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US slowdown hits Mastek's bottomline

NetScribes/Ganesh Ramamoorthy

Mastek Ltd's net profit for the quarter to March 31, 2001 was almost wiped out due to a softening CRM front-end solutions market, the overall US slowdown, and delays in closing strategic outsourcing accounts. Front-end and e-commerce solutions accounted for 40 per cent of the Mastek Group's revenues in the previous quarter.

The company's net profit was dragged down by almost 100 per cent to Rs 300,000 from Rs 65.30 million in the same quarter last fiscal. Total income for the quarter ended March 31, 2001 stood at Rs 191.40 million, compared to Rs 245.50 million in the previous corresponding quarter.

Revenues from US operations dipped to 41 per cent of the total income from 46 per cent in the December quarter, 52 per cent in the September quarter, and 60 per cent in the March quarter.

"Although, revenues from the US operations have dropped in the second sequential quarter, I feel more comfortable due to the quality of outsourcing leads that our US team have generated as well as early successes in the quarter," Ashank Desai, managing director, Mastek, said in a release.

"On-target performance of our European business, which accounted for 47 per cent of our revenues during the last three quarters, has been a comforting factor. In Europe, we have not come across any pressure on volume of business from the existing customers as well as billing rates," he added.

Mastek expects the slowdown in the US economy to have mixed impact on the industry. "The immediate challenges would be manifested in pressure on IT budgets and billing rates as well as cancellation of non-strategic IT projects. We expect our geographically diversified business model to contain this impact," Desai said.

"The positive impact is in terms of US IT shops putting greater emphasis on pursuing offshore outsourcing strategy. However, this impact would show up after a time lag. I am, therefore, confident that the strategy of targeting large outsourcing accounts that we started pursuing from June 2000 is in the right direction," he added.

The Mastek Group's total income dipped by 10 per cent to Rs 603.5 million for the third quarter ending March 31, 2001, from Rs 671.5 million during the same period last year. Net profit for the quarter stood at Rs 1.14 million down 38 per cent from 2.99 million during the same quarter last year.

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