Cyient’s Q3 disappoints

Cyient posted a disappointing set of earnings for Q3FY20. Its consolidated revenue was down 5.5% sequentially at Rs.1106 crore. Its consolidated EBIT margin was flat at 9.6% (QoQ). The EBIT margin was helped due to benefits of changes to revenue mix by 110 bps, cost optimization by 30 bps, favorable DLM margin by 60 bps and all this offset by increase in other direct costs 120 bps, lower bill days impact 60 bps and volume impact of SG&A 20 bps.

Mr. Krishna Bodanapu, Managing Director and Chief Executive Officer, said “Q3 is generally a slow quarter and we recorded a revenue decline of 5.7% in constant currency QoQ and 5.3% YoY. The services revenue declined by 0.2% QoQ in USD predominantly driven by decline across Transportation and A&D business units. The decline in services business was majorly driven by a long term risk sharing agreement we signed with one of our key clients. As part of this agreement, we have provided a one-time discount in Q3. This agreement will accelerate our growth in the coming years and since the cumulative impact was taken in Q3 it has resulted in a de growth.”

It ended the quarter with a net profit at Rs.108 crore, up 10% (QoQ). The surge in the bottomline was mainly on account of the 88% jump in other income – unrealized forex restatement gains.

Cash and cash equivalents stood at Rs.1024 crore.

For FY20, the company expects a slight de-growth driven by decline in key clients across Communications and Aerospace BU’s.

The company’s employee count dropped to 14,472 from 14,869 (QoQ). Involuntary attrition stood at 5.2% in the quarter, voluntary attrition was 19.7%.

The stock price opened 2.5% higher at Rs.463 but soon realization dawned and the stock slipped 2% to Rs.444.