Analysts lukewarm to Satyam's results announcement

The announcement by fraud-hit Satyam Computer Services that it will announce results for fiscal 2009 and 2010 on September 29 has not cut much ice with the analyst community.

According to one, the future of Satyam would not be greatly better till at least till March 2012.

“There is no way the new management can afford to surprise the market by disclosing or revealing some deeds of the previous management. Any such attempt would go against Tech Mahindra if not Satyam,” a source tracking the company told DNA.

Meanwhile, analysts, too, feel the results would not provide any indication about the current health of the company.

“Satyam has seen client exits and project ramp-downs through much of last fiscal. We believe that quarterly revenue run-rate has likely gone down through that year and the financials of fourth-quarter last fiscal are a more correct barometer of Satyam’s business,” said Bhavtosh Vajpayee and Nimish Joshi, analysts with CLSA Asia-Pacific Markets, in a note on Thursday.

“The absence of fourth-quarter financials will undermine any attempt to forecast future financials for now. Moreover, we do not expect the Satyam management to make any pointed commentary on current fiscal’s prospects and that could likely disappoint the street,” they Vajpayee and Joshi said.

“The single biggest gain of announcement of results is that the obstacle of clients not dealing with a vendor with unknown financials is removed and clients could now begin to engage with Mahindra Satyam post the results event,” said Nishit Jasani and Viju K George of JP Morgan.

Based on their analysis, Jasani and George see net profit in the range of Rs850-900 crore and EPS at Rs7.2-7.6 for the current fiscal.

While employees continued to exit the company till recently, revenue, too, is believed to have taken a proportionate hit.

Though there are indications that the run rate was in the range of about $100 million per month, the consolidated annual revenue is expected to be in the range of $1-1.3 billion.

Even for the year ended March 2011, the company is expected to have a lower run rate and the growth of the company is expected to be lower than the industry growth.

“Optimism in Satyam’s growth prospects is being driven by overall buoyancy in demand seen in the Indian IT sector. However, we do not expect Satyam’s growth to follow the sector prospects in this fiscal or the next,” Vajpyee and Joshi said.

According to them, the revenue deterioration, inability of the company to bag new projects in the absence of published financial results for the past years and hit attrition rate are the key factors that have pulled Satyam back in the competition.