Corporate News/Software results-Infosys-Satyam Comp-NIIT-Pentafour Soft-DSQ Soft
----------------------------------------------------------------------
(Courtesy:CapitalMakret)
Infosys-Satyam Comp-NIIT-Pentafour Soft-DSQ Soft.
Software Results -Overshooting all expectations
While infotech companies were expected to post excellent quarterly results, the over 100% growth in net profit reported by almost all of them is more than what one hoped for
When most of the software companies posted high growth rates in the first quarter, there was a lingering apprehension as to whether they could be sustained in the subsequent quarters. Even industry majors (like Infosys) had cautioned against high expectations. The exceptional growth was attributed to rupee depreciation also. However, not only were the high growth rates maintained in the second quarter, even the third-quarter results show no sign of slowdown. Thus, software companies are reporting higher and higher growth rates despite the growing base.
Infosys Technologies
-------------------------------------------------------------------------------
Infosys' revenue growth continued to remain strong in the third quarter at 91% with net profit shooting up 120%. The 9-month revenue and profit growth are 99% and 123% respectively, compared to growths of 85% and 62% in 9803. A 1:1 bonus has been declared. 'Growth during this quarter has been encouraging. At Infosys, we clearly see the share of Y2K revenue coming down in this financial year. Our strategy of using Y2K to enter into long- term relationships with our customers has been fairly successful. Today, the business is well-segmented and we are confident of meeting the challenges,' says N R Narayana Murthy, chairman and managing director.
=====================================================================
Infosys Technologies
Income from repeat business contributes 90% of sales
=====================================================================
9812(3) Var.(%) 9812 (9) Var.(%) 9803(12) Var.(%)
=====================================================================
Sales 139.45 91 356.98 99 257.66 85
OPM (%) 40.9 36.6 34.4
Operat. Profit 57.00 123 130.67 116 88.62 65
Interest - - -
Gross Profit 57.00 123 130.67 116 88.62 67
Depreciation 9.12 57 21.47 402 2.75 116
Tax 7.79 419 17.04 32 75.50 5
Net Profit 40.09 120 92.16 123 60.37 62
EPS (Rs)* 100.1 76.7 37.7
====================================================================
* on an equity of Rs 16.02 cr Figures in Rs cr
Source: Capitaline ole
====================================================================
During the third quarter, Infosys' total income from North America was 82%, (as compared to 79% during the corresponding quarter in the previous year). Total income from Europe was 9% (10%).
Among the business segments, software services contributed 97% to the total income, banking and related products, 2%, and treasury income, 1%. In the software services, branded services contributed 20% to the total income, software development, 26%, software maintenance, 24%, software reengineering, 11%, and others, 19%. Under branded services, In 2000 contributed 19% to the total income, while Internet and E-commerce solutions contributed 1%.
The offshore component of the software services income during the quarter was 55%. Income from repeat business was 90%. The top 5 clients contributed 30% of the total income, while the top 10 clients contributed 46%.
Infosys added seven new customers during the third quarter and increased its total employee strength to 3501 as on 31 Dec.'98 from 3167 as on 30 Sep.'98. Software personnel numbered 3150 as on 31 Dec.'98 as compared to 2835 as on 30 Sep.'98.
The company inaugurated its second software development centre at Chennai in Nov.'98. This facility is spread over 23,000 sq ft and can accommodate up to 240 employees. Including this facility, Infosys has 11 development centres in the country. During this quarter, Infosys acquired 20 acres of land at Pune Infotech Park and announced the construction of its software development campus there. Eventually, this facility is expected to accommodate over 2,000 software professionals. The new facility - Infosys Park - at Electronics City, Bangalore, adjoining the existing facility, has been progressing satisfactorily. One more module with a total built-up area of 34,000 sq ft and a capacity to accommodate up to 275 employees was made operational during the quarter. Infosys Park can house up to 825 employees in a total built-up area of 98,000 sq ft. A powerhouse with a capacity to generate 2,000 kVA of power was also commissioned during the quarter. Infosys Park is scheduled for completion by Dec.'99 and will accommodate up to 2,000 software and support professionals.
