Indian outsourcer Satyam's profits soar 78.5 percent

Satyam forecasts revenue growth of up to 27.3 percent for fiscal year

Indian outsourcer Satyam Computer Services reported Friday strong growth in revenue and profits for the quarter ended June 30, as business volumes grew and it moved more of its services delivery offshore to India.

Satyam's revenue for the quarter was $322.5 million, up by 31 percent from the same quarter last year. The company's profits grew 78.5 percent from the same quarter a year ago to $75.5 million.

Satyam has also forecast revenue growth of up to 27.3 percent in its fiscal year ended March 31 next year. The company crossed $1 billion in revenue in its last fiscal year.

The company's profits grew in the quarter because of increased business volumes, operational efficiency and also because the services delivered offshore from India have grown over the last four quarters to 47 percent of revenue, said Ram Mynampati, president of Satyam's commercial and healthcare businesses. The depreciation of the rupee against all major currencies also helped, he added. The company has also scheduled its annual salary increases for the next quarter.

The results are based on U.S. generally accepted accounting principles (GAAP).

About $316 million of the total revenue came from the company's IT services business, while revenue from its business process outsourcing (BPO) business was about $6 million. The company is still making a loss in its BPO business, though losses in this business have come down from last year.

The three-year old BPO business is still in an early investment stage, and in this fiscal year the company expects revenue from the business to grow by about 80 percent to about $36 million, Mynampati said. The company sees BPO services as strategic as customers are looking for a single provider for both IT services and BPO, he added. New BPO services have also provided access to new customers for IT services.

Most of the company's revenue in the quarter came from North America and Europe. The company added 34 new customers in the quarter, and also added 1,100 staff to take the total to about 29,500 as of June 30. The company plans to hire up to 12,000 staff during this fiscal year. About 15 percent of the staff are outside India.

Satyam, based in Hyderabad, is India's fourth-largest outsourcer after competitors Tata Consultancy ServicesInfosys Technologies, and Wipro. All three companies reported earlier this month strong revenue and profit growth, reflecting an upswing in outsourcing to India.

Most Indian outsourcers are also moving up the value curve to offer consulting services as well. Satyam's enterprise business solutions business accounts for 40 percent of total revenue of which about 7 percent is revenue from consulting, Mynampati said.

Analysts echoed the company's view of the market.

"Infosys, Satyam, Wipro, TCS, and HCL are beginning to win larger and more varied deals," said Siddharth Pai, partner at sourcing consultancy firm Technology Partners International (TPI) in Houston, Texas. "Our data suggests that there is no reason to doubt that this trend will continue, especially as buyers gain experience of working with them, and their confidence grows as a result."