PRICING PRESSURE LIKELY ON SATYAM

KV Ramana, Hyderabad
DNA

Despite putting up a “better-than-guided” performance for the second quarter of this fiscal, the IT services major Satyam Computer Services is likely to come under pricing pressure in the coming quarters, analysts say. Though the pricing pressure was evident in the second quarter, the impact was marginalised by various other factors.

In the second quarter, the offshore and onsite billing rates declined sequentially by 0.4% and 0.8% respectively. This is the second consecutive quarter when the company reported fall in billing rates. “The fall in rates only reflects the intensifying pressures in the global business environment,” an analyst report said.

Murthy Tanikella, head of Satyam’s investor relations, said that the fall one gets to see in the Q2 earnings is the realised billing. “But, if you look at like-to-like billing, it’s flattish. Cross currency fluctuations and the conversion of other currencies into dollars has led to the numbers declining,” he added.

According to him the fall does not indicate a trend. Tanikella said, “Based on our interaction with the clients in Q2, there is no billing pressure. However, if the situation worsens, we can be under some pressure. For now, there are no pricing negotiations.”

However, a pricing metrics prepared by Credit Suisse indicates that there has been pressure on Satyam’s pricing. The firm’s volume grew by 4% in Q2 and that of Infosys by 6.5%, the onsite pricing of Satyam declined by 0.75%. Infosys’s pricing witnessed a rise by about 0.64% for the quarter. Similarly, the offshore pricing of Satyam dropped by 0.43%, while that of Infosys improved by 0.07%.