Mahindra Satyam, erstwhile Satyam Computer Services, reported on Monday its first quarterly earnings since the July-September quarter of 2008.In January 2009, it was plunged into turmoil after its founder, and the then chairman, B Ramalinga Raju, confessed to overstating profits for years.
In September, Mahindra Satyam reported results for the year ended March 31, 2010.
The Hyderabad-based company, which reported on Monday first and second quarter results, said net profit fell to Rs 23 crore (Rs 230 million) in the three months ended September from Rs 98 crore (Rs 980 million) in the previous quarter ended June, while revenue declined to Rs 1,242 crore (Rs 12.42 billion) from Rs 1,248 crore (Rs 12.48 billion).
"The dip in net profit in the second quarter was on account of employee costs. In the first quarter, we had forex gains, which were less in the second," chief financial officer S Durgashankar said.
The company's headcount rose from 27,722 in the first quarter to 28,068 in the second quarter.
The company's business process outsourcing arm contributed Rs 25 crore (Rs 250 million) each quarter.
The Company Law Board, in its orders on June 30 and July 6 of this year, exempted Mahindra Satyam from publication of financial results for the quarters ended from December 31, 2008, to March 31, 2010, and permitted to publish the financial results from the quarter ended June 30, 2010, along with the financial results for the quarter ended September 30, 2010.
Growth will be slow
On the projections for the next two quarters, chief executive officer C P Gurnani said, "There are still six months left and these two quarters will be of slow recovery.
"The US still accounts for 60 per cent of our business. There is still a large headroom for growth. There are operating levers."
Stating that synergies between Mahindra Satyam and Tech Mahindra should be further optimised, Gurnani said the company's current services offerings, too, needed to be further fine-tuned.
Merger will be delayed
The company is in consultation with various board members and discussions, too, are on with various law firms for the merger with parent Tech Mahindra, but the merger could take another year.
"The earlier indication of November 15, 2010, was too fast. We are in the process of consultation and we are trying to see what are the wrinkles to iron them out.
"It is a process which takes at least a year. It (merger) cannot happen in a hurry. I believe it (merger) will go till the
end of next year," said chairman Vineet Nayyar.
Challenges still remain
Nayyar said the challenges for the company were not yet over. "We are still at a cusp. You will see, in absolute terms, legal challenges, class action suits, which we will face. There is a challenge of competition and stigma hangover too.
Now, the company is rightly poised and in the next two years, it will flourish," he said.
Nayyar said the attrition rate was 25 per cent and the company had raised pay by 15 per cent to retain talent.
He said the utilisation was 71 per cent, which was a conscious choice that their utilisation needed to be low. "I believe C P (C P Gurnani) would initiate measures to go for full utilisation in the coming months."
'Satyam as a patient'
"Please see Satyam as a patient. It is in an ICU (Intensive Care Unit) for almost a year. The good news is that most of the damages have been repaired", Nayyar said.
According to Gurnani, there is huge traction in the discrete manufacturing space and financial services.
"The Asia-Pacific market has shown substantial growth. Earlier, there were a lot of clients, who had put us on hold.
"Now, we have reached the threshold, which will allow us to approach them with confidence. On new deals, the typical sales cycle is four to six months and we hope to bag good amount of new logos in the next two quarters," Gurnani said.
During the last two quarters, Mahindra Satyam added nine new accounts.
CBDT under consideration
Mahindra Satyam had filed a petition before the Central Board of Direct Taxes, requesting for stay of demands for financial years 2002-03 to 2007-08, aggregating Rs 503.2 crore (Rs 5.03 billion) till the correct quantification of income and taxes payable is done for the respective years.
On the status of the petition, Nayyar said, "As it is said in legal parlance, it is under serious consideration."
To hire 4,000 in six months
Gurnani said the company was looking at augmenting its workforce. It would hire about 5,000 young graduates, recruitment for which would begin from next financial year.
"To meet our regular business requirements, our human resources team will be hiring about 4,000 professional in the next six months."
