Mahendra Satyam: FY10 numbers may not paint right picture
Experts feel that Mahindra Satyam’s revenue and profit numbers may not mean much unless looked in the backdrop of its audited balance sheet.
By Ranjit Shinde, ET Bureau |
Mahindra Satyam, formerly Satyam Computer, will announce its audited results for FY10 on Wednesday. Several analysts have come out with their estimates of topline and profitability of the company. But according to some, what will matter the most is the management’s commentary on the final figures and quality of assets and auditors’ remarks about the company’s financial statements.
Experts feel that Mahindra Satyam’s revenue and profit numbers may not mean much unless looked in the backdrop of its audited balance sheet. “As an investor, what I wish to know is the accounting treatment given to various dubious financial transactions undertaken by the previous management,” says investment advisor SP Tulsian. He thinks mere understanding of topline and bottomline won’t be enough for a company that has been revived after an era of mismanagement.
In January 2009, B Ramalinga Raju, the then founder-promoter of Satyam, confessed to an accounting fraud to inflate its profits. Since then the company had not declared its results. In its last available full-year report, the company had reported a net profit of `1,689 crore on revenue of `8,473 crore for FY08.
Analysts expect a topline potential of over $1.1-1.2 billion (over `5,250 crore) per annum. In its latest report, Elara Capital mentions that Satyam’s current stock price of around `100 assumes earnings per share of `6 for FY10 at an operating margin of 12%. This means that any numbers below these estimates may hamper the stock price. “The other key metrics to watch out for would be the attrition number as it remains one of the most significant challenges for Satyam,” mentions the report.
Mr Tulsian feels that the FY10 numbers alone may not paint a correct picture since some of the expenses, such as legal charges, might be extraordinarily high apart from being one-time in nature. He thinks that investors should look for the quantity and quality of reported assets and less number of qualifications by auditors. “Least qualifications would mean more clarity of the past transactions,” he highlights.
He feels that the declaration of latest audited numbers may not change much for investors. “All said and done, the company has tangible and intangible assets in place. It’s a debt-free company and no bank has raised claims against the company so far. This ensures that it would be business as usual going ahead.” He also thinks that the current market valuation of the company values its tangible assets and business potential at a multiple of less than one.
Experts feel that Mahindra Satyam’s revenue and profit numbers may not mean much unless looked in the backdrop of its audited balance sheet. “As an investor, what I wish to know is the accounting treatment given to various dubious financial transactions undertaken by the previous management,” says investment advisor SP Tulsian. He thinks mere understanding of topline and bottomline won’t be enough for a company that has been revived after an era of mismanagement.
In January 2009, B Ramalinga Raju, the then founder-promoter of Satyam, confessed to an accounting fraud to inflate its profits. Since then the company had not declared its results. In its last available full-year report, the company had reported a net profit of `1,689 crore on revenue of `8,473 crore for FY08.
Analysts expect a topline potential of over $1.1-1.2 billion (over `5,250 crore) per annum. In its latest report, Elara Capital mentions that Satyam’s current stock price of around `100 assumes earnings per share of `6 for FY10 at an operating margin of 12%. This means that any numbers below these estimates may hamper the stock price. “The other key metrics to watch out for would be the attrition number as it remains one of the most significant challenges for Satyam,” mentions the report.
Mr Tulsian feels that the FY10 numbers alone may not paint a correct picture since some of the expenses, such as legal charges, might be extraordinarily high apart from being one-time in nature. He thinks that investors should look for the quantity and quality of reported assets and less number of qualifications by auditors. “Least qualifications would mean more clarity of the past transactions,” he highlights.
He feels that the declaration of latest audited numbers may not change much for investors. “All said and done, the company has tangible and intangible assets in place. It’s a debt-free company and no bank has raised claims against the company so far. This ensures that it would be business as usual going ahead.” He also thinks that the current market valuation of the company values its tangible assets and business potential at a multiple of less than one.
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