Two years after the Mahindras taking over the reins, Mahindra Satyam still continues to pass through rough weather as it negotiates legal and tax rows in India and abroad.

News of losses dragged down the stock price by 4.17 per cent as the scrip ended at Rs 73.55 on Monday on the Bombay Stock Exchange.

Settling of class action suits and issues with US market regulator Securities Exchange Commission (SEC) cost Rs 641 crore in the full year, resulting in net loss to the tune of Rs 327 crore in the fourth quarter ended March 31, 2011, and Rs 147.30 crore in the full year. Earning per share (EPS) eroded and slid to negative zone at Rs -2.78 a share and Rs -1.25 in the quarter and full year, respectively.

But analysts see a silver lining. EBIDTA, a key parameter that shows operational performance, shot up to 13 per cent in the quarter as against 6 per cent and 5 per cent in the third and second quarters, respectively. Though still far lower than industry levels, Mr Vineet Nayyar, Chairman of MSat, asserted that it had been on the growth trajectory in the last three quarters. “It will take about 18 months to reach those levels,” he said.

Merger

As it grappled with legal and tax issues, the company has pushed the plan to merge MSat and Tech Mahindra to next financial year. “We are in talks with SEC to settle various issues. Things will be clear by October, 2011. We see April-May (2012) timeframe for the merger,” he said.

“While revenues came in above expectations, the improvement in margins surprised us. However, we believe that the relatively higher number of working days when compared with the third quarter and cross currency fluctuations partly helped revenue growth and margin improvement,” Mr Dipen Shah, Senior Vice-President (Private Client Group Research), Kotak Securities, said.

“While the company is reporting sequential improvement, we believe that, the company will have to overcome several operational challenges before it returns to industry growth and margins,” he said.

Stating that it could not compare with quarterly results of previous year, Mr Vineet Nayyar said revenue for the quarter increased by 7.5 per cent to Rs 1,375 crore in the fourth quarter over the third quarter figure. Before exceptional items, net profit was put at Rs 245 crore.

For the full year 2010-11, revenue came down by 6.1 per cent to Rs 5,145 crore from Rs 5,481 crore last year. Net profit before exceptional item was Rs 494 crore.

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