>SASKEN COMMUNICATION TECHNOLOGIES (ANGEL BROKING)

■ Poor core business performance pressurises Top-line: Sasken recorded a disappointing 9.1% qoq decline in its 4QFY2009 Top-line, which touched Rs168.3cr. This was due to the poor performance of both its Services and Products Businesses. This performance was recorded in spite of the Rupee’s depreciation against the Dollar, with the average realised rate being higher by 2.7% qoq (Rs50.26 v/s Rs48.93 in 3QFY2009). Services revenues, in Dollar terms, fell by a significant 11.6% qoq to US $31.3mn (US $35.4mn in 3QFY2009). In Rupee terms, the Services Business clocked a 9.2% qoq fall. The Networks Business continues to face pressure, given the challenging business environment. The bankruptcy of its key client Nortel is a clear case in point and Sasken had a total of Rs24cr in receivables from this client as on March 31, 2009. Volumes fell 9% qoq and billing rates fell 3% qoq. On the other hand, Product revenues fell by 8.9% qoq, with the key reason being the collapse in Customisation revenues (down by as much as 70.8% qoq), even as Royalty Income (up by as much as 72.8% qoq) and Licence Fees (up 62% qoq) showed healthy growth.

On a yoy basis, in Dollar terms, Sasken recorded a disappointing 10.4% de-growth in Services Revenues. Yet, due to a 26% yoy higher Rupee-Dollar rate (Rs50.26 v/v Rs39.89 in 4QFY2008), Services Revenues in Rupee terms grew by 12.9% yoy. However, core business growth remains a challenge and we expect this to continue until a clear improvement in the business environment materialises. Sasken’s Products Business clocked a disappointing 39.9% yoy de-growth in revenues, in Rupee terms, which was due to a crash in Customisation revenues (down 78.4% yoy) and Licence Fees (down 29.8% yoy), even as Royalties rose by 27.9% yoy. Overall revenues in Rupee terms grew by 7% yoy for the quarter.

■ Higher Product Margins drive overall Margin expansion: For 4QFY2009, Sasken reported a healthy 344bp qoq expansion in EBITDA Margins due to significantly higher Product Margins (higher by as much as 5,169bp qoq, or 51.7%). On the other hand, Services Margins fell by 103bp qoq. On a yoy basis, Margins rose by an impressive 715bp.

■ One-time item reduces Bottom-line: Owing to a one-time item related to a write-off of capitalised software product costs, Sasken’s Bottom-line for the quarter crashed by 73.1% qoq and by 73.9% yoy. Excluding this, the Bottom-line rose by an impressive 32.9% qoq and by 28.7% yoy.

To see full report: SASKEN COMMUNICATION