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Technology Stocks : SYNTEL (SYNT) - Upcoming Year 2000 IPO
SYNT 40.990.0%Oct 10 5:00 PM EST
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To: JDN who wrote (1716)5/25/1998 8:45:00 PM
From: l. niedzwiecki  Read Replies (3) of 2761
 
Here are some notes I jotted down at the annual shareholders meeting last Monday. These notes were responses to questions asked during the meeting:

1. Affect of U.S. sanctions on India - Mr. Desai stated that the sanctions the U.S could impose fell under two categories: the first is a restriction on credit from the U.S., and the second is a restriction on defense related goods exported to India. Mr. Desai said that any other sanctions beyond the ones stated would take an act of Congress to impose. Furthermore, Mr. Desai said that 95% of revenues were generated in the United States. Mr. Desai finished the question by stating the sanctions have no affect on Syntel's business.

2. Expectations of growth - Mr. Desai said analysts expect Syntel's industry to grow 12% annually and Syntel to grow at twice that rate. Mr. Desai said he feels comfortable with the analysts expectations and that the Syntel team was working to exceed expectations (he smiled after the "exceed expectations").

3. Turnover in the IT services industry - Syntel has experienced 29% annual turnover over an unspecified period of time. Mr. Desai said the industry turnover was between 35-45%. He said turnover was slightly higher in the U.S. than in India.

4. Increase in work visas - Mr. Desai said Syntel has planned its expansion around the increase. He said Syntel would not have a problem if the bill did not pass. This was before the announcement of the passage. I have a feeling that Mr. Desai is pleased with the outcome.

5. Questions came up about acquisitions. Mr. Desai answered with the usual management jargon that basically says "no comment". When the attendees figured out they would not get a straight answer, one fellow asked about the sale of Syntel to another company. Mr.Desai's response was that if the bid was in the shareholder's best interest, he would consider it.

6. The management team did emphasize the push toward higher margin services. Mr. Desai emphasized the growth in Intellisourcing contracts. When asked about Y2K business, Mr. Desai said these contracts allowed Syntel an opportunity for larger, more profitable contracts. He treated the Y2K business as a matter of fact and did not spend a lot of time discussing it.

Mr. Desai was asked to compare Syntel and Complete Business Solutions. He responded by saying CBSL participated in a lower margin business and that CBSL was at the low end of the IT Services food chain.

7. Of the 5.2 million shares float, institutions own 33%. Management is eligible to sell its share, but Mr. Desai did not elaborate.

This was my first shareholder's meeting, so I am not a good judge on how well management presented. I do not have anything to compare to. That said, I feel the presentation was successful in demonstrating that Syntel's management team has a good understanding of its business, a responsible plan for continued growth, and the confidence to execute that plan.

Niedz
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