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.
Satyam: One swift move - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Nov 23, 2001

    Satyam: One swift move

    Satyam has made a positive move with the recently announced partnership. Satyam tied up with CSC and according to the terms of the agreement, Satyam will provide software-consulting, design & development services in the areas of ERP, e-Business and legacy system implementation and maintenance for CSC's global customers. The agreement is for a period of three years.

    The software services majors in the west have been facing stiff competition from the Indian companies. While the Indians have been offering same quality of services if not better, they have been able to price them at almost half of what their western counterparts like CSC, EDS and IBM charge. This is due to the fact that employee costs for the Indian companies is lower by one fourth.

    Countering the pricing pressure, especially in the present economic environment seems to be the motivating factor behind CSC’s current move. Thus, this move will give it access to low cost services through the offshore model, which has been pioneered by Satyam. CSC can now offer services to its clients at a lower price.

    (Rs m) 2QFY01 2QFY02
    Revenues 4,119 4,200
    Employees (Nos) 7,826 7,641
    Annual sales per employee 2 2
    Esimated revenues   538

    Satyam will set up dedicated offshore development centers (ODCs) to provide services to CSC's global customers. Satyam expects that over 250 of its employees will work on these assignments in the coming years. Considering the earnings average earnings per employee for 1HFY02, according to our estimates, 250 employees could mean revenues of Rs 537 m (US$ 11 m) over period of one year. Though is very small compared to Satyam’s estimated revenues for FY02 Rs 16,354 m (US$ 340 m). But real advantage is that Satyam will gain access to CSC’s global clients. CSC is the one of the leading global players in the IT services segment with revenues of Rs 480 bn (US$ 10 bn) in FY01. Satyam could reap significant benefits from this move in the future years.

    This could very well be the inflection point in Satyam’s efforts to grow. Satyam at the current price of Rs 215 is trading at a P/E multiple of 16x its FY02 estimated earnings. The company’s stock trades at a discount to its peers due to concerns regarding the company’s management and numerous subsidiaries. The question now is: Is this the first of many to come for the Indian software sector?



    Equitymaster requests your view! Post a comment on "Satyam: One swift move". 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


    Jul 3, 2013 (Close)


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