraNova and the low cost delivery model of Silverline. The combined entity will also have the largest sales and delivery infrastructure in the US.

    SeraNova carries accumulated losses of US$ 7 m along with around $ 14 m in outstanding loans from its parent company, Intelligroup. SeraNova is involved in the design and implementation of Internet based software applications, catering mainly to Fortune 2,000 companies. Its top two customers (American Express and Volkswagon) account for around 54% of revenues. Thus the risk from client concentration is high since loss of any one client will have a significant impact on its financials. The company had earned revenues of $36 m as on December 1999. It is projecting to earn $72 m for the current year. Nevertheless, the key question remains how the two companies, with disparate salary structures and possibly overlapping marketing and sales structures, will smoothly integrate into one team without any employee attrition.

    We feel that the price paid by Silverline at 1.6 times forward revenues of SeraNova is on the higher side. The ratio fixed at 0.35 means that the equity dilution for Silverline will be around 14%, diluting the earnings of Silverline substantially. The management, however justified the acquisition on the basis of a strong project pipeline.

    Silverline has recently raised US$ 125 m through an ADS issue. The company has utilised $ 12.5 m cash in acquiring 6% strategic stake in TIS Worldwide and $ 22 m for the acquisition of SKY Capital International.

    At the current market price of Rs 310 Silverline is trading at a P/E of 11 times its 3QFY01 annualised earnings. The company's future valuations depend on its ability to generate returns on the amount invested by it. Also it will have to utilise its excess cash efficiently in order to maintain its high growth rate.



    Equitymaster requests your view! Post a comment on "Silverline: Impressive results but…". 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

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    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.

    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.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    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


    Apr 19, 2012 (Close)


    • 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