The company divested 1.36 mln Series A convertible preferred shares (68% of its preferred stockholding) in Yantra Corporation in favour of a venture capitalist. This disinvestment yielded $ 1.5 mln as against a cost of $ 1.02 mln. Infosys' economic interest in Yantra Corporation, as represented by voting rights, fell below 51% subsequent to the disinvestment.
Satyam Computer Services
--------------------------------------------------------------------------------
Satyam Computer Services reported 116% and 92% growth in sales and net profit (before extraordinary items) respectively. However, the growth rate is becoming moderate with every quarter. Sales and net profit were up 166% and 137% in the first quarter and grew 142% and 113% respectively in the second quarter. For the nine months, sales and profits were up 138% and 111% respectively, compared to their respective growth rates of 100% and 43% in 9803. Notably, growth in net profit in 9803 appears to be low because the company adopted accelarated depreciation rates for the first time that year.
Expressing satisfaction about the third-quarter results, B Ramalinga Raju, chairman, commented, 'Several events marked the generally upbeat tone during this quarter. The joint venture with General Electric is a welcome recognition of Satyam's growing expertise, both of its ability to deliver higher value-added services and its excellence in the engineering software area. Another momentous achievement was that Satyam Infoway became the first private Internet service provider in the country. In yet another far- reaching development, a wholly-owned subsidiary for launching Vision Compass, our performance measurement product, is being set up in the US. We hope to introduce this exciting product in the international market formally in the current quarter.'
========================================================================
Satyam Computer Services
Y2K's share continues to decline
========================================================================
Year 9812 (3) Var.(%) 9809 (9) Var.(%) 9803 (12) Var.(%)
========================================================================
Sales 100.42 116 271.13 138 178.49 100
OPM (%) 39.5 38.3 37.7
Operating Profit 39.68 128 103.87 146 67.23 92
Interest 7.12 121 18.63 1431 1.98 111
Gross Profit 32.56 130 85.24 147 55.25 88
Depreciation 11.65 260 28.42 268 22.89 265
Tax 1.10 86 3.30 131 2.39 9
Net Profit 19.81 92 53.52 111 29.97 43
EPS (Rs)* 30.5 27.4 11.5
========================================================================
* annualised on an equity of Rs 26.02 cr
Figures in Rs cr Source: Capitaline Ole
========================================================================
The share of the Y2K business continues to decline;it is now only 28% of the total revenue (cf. 29.9% in Q1). An important aspect is that almost all the current Y2K projects being executed are from existing clients. The company also completed its second Euro project successfully. Non-legacy projects' share was almost 40% of the revenue (cf. 38.6% in Q1).
Offshore projects continue to be the mainstay of the business and generate 73% of the revenue (cf. 75% in Q1). Fixed-bid projects accounted for 24% of the revenue (cf. 29.6% in Q1). The share of North American business was 80% (cf. 79.7% in Q1).
Nine new customers were added during the current quarter. The quarter also saw the setting up of yet another dedicated India Development Centre(IDC), this time with the world's largest manufacturer of earth-moving equipment. The other IDCs continue to grow satisfactorily, with the largest one now employing over 400 people.
The 50:50 joint venture with General Electric's Industrial System group, Satyam-GE Software Services, is now operational. It will undertake CAD/CAM design, embedded software development and man-machine interface design projects. It is GE's goal to make this jv its world centre for new product introductions for its industrial systems business. Almost the entire work executed here would involve designing and writing codes for new products.While this jv will not affect Satyam's business with other GE units under its current contract, it will enhance Satyam's visibility with other GE divisions.
Employee strength was 3510 as on 31 Dec.'98 (cf. 3210 on 30 Sep.'98), of which 3059 were technical staff (cf. 2838 last quarter).
The expansion project undertaken during the current financial year is in an advanced stage of completion. It includes the setting up of infrastructure for 2000 software and 200 support service personnel in six Indian and seven overseas development centres. All these facilities are expected to be fully operational by Mar.'99. Of the total investment of Rs 130 cr, almost Rs 95 cr has already been spent.
