Revenues, profits and margins

The operating margin of the company increased to 26.24 per cent. Operating profit increased by 212.13 per cent to Rs 20.60 crore compared to the, same quarter last. year. The company's other income declined 28 per cent on a Y-o-Y basis. But on a Q-o-Q basis, the 36 per cent decline in other income has reduced earnings before interest, tax, depreciation and amortisation (EBITDA), which grew at 12.6 per cent. The main revenue driver for HSS has been the non parent component which grew 34 per cent sequentially. "The HSS' operations have done well primarily because the company`s clients are doing well," said an analyst with a foreign research house.

BPO operations, too, have leaped 140 per cent to Rs 4.4 crore. Domestic sales have declined to Rs 0.2 crore from Rs 1.6 crore in the corresponding previous quarter. Stagnant growth of the parent operations (1.62 per cent) and the negative growth of the product division (-11 per cent) seem to be a cause of concern. "The parent company's order book is looking good. It may indicate a favourable growth for the coming year," he adds. HSS has also announced 100 per cent strategic acquisition of Tenet Technologies Private Ltd which will enable it to significantly increase its presence in
Japan.

Analysts' views on business outlook

Analysts feel that the HSS and BPO operations are expected to look better for the coming year. Higher volumes from existing customers and better utilisation expected to contribute towards growth. The operations of the parent company are expected to do well, fuelled by a positive note on the parent company's order-book.

Share price and valuations

Better than expected results helped HSS to gain around 7.5 per cent after results to close at Rs 275.65. The 12-month EPS is Rs 14.49. The stock is currently trading at a P/E of 18.6 and closed at Rs 270.60 on the BSE. Analysts expect the stock to do well but have declined to comment on the v
figures.

Last updated : October 28, 2004