Apr

20

TCS Earning Updates FY 2009

Filed Under IT BPO KPO Services, India Business, India Investment Opportunities | 2 Comments

TCS announced its FY09 and fourth quarter results today. Here are the key points:

  • FY09 Indian GAAP consolidated net profit up 4.5% at Rs 5256.4 crore vs Rs 5026 crore last year

  • Indian GAAP consolidated net sales up 21.6% at Rs 27812.9 crore vs Rs 22863.4 crore last year

  • Seven large deals in January-March and added 163 new clients in FY09.

  • Reduced their outstanding debtor days by 12 days

  • TCS made 24,885 campus offers for FY10 and net additions of 13418 staff in Q4 FY09 — so total employee strength is 143761.

  • Employee utilization excluding trainees in January to March was at 79.7% and at 69.4% including trainees.

  • FY09 retail, manufacturing ops sales were at USD 500 million each and forex losses stood at Rs 781 crore (!!)

  • Citigroup BPO added 1.6% to the FY09 volume growth.

  • TCS cash and cash equivalents is Rs 4300 crore as on March 31, 2009

  • TCS board has approved a 1:1 bonus issue (subject to shareholder approval). It pegs the company’s Q4 EPS at Rs 13.54 and said it would pay Rs 5 per share as final dividend.

Our Quick Analysis

The TCS numbers look good given that last 6 months have been bad for new orders, and still sales have increased 21%.

By the way, I hope you saw that:  TCS forex losses stood at Rs 781 crore!Do you think if they outsourced forex hedging to some Forex experts, this could be less? This is such a drag on their performance.

The new client acquisition number is always of interest because that is a leading indicator for future growth. And TCS has done well on that. So its a Buy for tomorrow morning, and also a long-term Buy. Its the short-term that we are not sure if we should hold the share of buy it later once more details in the US come out.

Of course, the Indian may be very volatile in the next few sessions if you factor the US market today…. its going down from the start with the new updates from the banking sector about more write downs.

Jan

7

Satyam reveals Fraud after Fiasco

Filed Under IT BPO KPO Services, India Business, Indian Companies, Indian Government, Indian Stock Market | 4 Comments

Today is a bad day for investors of the Indian capital markets.

Till now the belief was that Satyam’s Board did a fiasco (which is paradonable if the intent was genuine) by doing things without the right process.

But today, Satyam’s chairman has revealed fraud in financial statements over the last few years, which results in over Rs5000 cr of non-existing assests. Now its a crime, not a mistake.

Read this fax letter from: Satyam_Computer_Services_Ltd_070109.pdf

Exactly a week back, we had written of two basic issues in the Satyam fiasco. Lessons From Satyam Investor Issues

The second point was this:
2. The effectiveness of Satyam’s corporate governance

What has come out very clearly from today’s news is that corporate governance was really bad at Satyam — and this is was top 5 Indian IT services companies — so you can well imagine what kind of controls may or maynot be there in smaller companies.

So this is going to put all IT companies under a very tight spot — with unplanned extra expenses in all kinds of auditing reviews.  Everyone has to learn from Infosys - the leading IT services stock — about how to be fully tranparent with investors. SEBI should use Infosys reporting as a guideline.

Investors are likely to now reduce the P/E valuaiton for mid-cap and small-cap companies, because this corporate governance risk just can’t be calculated for smaller companies when a large company like Satyam can do it wrong, despite an army of auditors and market analysts.

Every investor needs to reassess his portfolio companies and check if the parts are adding to the total.  This weak global economy will expose more such examples where things were hidden under rosy valuations and positive market conditions.

Following were the comments of Narayana Murthy (NRN) of Infosys about an hour back:

I am shocked and painfully dismayed at what has happened at an important software company in India. It is a total failure of governance. I only hope that relevant authorities get to the bottom of this and take appropriate action.

It is important to remember that one Satyam does not make the entire Indian software industry. I believe it is an isolated case. I want foreign investors to realise that there are many honest managements and good companies in this country. While what has happened at Satyam is totally regrettable, I believe that it does not represent India. It just represents one individual and one company.

In the short term, investors will start looking deeper into all companies they want to invest in, and rightly so. Once they realise that things are not all that bad and that most companies are decent and managements honest, they will regain their faith.

This too will pass. Investors will consider this as an extreme case. Right now, all of us must conduct ourselves in the most legal and ethical manner. It is a good warning signal for all managements.

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