Satyam Computer Services Ltd was beset by selling as a drop in Q3 net profit set concerns about the entire tech sector.

The scrip of the fourth largest Indian software exporter got drubbed 4% to Rs 249.40, no sooner trading commenced on Thursday. Around 347,000 SCSL shares changed hands on BSE so far.

SCSL, in fact, has been easing over the last few sessions as the market speculated about the company's Q3 outcome.

For Q3 ended 31 December 2002, SCSL posted a 2.2% fall in net profit to Rs 116.73 crore (Rs 1.16 billion) from Rs 119.43 crore (Rs 1.19 billion). Net sales jumped 19.8% to Rs 522.26 crore (Rs 5.22 billion) from Rs 435.77 crore (Rs 4.35 billion). Total income went up 16.9% to Rs 521.50 crore (Rs 5.21 billion) from Rs 446 crore (Rs 4.46 billion).

The Q3 results are way below expectations . As per a capitalmarket.com poll, SCSL was expected to post a rise of 2% to 8.5% in Q3 net profit to between Rs 121.80 crore (Rs 1.21 billion) and Rs 129.5 crore (Rs 1.29 billion) as against a net profit of Rs 119.40 crore (Rs 1.19 billion) in DQ 2001. Analysts had projected the company's sales in the range of Rs 521.6 crore (Rs 5.21 billion) to Rs 538.70 crore (Rs 5.38 billion) for DQ 2002, a growth of 20% to 23.6%.

A sequential decline has also been witnessed in net profit to Rs 116.73 crore (Rs 1.16 billion) from Rs 118.16 crore (Rs 1.18 billion) in the September 2002 quarter. Analysts, in their initial reaction, say SCSL's Q3 results depict immense pressure on profit margins for the software major.

SCSL has revised downwards the revenue and EPS guidance for the current financial year to Rs 2,010 crore- Rs 2,020 crore (Rs 20.1-20.2 billion) and Rs 14.57–Rs 14.66, respectively.

This is the second time in a row that SCSL has revised downwards its FY 2002-03 EPS guidance. At the time of announcing Q2 ended 30 September 2002 results, SCSL had revised downward its full year EPS guidance to Rs 16.06-16.26, from the earlier forecast of Rs 17.10-Rs 17.50. SCSL had cited a stronger rupee and the resultant fall in other income for the downward revisions.

SCSL's manpower strength has gone up by 351 to 9304 associates as against 8953 associates as on 30 September 2002. The entire increase has been in the form of technical associates.

SCSL, a SEI CMM Level 5 Company, is a global systems integrator. The company offers information technology expertise in the areas of software development services, consulting, systems integration, ERP solutions, product development, electronic commerce and internet-based services.

On 7 October 2002, Sify, the then subsidiary company, entered into a definitive agreement with a company controlled by Softbank Asia Infrastructure Fund and VentureTech Solutions Private Ltd for an investment of $20 million by subscribing to new shares of Sify. The investments were approved by the shareholders of Sify at its extraordinary general meeting held on 9 December 2002. Following the approval, on 16 December 2002, SAIF invested US$ 13 million and VentureTech invested $3.5 million, being the first tranche of the total investment of $7 million.

Consequent to the investments by SAIF and VentureTech, the holding of SCSL in Sify has fallen to 37.15% from 52.5% before the investments.

BSE Code: 500376