NIIT
--------------------------------------------------------------------------------
NIIT has begun 9909 with a bang. It reported a 109% jump in net profit (over the revenue growth of 45% in the first-quarter 9812) as against a growth of 62% in profit and 41% in revenues recorded in 9809. A 1:2 bonus has been declared.
The record growth in profits in Q1, traditionally a lean quarter, has been marked by a spectacular performance in international revenues, which grew 71% to touch Rs 83 cr and constitute 57% of the total revenues. The US business surged ahead with a 88% growth and was supported by healthy growths in Europe (55%) and Asia Pacific & Japan (62%). There was a 53% growth in the software business, leading to revenues of Rs 73.6 cr, a growth of 98% in educational multimedia and 30% growth in education and training.
==========================================================
NIIT
Thrust on software is paying off handsomely
==========================================================
9812 (3) Var.(%) 9809 (12) Var.(%)
==========================================================
Global Revenues 144.73 51 648.46 51
Net Revenues 95.46 45 457.62 41
OPM (%) 20.3 33.5
Operating Profit 19.34 33 153.3 740
Interest 2.86 -36 10.65 -50
Gross Profit 16.48 631 42.72 61
Depreciation 6.40 16 29.37 82
Tax 1.50 200 5.00 -9
Net Profit 8.58 109 108.35 62
EPS (Rs)* 60.0# 42.0
===========================================================
* on an equity of Rs 25.77 cr Figures in Rs cr
# projected for FY 9909 Source : Capitaline Ole
===========================================================
Commenting on NIIT's record performance, Rajendra S Pawar, managing director, says, 'Our strategy of enhancing NIIT's thrust on the software business in the international market has resulted in a growth of 71% in the international business. NIIT's globalisation strategy of establishing a local presence in many markets is a planned risk-management strategy.'
NIIT enhanced its presence in the international markets by expanding its education and training network to over 780 education centres all over the world. It dedicated its Mumbai software factory to British Airways for software development.
Pentafour Software
--------------------------------------------------------------------------------
A 91% growth in sales has resulted in a 103% rise in net profit in the third quarter, boosting their nine-month growth rates to 77% and 61% respectively. The rates are naturally much better than the 67% growth in sales and 46% growth in net profit reported last year. Declares,V Chandrasekaran, chairman and managing director, 'We are confident of posting a healthy growth of a minimum 50% for the next two years.'
The 2D/3D/special effects SBU has contributed 42.4% to the turnover. The multimedia division has bagged orders from New Media Ventures,US, and Interactive Film Works, US, to name a few. This SBU has an order book of US$ 57 mln, to be executed by Mar. 2000.
=======================================================================
Pentafour Software
Order book stands at $ 140 mln
=======================================================================
9812(3) Var.(%) 9812(9) Var.(%) 9803(12) Var.(%)
=======================================================================
Sales 133.84 91 347.98 77 284.56 67
OPM(%) 41.5 41.4 46.5
Operating Profit 55.53 78 143.93 70 132.24 87
Interest 7.98 58 24.71 71 24.93 64
Gross profit 47.55 82 119.22 70 107.31 94
Depreciation 11.8 38 40.33 93 38.94 360
Tax - - -
Net Profit 35.75 103 78.89 61 68.37 46
EPS(Rs)* 83.9 61.7 39.5
=======================================================================
* annualised on an equity of Rs 17.04 cr Figures in Rs cr
Source: Capitaline Ole
=======================================================================
The CBT/CD titles/multimedia products SBU has contributed 8.7% to the turnover. The company's CD titles division brought out 18 new titles during the quarter, in addition to the existing 79 titles. Pentafour has forged a partnership with Stan Lee Media, the media company of the famous comic book icon, Stan Lee, and the creator of such characters as Spiderman and The Incredible Hulk. The order book for the CBT/CD titles/multimedia products segment is US$ 18 mln, to be executed in 15 months. The banking and financial services SBU contributed 8.9% to the turnover and has a pending order book worth US$ 11.71 mln, to be executed in 12 months' time.
