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● Tech Mahindra (TechM) and Mahindra Satyam (MSat) held their
first joint analyst meet on Friday.
● Management indicated that overall IT spend in the telecoms
vertical could rebound in 2H FY12. Further, it expects to benefit
from the trends of convergence and increased offshoring in
developed markets; and greenfield implementations and
introduction of revenue-boosting products in emerging markets. It
also stated that its capabilities were world-class and that its win
ratio was well over 50% in any significant telecoms deal.
● Management was confident of strong growth in non-BT revenues
and highlighted potential for improving margins by right-sizing the
employee pyramid.
● On MSat, management indicated that it was on track to achieve
industry-level operating margins and revenue growth in one-two
years. Given some pending legal/regulatory issues, it expects that
merger process could be completed earliest by May 2012.
First-ever joint analysts meet
Tech Mahindra (TechM) and Mahindra Satyam (MSat) held their first
joint analyst meet on Friday. Speakers included Mr Vineet Nayyar,
CEO of TechM and Chairman of MSat, Mr C P Gurnani, CEO of MSat
and the business heads of both companies.
Telecoms vertical to recover in 2H FY12
Management indicated that overall IT spend in the telecoms vertical
could rebound in 2H FY12. Further, it said that the addressable
market for offshore IT vendors such as TechM had increased
significantly after the financial crisis as operators in developed
markets were under pressure to cut costs. It also expected to benefit
from the trend of convergence of telecoms, media and internet. In
emerging markets, implementing greenfield projects and introduction
of new products to boost revenues would be the key drivers for growth.
It also stated that its telecoms capabilities were world-class and that
its win ratio was well over 50% in any significant deal in telecoms.
Separately, management said that telecoms operators were
increasingly looking upon their IT vendors as ‘partners’ and wanted to
share both risks and benefits of projects. Consequently, the
commercial model was evolving from time- and material-based pricing
to outcome-based pricing.
Non-BT business to drive revenue growth
Management stated that revenues from its largest client, BT, could
continue to stagnate but it was confident of growing revenues from
other clients. Management highlighted that its non-BT revenues had
grown at a 25% CAGR (in US$ terms) over FY08-11 despite the
recession.
Employee pyramid to be key driver for margin improvement
Management indicated that improving the employee pyramid by hiring
more freshers would be a key lever for improving margins at both
TechM and MSat. For instance, it stated that only 20% of MSat’s
employees were less than 30 years of age.
While, it expected to see improved realisations due to better servicemix, management did not expect significant like-for-like price
increases.
Mahindra Satyam turnaround on track
Management indicated that it was on track to achieve industry-level
operating margins and revenue growth in one-two years.
According to management, the average deal size was increasing and
it was seeing embargoes lifted from a number of clients; there was
significant potential for improvement on this front.
Management mentioned that Mahindra Satyam had never operated at
an EBITDA margin of over 3%; hence, it believes that achieving
EBITDA margin of 13% in 4Q FY11 was a significant achievement.
Merger earliest by May 2012
Management also stated that it could start the merger process only
after the settlement of some pending issues namely: (1) pending
litigation by Aberdeen and Satyam group companies and (2) tax
demand from the Indian government. It believes that it has a strong
position in each of these cases. However, it expects that even in the
most optimistic scenario, it was unlikely to complete the merger
process before May 2012.
It believes that synergies will mainly be on revenue front and that cost
synergies had been largely realised.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● Tech Mahindra (TechM) and Mahindra Satyam (MSat) held their
first joint analyst meet on Friday.
● Management indicated that overall IT spend in the telecoms
vertical could rebound in 2H FY12. Further, it expects to benefit
from the trends of convergence and increased offshoring in
developed markets; and greenfield implementations and
introduction of revenue-boosting products in emerging markets. It
also stated that its capabilities were world-class and that its win
ratio was well over 50% in any significant telecoms deal.
● Management was confident of strong growth in non-BT revenues
and highlighted potential for improving margins by right-sizing the
employee pyramid.
● On MSat, management indicated that it was on track to achieve
industry-level operating margins and revenue growth in one-two
years. Given some pending legal/regulatory issues, it expects that
merger process could be completed earliest by May 2012.
First-ever joint analysts meet
Tech Mahindra (TechM) and Mahindra Satyam (MSat) held their first
joint analyst meet on Friday. Speakers included Mr Vineet Nayyar,
CEO of TechM and Chairman of MSat, Mr C P Gurnani, CEO of MSat
and the business heads of both companies.
Telecoms vertical to recover in 2H FY12
Management indicated that overall IT spend in the telecoms vertical
could rebound in 2H FY12. Further, it said that the addressable
market for offshore IT vendors such as TechM had increased
significantly after the financial crisis as operators in developed
markets were under pressure to cut costs. It also expected to benefit
from the trend of convergence of telecoms, media and internet. In
emerging markets, implementing greenfield projects and introduction
of new products to boost revenues would be the key drivers for growth.
It also stated that its telecoms capabilities were world-class and that
its win ratio was well over 50% in any significant deal in telecoms.
Separately, management said that telecoms operators were
increasingly looking upon their IT vendors as ‘partners’ and wanted to
share both risks and benefits of projects. Consequently, the
commercial model was evolving from time- and material-based pricing
to outcome-based pricing.
Non-BT business to drive revenue growth
Management stated that revenues from its largest client, BT, could
continue to stagnate but it was confident of growing revenues from
other clients. Management highlighted that its non-BT revenues had
grown at a 25% CAGR (in US$ terms) over FY08-11 despite the
recession.
Employee pyramid to be key driver for margin improvement
Management indicated that improving the employee pyramid by hiring
more freshers would be a key lever for improving margins at both
TechM and MSat. For instance, it stated that only 20% of MSat’s
employees were less than 30 years of age.
While, it expected to see improved realisations due to better servicemix, management did not expect significant like-for-like price
increases.
Mahindra Satyam turnaround on track
Management indicated that it was on track to achieve industry-level
operating margins and revenue growth in one-two years.
According to management, the average deal size was increasing and
it was seeing embargoes lifted from a number of clients; there was
significant potential for improvement on this front.
Management mentioned that Mahindra Satyam had never operated at
an EBITDA margin of over 3%; hence, it believes that achieving
EBITDA margin of 13% in 4Q FY11 was a significant achievement.
Merger earliest by May 2012
Management also stated that it could start the merger process only
after the settlement of some pending issues namely: (1) pending
litigation by Aberdeen and Satyam group companies and (2) tax
demand from the Indian government. It believes that it has a strong
position in each of these cases. However, it expects that even in the
most optimistic scenario, it was unlikely to complete the merger
process before May 2012.
It believes that synergies will mainly be on revenue front and that cost
synergies had been largely realised.
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