Mastek cited decision postponements by clients and order size reductions, slow ramping up by strategic customers and economic and other external uncertainties for the downward revision of its full year's guidance.

The revised guidance sent the scrip reeling on Thursday and it was locked at the 20% lower limit of Rs 448.20, minutes from commencement of trading. Around 200,000 Mastek shares were traded on BSE in early trades. The outstanding sell position in the stock was 360,000 shares at the lower limit.

After trading hours Wednesday, Mastek group reported a flat sequential net profit of Rs 16.03 crore for Q3 ended 31 March 2003 compared to Rs 16.26 crore in Q2 ended 31 December 2003. On a year-on-year basis, net profit has risen 45% from Rs 11.03 crore in Q3 ended 31 March 2002.

Mastek group's total income grew 2% sequentially to Rs 99.06 crore from Rs 97.43 crore in Q2 ended 31 December 2002. On a year-on-year basis, the group's revenues rose 37% from Rs 72.54 crore in Q3 ended 31 March 2002.

On reviewing the overall performance during the nine months period ended 31 March 2003, Mastek said it has revised downwards its revenue guidance for the group (including the share of JVs), for 2002-03, from Rs 418-432 crore (Rs 4.18-Rs 4.32 billion) to Rs 370-380 crore (Rs 3.7-Rs 3.8 billion) and its profit after tax guidance for the group (including the share of JVs), for 2002-03, from Rs 64-68 crore to Rs 50-54 crore.

Ashank Desai, Chairman and Managing Director, said athough the performance during the last quarter appeared satisfactory in terms of profit objectives, the past couple of weeks have been quite challenging for us. Based on the performance during these weeks, the company said that the April-June quarter performance will not fall in line with the growth momentum of the past six quarters

The company said there were negative surprises in terms of decision postponements and order-size reductions. Lengthening internal decision processes and focus on short-term performance partly caused by economic and other external uncertainties are some of the main factors leading to these developments. In short, from the revenue perspective, many of the strategic customers are not ramping up as fast as the company expected. The impact of this on profits would be compounded as the company had already committed to investments in staff, delivery infrastructure and sales and marketing initiatives.

The company further said that the Iraq war and emerging geopolitical uncertainties may have a near term impact on prospect visits besides lengthening sales cycle and budgetary releases in the medium term.

Presently, US and Europe contribute 27% and 60% respectively to the group's revenue. The group's international revenues for the nine months ending 31 March 2003 were Rs 278.43 crore (Rs 2.78 billion), an increase of 42% over the Rs 195.97 crore (Rs 1.95 billion) in the corresponding period last year, which was led by growth of 49% in the US operations and 33% in the European operations.

Mastek offers a wide range of software services - from the traditional application management to the enablement of eCommerce. It derives majority of revenues from the UK. The company has been assessed at SEI CMM Level 5 and People CMM Level 3.

In its pursuit of diversifying the business offerings, Mastek has launched BPO services. During the quarter the wholly owned subsidiary Mastek BPO Private Limited was formed for this initiative. The subsidiary has an authorised capital of Rs 10 crore and the initial investment by Mastek in it has been Rs 2.51 crore. A pilot but scalable facility admeasuring 7,590 sq. feet has been taken on lease at Thane near Mumbai.