Satyam FY07 net jumps 43% to Rs 1,405 cr

Hyderabad: Satyam Computer Services beat expectations to record 43% rise in net profit at Rs 1,404.73 crore and 35% growth in top line at Rs 6,485 crore in 2006-07, riding on buoyant trends in offshoring. As per the Indian GAAP numbers for the quarter ended March 2007, the company posted 38.3% rise in net profit at Rs 394 crore while revenues touched Rs 1,779 crore, an increase of 35.4% over the corresponding period previous fiscal.

On the back of strong demand in the market for offshored services, the IT major has pegged its 2007-08 earnings growth at 28% to 30% to touch $1.9 billion.

The Indian GAAP guidance, after factoring in rupee appreciation of 6%, will translate into a revenue growth of 20% to 22% to touch Rs 7,793 to Rs 7,916 crore and an EPS growth of 18% to 20%.

Satyam scrip closed at Rs 476.20 on BSE on Friday, up 6.33% over the previous session.
Satyam's management appears to be conservative about FY08 revenue and EPS forecast following strengthening of rupee verses dollar. In 2007-08, if rupee strengthens this much, it may pull down operating margins by over 200 bps (basis points) for Satyam. However, the company believes that the impact on margins will be muted following scale benefits, currency hedging and 2%-3% rise in billing rates.

Addressing a press conference, Satyam Computer founder and chairman B Ramalinga Raju said: "There has been a significant progress in offshore contribution to 49% of revenue in 2006-07 compared to 45% in 2005-06, driven by double-digit offshore volume growth in each of the quarters." This augurs well for the company since margins are better in offshore activities.

Commenting on margins, Mr Raju said Satyam has been successful in limiting the margin drop to 62 bps in 2006-07 against the guided 100 bps drop. The company's EPS for the fiscal stood at Rs 21.45, up 40.6% from 2006 while EDITDA margins was 23.7%, a drop of about 60 bps over 2006. Satyam is looking at a "flattish" situation in 2007-08 on the operating margins front.

The company reported a sharp drop in attrition rate from 19.2% in FY 06 to 15.7% in FY07.
Satyam has also proposed a capital expenditure outlay of $100 million in 2007-08 for setting up five special economic zones in Vizag, two in Hyderabad, Chennai and Nagpur. These SEZs will drive future growth and expansion for the company particularly in the light of the STPI sunset clause.