Key highlights of FY09/10 financials — (a) FY09/10 revenues of
Rs88.1bn/54.8bn, (b) EBITDA (recurring) margins of 3.4/8.3% for FY09/10, (c)
Headcount at ~45/27K at end-FY09/10 – indicated by management, (d)
Exceptional items of ~Rs80bn/4bn in FY09/10, (e) Net cash of -Rs3.3bn,/21.4bn,
in FY09/10.
What does it imply for future? — (a) Revenues for FY10 are largely in line at
~$1.15bn – the quarterly results in November should indicate the run rate, (b)
Pace of EBITDA margin improvement is the key – assuming $1.33bn, revenue and
~19% EBITDA margins in FY12E implies an EPS of ~Rs7.8 , (c) Major loss of clients –
number of clients declined from ~500 pre-event to ~350 despite Satyam
continuing to add clients – it added 44 clients in FY10 as per management.
Other details provided — (a) Exceptional item for FY09 (Rs80bn) includes Rs62bn
of prior period adjustments, (b) Upaid litigation continues over tax liability on the
$70m, which was the settlement amount – currently adjourned, (c) Company is
contesting class action lawsuits – outcome is not determinable at this stage, (d)
TechM-Satyam merger can be initiated only when current financials are known
(Nov 15) and may take 9-12 months to go through.
Our view on TechM remains negative — Our negative view on TechM was premised
on (a) Core business of TechM still being sluggish, (b) Low visibility on Satyam’s
financials and (c) Tough supply side situation in the sector. More clarity on
current margins should emerge when Satyam reports quarterly results on Nov 15.
However, there are downside risks to Satyam’s margin assumption built in to our
report, we believe. Also, clarity over Upaid (the tax liability issue) and class action
lawsuits remains. We remain Sellers of TechM.
No comments:
Post a Comment