Tuesday, October 20, 2009

Tech Mahindra Rings On Strong Q2 Outcome

. Tuesday, October 20, 2009

By stockOzone team

Tech Mahindra rose 1.07% to Rs 951.50 at 10:27 IST after net profit surged 56.37% to Rs 210.64 crore on 4.67% rise in net sales to Rs 1109.84 crore in Q2 September 2009 over Q1 June 2009.

The Q2 September 2009 results were announced after market hours on Tuesday, 20 October 2009.

Meanwhile, the BSE Sensex was down 24.36 points, or 0.14%, to 17,198.65

On BSE, 43,807 shares were traded in the counter as against an average daily volume of 4.18 lakh shares in the past one quarter.

The stock hit a high of Rs 958 and a low of Rs 945.55 so far during the day. The stock had hit a 52-week high of Rs on 1008 on 8 September 2009 and a 52-week low of Rs 203.70 on 23 January 2009.

The stock had outperformed the market over the past one month till 20 October 2009, rising 4.26% as compared to the Sensex's 2.88% rise. It had also outperformed the market in the past one quarter, rising 17.27% as compared to the Sensex's return of 13.38%.

The large-cap telecom software developer has an equity capital of Rs 122.04 crore. Face value per share is Rs 10.

The current price of Rs 954.10 discounts the company's Q2 September 2009 annualised EPS of Rs 69.07, by a PE multiple of 13.81

Tech Mahindra had a debt position of Rs 2,179 crore as of 30 September 2009. During the latest quarter, the company refinanced Rs 1,150 crore of debt reducing the effective interest rate on its debt portfolio to 8.7% a year, the company said in a press release to the BSE. The company also said it had increased its head count from 25,482 in Q1 June 2009 to 26,515 in Q2 September 2009.

Revenues from BT Group Plc slipped for the sixth consecutive quarter ended September 2009. Revenues from BT fell to 49.8% of total revenues in Q2 September 2009 from 60% in Q2 September 2008. BT Group Plc owns 30.92% in Tech Mahindra (as at end June 2009) and is also the largest customer, accounting for nearly half of its revenue.

Tech Mahindra posted forex gains of $5 million in Q2 September 2009 as against a loss of $11 million in Q1 June 2009. The company said it derived 28.4%, 60.9% and 10.7% of its revenues from the US, Europe and the rest of the world in that order.

In September 2009, Tech Mahindra won a major portion of telecom IT outsourcing deal worth $400 million from Etisalat DB Telecom India. The outsourcing deal would include implementation of its end-to-end IT applications & infrastructure, system integration and managed services.

In April 2009, Tech Mahindra acquired 31% stake in fraud-hit Satyam Computer Services now renamed as Mahindra Satyam for Rs 1756 crore, or Rs 58 a share. Subsequently it made an open offer to buy another 20% at the same price as mandated by the stock exchange.

However, the open offer failed to evoke response from subscribers as only 4.21 lakh shares including 2.69 lakh underlying American Depository Shares (ADS) were validly tendered, representing less than 0.1% of the outstanding equity shares. Each ADS represents one ordinary share of Mahindra Satyam.

Mahindra Satyam later received approval from the Company Law Board to issue 19.86 crore equity shares to Venturbay Consultants, a subsidiary of Tech Mahindra on a preferential basis at Rs 58 a share. Tech Mahindra's stake in Satyam rose to 43% post the preferential issue.

Tech Mahindra provides IT services and solutions to the telecom sector. It provides a variety of services ranging from IT strategy and consulting to system integration, design, application development, implementation, maintenance and product engineering.

Disclosure: Author does not own any of the stocks discussed here.

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