New Delhi: Aided by Satyam's strong performance, country's sixth largest software exporter Tech Mahindra today posted a more than three-fold hike in net profit to Rs 302.5 crore for the March quarter, but expressed caution at the economic distress in Europe.
The company's net profit stood at Rs 92.1 crore in the year-ago period. Its revenues grew 12.48 percent in Q4 FY'12 to Rs 1,419 crore from Rs 1,261.5 crore in the same period last year.
"We are passing through uncertain times. Eurozone continues to be in challenge globally and it is not very clear what is the way out. One thing is certain that a few economies are in huge distress and nationalism of individual countries is overtaking prudent economic management," Tech Mahindra Vice-Chairman, MD and CEO Vineet Nayyar told reporters here.
He added that because of the economic turmoil in Greece, there is a huge stress on banking institutions and the economy of Europe and that the future of Eurozone is becoming increasingly uncertain.
"It’s better in the US than Europe but we are seeing elements of slowdown there as well. But it should grow fairly well for us as we have some large partnerships there," he added.
The European region contributed 46 percent to the company's revenues for the quarter ended March 2012, while that from North American market and Rest of the World (RoW) stood at 34 percent and 20 percent, respectively.
"Closer home, the situation is not much better. Fiscal deficit has grown hugely, growth has slowed down, interest rates are up and the rupee is sinking. It is in this situation, that we must (now) look at the IT industry," Nayyar said.
The Indian IT sector has warned of a volatile global economy, which may lead to reduced client spending.
While companies like Infosys and Wipro have given muted earnings guidance for the quarter ahead, industry body Nasscom has till now stuck to its forecast of 11-14 percent growth for the ongoing fiscal.
The Indian players are also facing stiff competition from global giants like IBM and Accenture for outsourcing projects.
For the year ended March 31, 2012, Tech Mahindra's net profit grew 70 percent to Rs 1,095.4 crore, while revenues were up 6.7 percent in FY'12 at Rs 5,489.7 crore.
"Profit after tax for the full year, we closed at Rs 557 crore as our share of profits from Satyam. This shows that our decision to acquire Satyam was a wise one and it is now giving us rich dividends.
"The reason why the rationale of our acquisition is now fully justified by the performance that we have been able to get out of Satyam," Nayyar said.
Tech Mahindra, whose revenues declined 1.7 percent sequentially, may be helped by the weakening rupee.
"We do expect some tailwinds from currency movement in the next quarter," Tech Mahindra CFO Sonjoy Anand said.
The rupee today breached the 56-level. Overall, the depreciating rupee is expected to help IT companies improve their margins as they earn their revenues in dollars. One percent depreciation in the rupee is expected to have a positive impact of about 25-40 basis points on the margins.
Tech Mahindra added 2,430 people during 2011-12, taking the total headcount to 40,763 as of March 31, 2012. Software professional headcount stood at 24,833, BPO at 14,792, while support staff was 1,138. Attrition rate for the quarter stood at 19 percent.
On its merger with Satyam, Nayyar said the boards of both companies will meet next month to approve the merger, following which the proposal will be sent to court for approval. The deal has already got clearance from the Competition Commission.
He said C P Gurnani, the CEO of Satyam, will take over as the CEO and Managing Director of Tech Mahindra as well after the approval from the government, which should take about a month.
Nayyar would continue as Vice Chairman of Tech Mahindra.
Tech Mahindra had acquired Satyam after it was hit by a massive accounting fraud by founder B Ramalinga Raju.
The company, which gets 98 percent of its revenues from the telecom sector, expects 6-7 deals coming up soon.
"We are finding that because of competition, the uncertainty and general distress all around, the optional spend of telecom (players) has come down. This is changing the natiure of business for companies like us because most of the telcos in the US, Europe and Asia are trying to reduce their operational expenditure," Nayyar said.
He added that while the IT spend is coming down and the growth is under pressure, but the desire of reducing operational expenditure will provide huge opportunities.
"We are looking at 6-7 major opportunities in operational areas from USD 25-150 million as total contract value, that is a positive," he added.
Operators like Etisalat DB and STel, whose licences were cancelled by Supreme Court in February this year, were clients of Tech Mahindra.
"We had a Rs 200 crore bank guarantee with Etisalat, which has been encashed. We also had USD 14 million exposure on uncovered guarantee with two players," he said.
The company's non-BT business grew 20 percent, he said adding that BT business has grown two percent sequentially as the re-tendering process is slow and it has been able to retain its share. BT is the largest client for the firm, contributing over 40 percent of its revenues.
The cash and cash equivalent stood at Rs 402 crores as on balance sheet of March 31, 2012. The Board of Directors have recommended a dividend of Rs 4 per share.
Shares of the company closed at Rs 611.90 apiece, down 0.89 percent from its previous close on the BSE.
First Published: Wednesday, May 23, 2012, 18:59