HYDERABAD/ALKHOBAR, 22 April 2006 — India’s fourth-largest software exporter, Satyam Computer Services Ltd., posted an annual net profit at Rs. 981.9 crore, a growth of 38 percent YoY, but the market felt that the company’s outlook was disappointing, and shares of Satyam fell more than 7 percent to 807.15 rupees in afternoon trading on the Mumbai Stock Exchange, the biggest decline since February 2004.
“The falling prices are a kind of knee jerk reaction. We believe that our results really were not understood,” said Satyam CFO Srinivas Vadlamani, in a telephone interview. “We are very bullish on the performance of the company and very optimistic about the future.”
Satyam forecast revenue growth of 25.2-27.3 percent for the year to March 2007 and earnings per share growth of 18-20 percent to 36-36.6 rupees. Satyam cited charges for stock incentives and salary increases as reason for the forecast. Without the stock incentive expenses, the company expects full-year earnings per share to rise as much as 23.4 percent.
As per Indian Generally Accepted Accounting Principles (GAAP) consolidated financials, Satyam’s revenue for FY 05-06 from software services stood at Rs.4793 crore, and was up by 36.12 percent over FY 04-05. Earning per share (EPS) for the year (excluding profit on sale of stake in Sify) at Rs.30.5 is higher than the guidance of Rs. 30.36.The revenue guidance for FY 07 is expected to be in the range of Rs. 6000 crore to Rs.6100 crore. The EPS guidance for FY 2006-07 is Rs. 36.0-Rs. 36.6.
Revenue for the quarter stood at Rs.1314 crore - a growth of 35.21 percent YoY while net profit was Rs.284.65, up by 38 percent YoY and 5.53 percent sequentially. Volume growth at 6.8 percent was the growth driver in this quarter.
The revenue guidance for Q1, 06-07 is expected to be in the range of Rs.1,359 crore - Rs.1,366 crore. The EPS guidance for Q1, 2006-07 is Rs.8.62- Rs.8.66.
As per US GAAP, the company recorded revenue of $300.7 million and earnings per ADS of $0.39, representing a sequential growth of 6.7 percent and 8.5 percent respectively.
Satyam’s highest management clearly were not expecting the market’s reaction. In a statement issued along with the initial results release, B. Ramalinga Raju, founder and chairman, Satyam said: “I am pleased to report that our performance exceeded the guidance in Q4. It is with a sense of great pride and joy that I report Satyam’s entry into the billion dollar club. Achieving this significant landmark has been possible by the support received from our customers and investors and the hard work of our associates.”
He added, “We believe that the demand will continue to remain buoyant in fiscal 2007 due to increased IT spend by organizations as well as greater acceptance of the global delivery model.”
Recently, the Middle East has been an area of major growth for Satyam, although Saudi Arabia is still not as much of a profit center for the company as other GCC countries such as the UAE.
“We have a lot of interest in doing business in the Middle East,” stated V. Srinivas. “In terms of Oracle implementations we are one of the market leaders. For the current year, our Middle East revenues grew by almost 60 percent.”
Al-Rajhi Bank, Oman Polypropylene, Dubai Holding, Wataniya Telecom and M. H. Al-Shaya are listed as some of Satyam’s GCC reference customers. Under SAGIA regulations, Satyam is in the final phases of opening its own in-Kingdom offices.
Satyam’s management did indicate that the company could consider offering training to Saudi graduates its facilities in India, but it has no interest in setting up development centers in the region.
In 2006-07, Satyam will be investing $75 million in enhancing its infrastructure, including setting up a new development center in North India around Delhi.