Satyam Computers

The main reason for this improved performance has been the companys overseas operations taking a big leap. It added a bunch of reputed multinational companies to its client list, and the biggest among them being General Electric. Other important clients include AT&T, Goldman Sachs and Northwest Airlines. The company is also putting emphasis on the Y2K project (year 2000, millenium bug)line, the total global market of which is worth $300 billion.

However, the companys net profit has fallen short by 19.5 per cent against the projection of Rs 25.40 crore made during the rights issue in 1995. The main reason for this shortfall is the increase in interest burden and depreciation. While interest burden increased by 38.78 per cent to Rs 5.23 crore mainly because of higher working capital requirement, depreciation increased by a whopping 72.56 per cent to Rs 5.53 crore. The increase in depreciation is mainly due to its software technology park, Satyam Technology Center, starting operations.

Increased tax liability by 61.03 per cent to Rs 2.50 crore further affected the profits. Tax was paid at an effective rate of 10.9 per cent against 10.25 per cent in 1995-96. However, in the current year, the tax liability may come down drastically because of the removal of tax on software exports.

Despite a considerable increase in net profit, the earnings did not grow proportionately. This was because of the increase in equity from Rs 22.30 crore to Rs 26.01 crore on account of conversion of Part B of the FCDs allotted during the rights issue.

The stock of Satyam has been witnessing heavy buying interest after the budget. The scrip has gained over 100 per cent, and has moved from Rs 40 to Rs 85. With the prospects of software industry looking bright, the stock may continue its uptrend.