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Mahindra Satyam (MSat) seems to be finally heading in the right direction, following a disappointing FY11 result, which saw both revenue and profits fall (see Mahindra Satyam still struggling). For the first quarter ended 30 June (Q1 FY12), MSat beat market expectations with an operating profit of INR 2.1b (14.7% margin), vs. INR 980m (7.9% margin) the previous year. Revenue meanwhile grew 14.9% to INR14.3b, and this was up 4.3% on the previous quarter. EBITDA profits were also up almost 18% QoQ. Remember, MSat's operating margin was just 5.3% in FY11, the lowest by far in its peer group.
Other good news for MSat is that the margin improvement is taking place alongside growth in headcount (employee numbers went up 2,172 in the quarter to 31,438), meanwhile attrition fell to 17% from 22% in Q4FY10.
There is also more house-tidying to be done around the former Satyam. During 2012 MSat will withdraw its American Depository Share (ADS) listing in the US, because of “the effects of the [former Satyam] fraud on the company’s historical financial statements and its impact on its ability to meet US regulatory requirements.” MSat will continue to be listed on the Indian stock exchanges.
The challenge for MSat is to now ensure that this improving picture is continued through the rest of the year. However this is going to be no easy feat given the economic headwinds that are buffeting the markets. Even then there is much work still to be done if MSat is to get near the 20% FY margin delivered by sister company Tech Mahindra (see here), ahead of their integration late next year.