The insurance SBU has contributed 9.4% to the turnover. After the success of its life insurance product Pentalife, the company is now giving final touches to its general insurance product, Penta Ensure. The insurance segment's order book is worth US$ 9.34 mln and is to be executed by January next year.
The ERP SBU, providing enterprise solutions, accounted for 30.6% of Pentafour's turnover. During the third quarter, the company bagged orders from Illinois Tool Works,US, Sphere International, UK, Tru Solutions, Japan, and others. Another source of revenue is Penta Works - an ERP solution for small and medium enterprises. The ERP segment's order book is worth US$ 43.95 mln and is to be executed in 15 months.
Pentafour has restricted its exposure to maintenance projects and revenues from Y2K have contributed 5% to its turnover. It has formed a core team to address the Euro single currency issue, in conjunction with IBM and the BIG 5.
An extraordinary general meeting is scheduled for February 1, 1999 to get the approval of shareholders for raising the investment limit of foreign institutional investors from 24% to 30% and an additional limit of 10% for overseas corporate bodies/non-resident Indians. The agenda of the meeting also includes getting shareholders' approval for investment in wholly-owned subsidiaries/joint ventures/ acquisitions in India or abroad. The funds generated from this preferential allotment of equity shares, up to a maximum of Rs 29.3 lac, will be used primarily to pre-pay high-cost borrowings and invest in overseas animation and special effects for multimedia software projects for the films and broadcasting segment.
DSQ Software
--------------------------------------------------------------------------------
With 107% growth in sales and 110% rise in net profit in the third-quarter 9812, DSQ Software's 9-month report shows a 112% rise in sales and 93% increase in net profit. The company had set up dedicated development centres for NEC, NEDCAR, Nippon Systemware and OKI Electric. In the current year, it has added new customers such as Levis, ABN Amro, Volvo, Rover, GE, Sanwa Bank, Aerospatiale-France and Credit Suisse First Boston. In an out- of-court settlement (agreed to on 12 Oct.), the Commonwealth Development Corporation (CDC) has agreed to offload its 19% holding in DSQ Software in favour of the company's promoters. After the agreement, the promoters' stake in the company will increase to over 60%. The company now plans to raise Rs 150 cr before March-end through the private placement/preferential allotment of 85 lac shares of Rs 10 each at a premium of not less than Rs 248. The funds will be utilised to pre-pay its debt.
=========================================================================
DSQ Software
The company boasts of several dedicated development centres
=========================================================================
9812 (3) Var.(%) 9912(9) Var.(%) 9803 (12) Var.(%)
=========================================================================
Sales 63.36 107 158.34 112 116.78 83
OPM (%) 29.8 31.9 33.8
Operating Profit 18.89 87 50.55 79 39.51 51
Interest 1.99 8 7.40 35 6.36 21
Gross Profit 16.90 105 43.15 90 33.15 58
Depreciation 3.24 85 8.97 77 8.23 41
Tax - - -
Net Profit 13.66 110 34.18 93 24.92 64
EPS (Rs)* 27.0 22.5 12.3
=========================================================================
* Annualised on an equity of Rs 20.25 cr Figures in Rs cr
Source: Capitaline Ole
=========================================================================
Coming to valuations, Infosys Technologies, at Rs 4,000, trades at a P/E of 40 times its annualised third-quarter earnings, Satyam, at Rs 916, trades at a P/E of 30 times its annualised third-quarter earnings and NIIT, at Rs 2,017, trades at a P/E of 34 times its projected FY 9909 earnings. DSQ, at Rs 346, trades at a P/E of 12.8 times its annualised third-quarter earnings and Pentafour, at Rs 733, trades at a P/E of 8.7 times its annualised third-quarter earnings. Considering the high rates at which these companies are growing in a scenario where most other sectors are floundering, most of the FII money and domestic funds will continue to go to these software companies this year, and software scrips will continue to post new highs as a result.
|
