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Mahindra Satyam Q2 net soars; Euro crisis a worry

Reuters
Nov 10, 2011 at 03:08pm IST

Hyderabad: Software services exporter Mahindra Satyam warned on Thursday the euro zone debt crisis could dent demand for outsourcing, after beating estimates with a more than 10-fold jump in its quarterly profit.

Europe is the largest market after the United States for India's $ 76 billion information technology industry that gets more than 90 per cent of its revenue from providing services such as developing software applications and managing call centres.

"We are living in uncertain times. The current euro zone crisis has the potential to significantly impact the market conditions," Mahindra Satyam Chairman Vineet Nayyar told reporters at the company headquarters in southern city of Hyderabad.

Mahindra Satyam Q2 net soars; Euro crisis a worry

Mahindra Satyam said net profit for the fiscal second quarter ended September 30 soared to Rs 2.38 billion. (Reuters)

He said the troubles in Europe could hit the near-term outlook for outsourcing demand from overseas clients, but spending on technology services in the long term was expected to remain strong as global corporations look to cut costs.

The company, which was bought by Tech Mahindra in 2009 after it was hit by India's biggest corporate fraud, expects its merger with the parent to be completed next year, Nayyar said.

Mahindra Satyam said net profit for the fiscal second quarter ended September 30 soared to Rs 2.38 billion from Rs 233 million a year earlier, as it added 36 new customers in the quarter.

Analysts had forecast a net profit of Rs 1.98 billion, according to Thomson Reuters I/B/E/S.

The company had reported the year-ago quarterly results for the first time since it was hit by the financial fraud, and was still reeling under client and staff exits.

"This company had a near-death experience two-and-a-half years ago," Nayyar said, referring to the disclosure of the fraud that had threatened the existence of what was then India's No 4 software services exporter.

Satyam Computer, as it was previously known, had stunned investors in January 2009 when its former chairman and founder Ramalinga Raju said profits had been overstated and assets falsified in a fraud allegedly worth more than $ 1.5 billion.

Raju was granted bail last week by India's Supreme Court in the fraud case.

"By the results which we are giving today, I think it would be safe to assume that the period of convalescence is now almost over and we are back to health," Nayyar said. "We are ready and we will give the competition the run for the money."

Mahindra Satyam competes with bigger local rivals including Tata Consultancy Services and Infosys Ltd as well as global majors such as IBM and Accenture for winning large outsourcing contracts.

Tata Consultancy, India's top software services exporter, on Wednesday announced a $ 2.2 billion order, its second-largest ever, and said its overall business pipeline continues to be positive despite a tough economic environment.

Indian markets were closed on Thursday for a public holiday.

Shares in Mahindra Satyam, which has a market value of $ 1.7 billion, are up 10 per cent this year, outperforming a nearly 17 per cent fall in the sector index and 15 per cent fall in the Mumbai market.

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