Satyam Computer Services -- A good byte

The silver lining in uninspiring industrial scenario is the computer industry. The industry is growing at the rate of 50 per cent per annum. It has been exempted from the provisions of MAT besides, given tax concessions in the recent budget.

In the case of Satyam Computer its success formula is choosing the right clientele, value addition, and offshore business.

It takes up turnkey software development projects for exports in areas related to professional services and communication products, especially related to home office.

Having proved itself, the company is now taking up specific application development projects. It aims to take up more and more of complete projects, rather than parts.

It tied-up with Dun & Bradstreet Corporation (D&B), the renowned global leader in business information.

D&B converts information into value-added products. Satyam also has a three year tie-up with the General Electric of United States. Other clients include AT&T, Caterpillar, Volkswagen and Selective Insurance.

Satyam has been posting over 100 per cent growth in sales in the last 18 months. The personnel cost, which accounts for 45 per cent of the total cost is bound to go up, as wages for well-qualified software personnel keep going up, inching towards international standards.

The price of the scrip has shot up to Rs 88 from Rs50. The price rise has been pretty steep starting around Rs 65. The price is expected to sustain at Rs 100 plus in a year's time. However, profit booking by those who entered at Rs 50 is very likely. Buy it on reaction around Rs 70 to ensure a gain.

Flex Industries Flexible growth

The packaging industry today enjoys the safety of a growing market - especially so the industry which manufactures flexible packaging material. The industry has a wide user base; tea, coffee, milk, detergents, shampoos and processed foods come in flexible packages. And new applications get added up from time to time thus expanding the market. A case in point is the packaging of vegetable oil is an illustrative example.

FIL, which commands a 30 per cent market share with a client base of over 1,000 companies produces polyester film and bi-axially oriented polypropylene film (BOPP).

To take advantage of the growth in market for its products, Flex added a second PET (polyester) film line with a capacity of 12,000 tpa and a BOPP film line of 1200 tpa in 1995-96. This expansion strategy is a double-edged weapon. While the company has prepared itself for tapping into growth, it can suffer the pangs of over capacity in the short-term. The company is targeting both domestic and export markets. In the domestic market, the price realisation on polyester film is around Rs 54 per kg as compared to a realisation of around Rs 64 overseas. But the company has the option of not operating the excess polyester film capacity if the domestic margins are not compensating enough. On the other hand, it could go in for laminating the polyester film for more value addition and better margins. A trend in lower polyester raw material prices and of lower interests forthcoming for working capital from banks would work in favour of the company. The company is in a stage where after having expanded it would wait to fully utilise that capacity in the next two years. The stock at Rs 56 is likely to go to Rs 72 in the next three months and further appreciate to Rs 100 in the next 18 months or even earlier.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.