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Company Report

Digital Globalsoft

Now a part of the HP-Compaq group, Digital Globalsoft Limited has put up an encouraging performance for the third quarter ended December 2002 after a slightly subdued September quarter.

Total revenues moved up 26 per cent on a year-on-year basis to Rs 113.27 crore (Rs 89.82 crore), while sequentially it went up 16 per cent from the September quarter income of Rs 97.91 crore.

However, total expenditure having gone up 32 per cent over the previous corresponding quarter to Rs 86.26 crore (Rs 65.20 crore) and 13 per cent sequentially, net profit managed to rise 10 per cent over the year-ago period and 26 per cent sequentially to Rs 27.01 crore (Rs 24.62 crore) [Rs 21.37 crore for the September quarter].

Digitalís income from operations at Rs 109.98 crore (Rs 87.28 crore) rose 26 per cent over the previous corresponding quarter, while sequentially the same went up by 16 per cent over the September quarter revenues of Rs 94.87 crore.

Operational expenditure has gone up 31 per cent over the previous corresponding quarter to Rs 75.86 crore (Rs 57.83 crore), while sequentially the rise was 10 per cent over the September quarter spending of Rs 68.77 crore. Other expenditure was also up by 18 per cent over the year-ago period but only 1 per cent up from the preceding quarter.

The higher rise in the costs compared with the growth in revenues (strain on billing rates) squeezed margins. Operating profit moved up 16 per cent over the year-ago period to Rs 34.12 crore (Rs 29.45 crore), while sequentially it went up by 31 per cent from the September quarter profit of Rs 26.10 crore.

OPM at 31 per cent was slightly better than the 28 per cent it reported during the September quarter but down by 3 percentage points over the 34 per cent it reported during the previous corresponding quarter.

Other income at Rs 3.29 crore (Rs 2.54 crore) went up 30 per cent over last year and was 8 per cent up from the September quarter income of Rs 3.04 crore.

The stock currently trades at Rs 631 discounting its December quarter annualised EPS of Rs 32.93 by 19 times. The market has been pleasantly surprised by Digitalís numbers but it has merely corrected the severe dip of September quarter. Growth is poor and it is one of the most expensive software stocks after Wipro.

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