Macsot Systems had to contend with selling pressure as the company's Q3 results came in below expectations.

By 10:50 IST on Thursday, the scrip of the Bangalore-based software company slumped 6.40% to Rs 123.50. It registered volumes of 21,728 shares on BSE thus far. In the 27 sessions between 13 December 2002 and 22 January 2003, the scrip of Mascot Systems fell 22.4% to Rs 131.95 from Rs 170.

For the third quarter ended 31 December 2002 results ( results were declared before trading hours today) the software company posted a 36.53% fall in net profit to Rs 6.67 crore (Rs 10.71 crore) on operating revenues of Rs 97.71 crore (Rs 97.46 crore).

The company's quarterly net profit has turned out a wee bit below a capitalmarket.com poll estimate. According to the poll (that assessed three IT analysts), for the quarter ended 31 December 2002, the software major was expected to post a 28.6-35.3% fall in net profit to Rs 6.8-7.5 crore. The company has also accounted for a one-time write–off of Rs 3.11 crore. If the write-off amount is excluded, bottom line sinks further (66% to Rs 3.56 crore).

Meanwhile, revenues were expected at between Rs 92.5 crore and Rs 96.8 crore for the quarter, a drop of 0.7-5%.

Sequentially, the company registered a net profit growth of 2.7% from Rs 6.49 crore in SQ 2002 on an 8.3% increase in revenues from Rs 90.2 crore. Operating profit, on a sequential basis, has also surged 14.2% to Rs 8.67 crore from Rs 7.59 crore.

Analysts are pessimistic about the company's profitability margins, which haven't seen any improvement over the quarter under review, over the next few quarters. In any case, the company's results were expected to be disappointing. At the moment, business from onsite jobs (where margins are low) is higher.

Mascot Systems is a leading provider of solutions for application maintenance outsourcing, e-business, business intelligence, application re-engineering, custom solutions and embedded systems. Mascot uses its proprietary solutions suite, SmartAPPSSM, as the framework for its distributed delivery. Mascot Systems has established operations in the United States, United Kingdom, Belgium, Germany, the Netherlands, Sweden, Japan, Singapore and Australia. The company has built a strong infrastructure capability that comprises over 1,600 employees worldwide and world-class offshore development centres in Bangalore and Chennai.

Mascot focuses on the finance and banking, retail and distribution, manufacturing, telecommunications and service industries.

In the last quarter (September-December 2002), the company acquired the prestigious SEI-CMM Level 5 certification for quality of software processes. The company was also awarded the BS7799 Security Compliance Certification that assesses security of a wide range of information systems and processes. These certifications enhance the company's competitive advantage in the global marketplace.

Recently, the company acquired eJiva ( including a Toronto-based development center), effective 1 January 2003, and Aqua Regia, effective 1 April 2003, to provide critical mass, enhance client profile, expand depth and range of services and strengthen sales and marketing, increasing Mascot's potential to compete for large business engagements.

Meanwhile, Mascot is looking at investing in the Business Process Outsourcing space in the next 12 to 18 months and is also considering acquisition of companies in this space in India. The company is planning to acquire early stage BPO companies with 300 to 500 agents, either into call centres or transaction processing (claims management, post sales support, etc.).

As on 30 September 2002, the promoters' holding in Mascot was 88.4%, while the public and institutions held 4.77% and 5.21%, respectively.

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