Mahindra Satyam reports loss due to lawsuit settlements (Lead)

May 23rd, 2011 - 8:03 pm ICT by IANS  

Ramalinga Raju Hyderabad, May 23 (IANS) Mahindra Satyam, formerly Satyam Computers, has posted a net loss for the quarter ended March 31, 2011, due to huge exceptional expenditure on account of settlement of lawsuits in the US.

The software services exporter reported a net loss of Rs.327 crore during the fourth quarter, compared to net profit of Rs.59 crore in corresponding quarter last year.

The company also posted a net loss of Rs.147.3 crore during the fiscal 2010-11 as compared to net loss of Rs.125 crore last year.

Mahindra Satyam chairman Vineet Nayyar told a news conference here Monday that the losses were on account of “exceptional items” to the tune of Rs.571.5 crore related to restructuring, forensic investigation and litigation support, class action settlement
consideration and provisioning for impairment losses in subsidiaries.

For the full year, the exceptional expenditure was to the tune of Rs.641 crore, he said. The losses were mainly on account of $125 million the company paid out to settle US Securities and Exchange Commission and unpaid lawsuits.

The revenues rose 7.5 percent to Rs.1,375.3 crore during the fourth quarter from Rs.1,279.3 crore during the similar quarter of the previous fiscal.

The EBITDA margin before exceptional items was Rs.178 crore during Q4 against Rs.82 crore margin of the previous quarter.

“Q4 is yet another quarter that demonstrated continuing progress on growth, operational efficiencies, high delivery standards and investments into capability building,” said Nayyar.

The revenues for the year were Rs.5,145 crore, down 6.1 percent year-on-year. With all the lawsuits “by and large” cleared, the company hopes to reach industry level in profitability rate in next 18 months.

“The company has done away with all its liabilities and therefore loss which happened on account of these exceptional charges will not be repeated,” he said.

Nayyar said the company doubled its margins to 13 percent during the fourth quarter and its endeavour would be to maintain the same margin in the first quarter of this fiscal.

Nayyar, who always compares Mahindra Satyam to a patient which had near death experience, said it has been nursed back to health.

He said the results should be viewed in the context of three-year journey that the company had set for itself.

“These results show we are on the right trajectory. At the end of three-year journey I am confident that we would be ready to enter marathon,” he said.

Nayyar said the company would not be making any provisions for exceptional items for the next quarter and it was also in talks with the Income Tax department over its claim.

“The claim is based on fictitious income declared by the previous management,” he said.

Satyam had shocked corporate India in January 2009 when its former chairman and founder Ramalinga Raju admitted that he overstated profits and falsified assets over the years.

Tech Mahindra acquired the Hyderabad-based company in April 2009 and renamed it Mahindra Satyam.

The firm’s CEO C.P. Gurnani said 10,000-12,000 employees would be recruited over the next four to five quarters. “It will be a fair mix of both the campus recruitment and lateral hiring,” he said.

The company’s headcount stood at 30,000 during the fourth quarter while the attrition rate came down from 25 percent to 22 percent. It added 434 associates during the fourth quarter and 1,729 in the whole year.

Mahindra Satyam added 30 new logos during the last quarter but it has reported only 12 new account additions as for any new account to be recognized the billing has to be $250,000.

Gurnani said the company has 230 active customers, and the deal pipeline has improved over last two to three quarters.

During the last quarter, Americas and Asia Pacific contributed 65 percent of revenues. Among the verticals manufacturing, technology, media and entertainment contributed to the growth.

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