Mahindra Satyam is a leading information, communications and technology company providing top-class business consulting, information technology and communication services. The development and delivery centers, of the company, in the US, Canada, Brazil, the UK, Hungary, Egypt, UAE, India, China, Malaysia, Singapore and Australia serve numerous clients, including several Fortune 500 companies.
The company is in the process of restating the accounts of the last few years and is expecting a refund of the huge taxes the company had paid on the inflated financials of the company. The amount could be around Rs.300crore. During Jan’09-Mar’31, the company had total collections of Rs.2, 064crores.
Emerging out of the multi-crore accounting scandal, the company is registering profits, as per the management, and is sitting on a cash pile of nearly Rs.3, 000crore, infused by its promoter Tech Mahindra.
The company has no liabilities and has even paid off all the debt including those taken from banks.
A majority of the capital brought in by Tech Mahindra is still unused.
Mahindra Satyam has managed to retain talent and important clients despite the scam which shackled the top management about 18 months ago. FIFA world cup contract bagged before the scam was retained by the company through the entire period of turmoil. If this is not proof enough of the enormous talent and management depth at Satyam then consider that not only has the company retained a majority of its existing clients but also continuously added new ones over the last eighteen months. For instance the company has bagged contracts valued at $8.17 million in the Middle East-North Africa region in the banking, financial services and insurance sector.
It has several prestigious relationships with large multinationals from the pre-scam days which are helping it move forward. This includes contracts worth 135 million dollars with Qantas and 12 million dollars with Suncorp.
The company has strengthened its Asia Pacific sales operations thereby reinforcing its business commitment to the region.
Accordingly, it has augmented its regional sales team with several new executive appointments and has opened new sales offices in Australia-Canberra and Perth
The Canberra sales force will focus on public sector business and the Perth team aims to leverage on the indigenous crude oil and natural gas boom in Perth
In the next 3 years, the company plans to invest in key capabilities and expand its business. The company intends to invest extensively in key verticals that contribute sizeable revenue to Satyam such as telecom, manufacturing, banking financial services and insurance and health care.
Apart from this the company will also explore new markets- Japan , Brazil
Since the accounts are yet to be restated we have to derive other yardsticks to arrive at what could possibly be the fair valuation of Satyam. One such yardstick can be the market cap/employee head count ratio. Since Satyam is a large company – in size and scale it can be compared to the other big boys i.e Infosys, Wipro, TCS, HCL Tech etc. Also as demonstrated earlier it has strong management credentials which can be compared to the other majors. Hence market cap/manpower will give not an accurate but the closest possible estimate to the possible valuation of Satyam post the submission of accounts, due in September this year.
Headcount | Mkt cap | mkt cap/head count | |
Satyam | 28000 | 10,152 | 0.36 |
Infosys | 109882 | 164,890 | 1.50 |
TCS | 140000 | 171,893 | 1.23 |
Wipro | 112925 | 107,116 | 0.95 |
In the above table Satyam, Infosys and TCS are the pure software companies while Wipro has an 11% contribution from other businesses. Comparatively Satyam seems to be at a much lower valuation and has the potential of doubling from the current levels.
Please note that this or any other analysis of this stock will not present a true and fair picture of the company as the last audited quarter results available are of September, 2008. True picture will emerge only by the end of September, 2010 when the reworked accounts are presented by the new management.
So to that extent buying in this stock is recommended only for investors with a penchant for risk.
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