The slowdown seems to have taken a toll on Sliverline’s financials. For 2QFY02, the company has posted a sequential dip in revenues of 21% and the decline in net profits is 21%. On a YoY basis, the company’s topline has declined by 38% and the bottomline has fallen by a significant 72%. These are amongst the most disappointing numbers from the software sector, posted during 2QFY02.
This steep decline in bottomline is due to falling operating margins. While Silverline’s topline has headed south, the employees costs have remained at more or less the same levels. Even the company’s other costs have been stagnant. The only cost head that has shown a decline is software development expenses, which is variable in nature. Silverline’s employee cost is one of the lowest in the industry at 16% of revenues in 2QFY02. The company earlier had laid off employees and rationalized salaries. It’s operating margins have declined from 36% in 4QFY01 to 26% in 2QFY02.
Operating Profit (EBDIT)
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No. of Shares (eoy) (m)
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However, since the Indian operations contributed only 26% to the consolidated revenues in 1QFY02, the results of Silverline Ltd. tell only a part of the story. The consolidated numbers will give clearer picture. The numbers are not available as yet. As soon as we get them we will update the report.
At the current market price of Rs 37, the stock is trading at a P/E multiple of 6 times its 2QFY02 annualised earnings. The valuations are likely to see a down side due to the disappointing performance.
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