Satyam has long road to revival

Nov 17, 2010 |

Correspondent

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MUMBAI, Nov.16: The stock price of Satyam Computers fell a massive 11.85 per cent on Tuesday to hit a one year low. The fall comes after the company declared a not so good set of financial results on Monday. Analysts tracking the company say that the numbers show the long distance the company still needs to cover, although it did record a profit for the first time after the scam broke out.

There is also an expectation that the company will continue to see pressure on its margins for some time to come. “The company is under pressure on two sides. Given its background, it is forced to offer lower rates to its clients versus peer group firms. Similarly, it needs to offer better salaries than peers to keep talent,” says an analyst who attended the firm’s conference call post the results.

Satyam had seen an operating profit margin of 5.9 per cent in the September quarter, down from 9.7 per cent in the June quarter. Large IT firms such as Infosys and TCS have margins of over 20 per cent. The company had hiked wages by three per cent for onsite employees and 15 per cent for offsite employees during the quarter. “Visibility on revenue growth is poor and the company faces an uphill task in winning large deals,” says IIFL, a brokerage house. IIFL has a ‘sell’ rating on the stock.

On the positive side however, the company is witnessing good traction in service industries such as manufacturing, telecom, media and entertainment, says Angel Broking in its note on the firm.

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