10 reasons why Mahindra Satyam can regain its lost glory

Mahindra Satyam (erstwhile Satyam Computers) seems to be recovering some of its lost glory. The company posted a 56% year on year (YoY) profit growth, well ahead of analyst expectation. An important feature of the result is the sharp jump in operating margin, which now brings it back in same league as that of Wipro and HCL Tech. Little doubt then the stock is trading 6.16% higher.

Following are the 10 reasons why Satyam Computers can regain its lost glory:

1.   Strong constant currency revenue growth of around 4% on a quarter on quarter basis as compared to a negative growth by Infosys and Wipro.

2.   Profit growth of 56.4% on a YoY basis and -17.1 QoQ. Lower growth on a quarter on quarter basis was due to a tax write back in the previous quarter.

3.   A strong 21.7% operating margin as compared to 17.5% in the previous quarter and 14.8% in June 2011.

4.   Contribution of top 10 clients grew by seven% on a QoQ basis, signifying strong demand.

5.   The company has settled a lawsuit with Aberdeen US and is defending another with Aberdeen UK.

6.   With most of its litigation related expenses provided for, the company paid tax at a rate of 27%.

7.   Unlike Infosys, Mahindra Satyam will be giving wage hikes to its employees from July 1.

8.   Its management has said that its deal pipeline remains strong across all verticals.

9.   Mahindra Satyam’s shareholders have approved its merger with Tech Mahindra in the ratio of 1:8.5.

10.  Tech Mahindra has moved 5.8%, even as analysts expect it to post flat growth when it declares its results on August 9. This indicates that Mahindra Satyam's performance has been the reason for the rise on account of maintaining the price arbitrage.