Citisoft likely to turn around this year

Citisoft Plc, the wholly-owned subsidiary of Satyam Computer Services Limited, is expected to turn profitable this year.

Citisoft is a specialist business and systems consulting firm that focuses exclusively on investment management. Satyam had acquired 75 per cent stake in the UK-based Citisoft in May 2005.

The consideration for the acquisition involves a guaranteed payment of $23.2 million payable over a three-year period besides a performance-based payment of up to $15.5 million, to be paid over a three-year period. On June 29, 2006, Satyam acquired the remaining 25 per cent shareholding of Citisoft.

From May 12, 2005, to June 30, 2005, Citisoft made a net loss of $0.14 million with net revenues of $2.05 million. For the quarter ended September 2005, it recorded a net loss of $0.1 million and net revenues of $3.74 million.

In the next quarter, its net loss increased to $0.42 million with net revenues of $3.49 million. For the year ended FY06 (from May 12, 2005 to March 31, 2006), it registered a net loss of $4 million on revenues of $13 million.

The financial year of FY07 has started on a positive note for Citisoft as it has pruned its net loss to $0.08 million for the quarter ended June 30, 2006 on net revenues of $3.66 million. Ram Mynampati, president of healthcare and commercial businesses, Satyam, told Business Standard, "Citisoft will turn positive this year."

Incidentally, Satyam's other subsidiaries like Nipuna Services Ltd and Satyam Computer Services (Shanghai) Company Ltd have also been making losses. For the quarter ended June 30, 2006, Nipuna registered $1.34 million net loss, while the Shanghai subsidiary made a net loss of $0.39 million.

According to TR Madan Mohan, director-consulting, ICT practice, Frost & Sullivan, "Satyam's subsidiaries are operating in areas that have the potential to grow. For instance, Nipuna has been a good investment. Satyam's acquisitions have also not been wrong choices. Besides, it would typically take 2-3 years to integrate two different companies. So Satyam should be given the benefit of doubt with regard to its subsidiaries."

He, however, added that Satyam had not been able to market its technological leadership well.

Meanwhile, V Srinivas, chief financial officer of Satyam, said that the effect of these losses was marginal on the company. "On a consolidated basis, their impact is just 3.5 per cent," he added.