It’s hard work ahead for Mastek
Mastek’s March 2007 quarter performance indicates that it will have to work hard to maintain its business profitability after its exit from its joint venture with Deloitte Consulting.
By TNN |
Mastek’s March 2007 quarter performance indicates that it will have to work hard to maintain its business profitability after its exit from its joint venture with Deloitte Consulting. Though this JV contributed just 10-15% of Mastek’s revenues, it had a positive effect on profitability due to higher margins.
The JV delivered a higher operating margin (13.3%) during the fourth quarter compared to the total business (11.1%). Its relatively smaller size ensured that operating margin did not fall significantly, but net profit, without considering the JV’s contribution, grew 2.4% on a sequential basis. That is much lower than the reported 8.9% growth in net profit.
The termination of the JV not only means loss of a lucrative revenue stream but has also reduced revenue visibility to that extent. Mastek’s dependence on its top clients will increase. In the March quarter, it earned 74% of its total revenue from top five customers.
While the company expects flat revenues in the next quarter owing to stronger trend in rupee against the dollar, net profit is expected to grow 8.5% sequentially on account of higher utilisation of resources.
The company is also optimistic about its US operations, which saw a robust growth of 27% during the March quarter. On the flip side, it also increases Mastek’s exposure to rupee-dollar fluctuations, since majority of the revenue at present is realised in UK pounds.
Ravi Ananthanarayanan & Ranjit Shinde
The JV delivered a higher operating margin (13.3%) during the fourth quarter compared to the total business (11.1%). Its relatively smaller size ensured that operating margin did not fall significantly, but net profit, without considering the JV’s contribution, grew 2.4% on a sequential basis. That is much lower than the reported 8.9% growth in net profit.
The termination of the JV not only means loss of a lucrative revenue stream but has also reduced revenue visibility to that extent. Mastek’s dependence on its top clients will increase. In the March quarter, it earned 74% of its total revenue from top five customers.
While the company expects flat revenues in the next quarter owing to stronger trend in rupee against the dollar, net profit is expected to grow 8.5% sequentially on account of higher utilisation of resources.
The company is also optimistic about its US operations, which saw a robust growth of 27% during the March quarter. On the flip side, it also increases Mastek’s exposure to rupee-dollar fluctuations, since majority of the revenue at present is realised in UK pounds.
Ravi Ananthanarayanan & Ranjit Shinde
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