X

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: Realigning business - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Nov 26, 2001

    Silverline: Realigning business

    On a consolidated basis Silverline posted very disappointing financials for 2QFY02. The company’s revenues on a consolidated basis grew by 8% YoY and declined 13% sequentially.

    This is due to a 44% sequential decline in the staff business that the company has been phasing out. Silverline’s projects business has registered a 4% sequential growth, which is low compared to industry majors. However, the bad news is that Silverline’s operating margins have taken a hit. This is due to the company not being able to offset the decline in income from staffing by adequately ramping up revenues from other segments.

    For 2QFY02, the company has posted a loss of Rs 312 m (US$ 7 m) due to providing Rs 384 m (US$ 8 m) as restructuring expenses and bad debts. Of the total (Rs 354 m) Rs 249 m (US$ 5.8 m) was provided towards bad debts. For 1HFY02, Silverline has already written off Rs 589 m (US$ 11 m).

    The operating margins declined from 25% in 1QFY02 to 20% in 2QFY02. While the company’s cost of revenues have declined the SGA expenses have increased considerably. The decline in cost of revenues is primarily due to decrease in employee costs as the company has realigned employee as per demand in the current scenario.

    All of Silverline’s revenues streams in the projects business other than package implementation saw growth. This revenue stream saw an 8% sequential decline. This was quite opposite to the trend shown by other software companies. However, the revenues from maintenance exhibited strong growth (16% sequentially), similar to others in the sector. The company added 9 new clients during the quarter. Silverline’s offshore revenues increased by 16% sequentially increasing the contribution from offshore development to 31%. This indicates that the company is moving more projects offshore and should benefit in terms of improved margins in the future if the trend continues.

    (Rs m) 1QFY02 2QFY02 Change 1HFY01 1HFY02 Change
    Sales 2,187 1,908 -13% 3,334 4,095 23%
    Other Income (48) (7) -86% 151 (55) -136%
    Expenditure 1,632 1,515 -7% 2,336 3,147 35%
    Operating Profit (EBDIT) 555 393 -29% 998 948 -5%
    Operating Profit Margin (%) 25.4% 20.6%   29.9% 23.1%  
    Interest - -   - -  
    Depreciation 290 303 4% 164 593 262%
    Profit before Tax 216 84 -61% 985 300 -70%
    Extra-ordinary items (156) (384) 146% - (539)  
    Tax 23 12 -48% 112 35 -68%
    Profit after Tax/(Loss) 37 (312) -936% 873 (275) -131%
    Net profit margin (%) 2% -16%   26% -7%  
    No. of Shares (m) 68.6 86.1   68.6 86.1  
    Diluted Earnings per share* 1.7 (14.5)   20.3 (6.4)  
    P/E (at current price)   -     -  
    *(annualised)            

    Please note: Consolidated numbers for Silverline. Read on the Indian entities numbers.

    The company has revised its revenue guidance for FY02 to Rs 7.5 bn to 7.8 bn (US$ 160 to165 m) down from Rs 9.1 bn to Rs 10 bn (US$190 to 210 m). This translates to the fact that Silverline has revised its topline growth figures from the previous range of 22% to 35% to 3% to 6% currently. Silverline expects to earn Rs 5.7 bn to Rs 6 bn (US$ 120 to 125 m) from the solutions business. The operating income is expected to be Rs 1.4 bn to Rs 1.6 bn (US$ 30 to 35m). The operating margins, therefore, is expected to be in the range of 19% to 21%. The figure is very low compared to the industry average of 33%.

    Obviously, the management’s revision in guidance is based on the premise that economic environment has become tougher. While it is de-emphasizing on the staffing business the other areas are not providing such a significant growth opportunity to offset the loss in revenues from staffing. At the current market price the stock is trading at a P/E multiple of 10x 2QFY02 annualised earnings (Indian entity’s earnings). The valuations should remain range bound based on the performance. However, in the recent past tech stocks have gained quite sharply. This could further improve Silverline’s valuations.

     

     

    Equitymaster requests your view! Post a comment on "Silverline: Realigning business". 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 Important Innovation in Finance Since Gold Coins(Vivek Kaul's Diary)

    Aug 10, 2017

    Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.

    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?

    5 Steps To Become Financially Independent(Outside View)

    Aug 16, 2017

    Ensure your financial Independence, and pledge to start the journey towards financial freedom today!

    More
    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

    SILVERLINE TECH SHARE PRICE


    Apr 19, 2012 (Close)

    TRACK SILVERLINE TECH

    • 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

    MARKET STATS