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BLOG: Poetic justice

Zafar Anjum | Nov. 18, 2011
Mahindra Satyam’s “pleasing” quarterly results say it all about the turnaround of the global IT services provider.

The global consulting, IT and business services provider Mahindra Satyam's reported growth for the fifth consecutive quarter despite an uncertain macro-economic environment has created a stir, from the media to the market.

Announced last week, the ten-fold year-on-year increase in its net profit last quarter (ended 30 September 2011) has exceeded all expectations. Consolidated revenue for the quarter was US$330 million, up 3.2 percent quarter on quarter.

This is amazing for a company which, only about two and a half years ago, was almost written off after it was hit by a financial scandal-the worst in India's corporate history. The company's founder and chairman Ramalinga Raju had cooked the books of the company and eventually acknowledged his shameful misdeed in a letter to the government using feline metaphors, giving intimations of his interest in poetry.

While he landed up in jail, Anand Mahindra of Tech Mahindra came to the rescue of the company. In two and a half years, Mr. Mahindra's team has turned the company around. The turnaround has been nothing less than spectacular.

And as if God was playing poetic justice, while Raju was finally granted bail by the Supreme Court along with his brother, Rama, and former chief financial officer Srinivas Vadlamani on 4 November, Mahindra Satyam announced its fantastic quarterly results on 11 November.

Of course, now Raju and Mahindra Satyam have nothing to do with each other except for a tainted shared past, that the company has surely put behind itself for good.

Pleasing results

According to the Mahindra Satyma's announcement, along with rising profitability, the company's key business performance indicators such as growth and talent retention are also on the right course. The company has added 654 people to its staff for this quarter, bringing the total headcount to 32,092. The attrition rate is now down to 15.6 percent from 17 percent in the earlier quarter.

The contribution of Mahindra Satyam's Asia Pacific division to this story of supercharged growth has been significant. According to Rohit Gandhi, managing director Asia Pacific, Mahindra Satyam, Asia Pacific was contributing about 40 per cent of the total revenues from year two itself of Satyam's revival plan.

"Whether you look at it from a top line perspective or bottom-line perspective, I think the results are very pleasing," Rohit told me during a conversation in his Singapore office. "The numbers state all."

How could Satyam do well despite the talk of the doom and gloom in the market? "In our case, Europe is still growing," he explained. "Even in the US, even though the economy is not doing well, the companies we deal with are all global companies. If you are dealing with a Citibank or a GE, their business is not America-focused. They are global. To whatever extent the global economy is impacted, they also get impacted. On the contrary, in an environment like this, this is also an opportunity companies look at to reduce cost." Offshoring provides corporates an opportunity to reduce costs. "Some of them are hastening their decision towards that," he said.


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