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Mahindra Satyam’s profits fall in third quarter

Veronica C. Silva | Feb. 7, 2013
Settlement of Aberdeen claim brings after-tax profits to only US$15 million

Global IT consulting company Mahindra Satyam posted a weaker third quarter for its fiscal year 2012 as a result of a one-time settlement with the UK's Aberdeen group.  

The IT business unit of the Mahindra Group saw its profit after tax fall by as much as 74.1 percent year-on-year to reach only US$15 million for its 2012 third quarter ending 31 December. Consolidated revenues were up 9.6 percent to US$356 million, which analysts said were below expectations.

Last December, Mahindra Satyam agreed to settle claims with Aberdeen Asset Management PLC and its subsidiaries for US$68 million on allegations of fraudulent misrepresentations. The case stems from the 2009 accounting scandal by Satyam Computer Services which was acquired by Tech Mahindra, the IT group of the Mahindra Group. The Aberdeen group claimed that it incurred losses of almost US$300 million because of the accounting fraud.

Analysts

Moneylife India reported that Nomura Equity Research has found the quarterly results to be below expectations. Meanwhile, the Economic Times of India also reported that Kotak Institutional Equities has downgraded Mahindra Satyam to "reduce" from "add."

With the case settled, Mahindra Satyam said the company could now move on to focus on its business. The company is even eyeing further mergers and acquisitions (M&As), but details were not disclosed.

"With the settlement of the Aberdeen suit, the external litigation issues now stand concluded, freeing us to focus even more on the business-ready solutions for our customers. Revenue growth from different verticals reflects our proven capability to enable enterprises to be future ready," said Vineet Nayyar, chairman, Mahindra Satyam.

Gains  

Despite these results, Mahindra Satyam noted some gains for the quarter, including a multi-million managed services contract with an existing unnamed client and a three-year managed services contract with an unnamed client in the health sector.

Mahindra Satyam also cited industry partnerships, including some with Oracle in Europe, the Middle East and Africa.

The company also reported additional headcount of 169 compared to last quarter to bring the total count to almost 37,000. Attrition remained stable at 13 percent for the quarter.

"We continue to strengthen our industry and alliance partnerships and explore multiple avenues for growth, including M&As," said CP Gurnani, CEO, Mahindra Satyam. "The investments we have made to expand our capabilities, combining the strengths of Tech M and MSat, have helped us to build disruptive solutions for the connected enterprise of the future." 

 

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