Our Bureau

Hyderabad, Nov 15

Rising employee cost has dragged Mahindra Satyam's net profit down to Rs 23.3 crore in the second quarter ended September 30, 2010, against Rs 97.5 crore in the preceding quarter. It reported revenues of Rs 1,242 crore in the second quarter, marginally lower than Rs 1,248 crore in the preceding quarter.

For the year ended 2009-10, it ended up with loss of Rs 124.60 crore.

"The cost of employees has gone up significantly as we attempted to retain talent. This has led to the fall in profit. The number of employees had gone up to 28,000 from 27,722 during the period," Mr Vineet Nayyar, Chairman of Mahindra Satyam, said.

The cost of employees in the second quarter went up to Rs 913.6 crore (Rs 867.7 crore).

Higher attrition rate

Addressing a press conference here on Monday to announce the results for the first two quarters and make the company "current with accounting standards" in the country, he said attrition rate was as high as 25 per cent in tune with the industry average.

Mr Nayyar said the company would recruit about 9,000 people in the next two years. "In the next six months, we will take 3,000-4,000 people and hire 5,000 graduates in the next financial year," he said. Contrary to its earlier announcement, the company said the merger with Tech Mahindra would be delayed till the end of next year. "Consultations with various board members and law firms have begun. Advice (for merger) is still being firmed up.

The earlier indication of November 15 for merger process to be announced was too early," Mr C.P. Gurnani, Chief Executive Officer, said.

Approaches CBDT

Mr Nayyar said the company has appealed the Central Board of Direct Taxes (CBDT) for grant of stay of collection of all the tax demands for 2002-03 to 2007-08 till the correct quantification of income and taxes payable by the company was done.

The CBDT had raised tax demands for Rs 503 crore for the scam-hit IT services company.

The company refused to comment on the Maytas demand for return of Rs 1,230 crore advanced during the scam period, saying the matter was in court.

Final stage

The proceedings by the Securities and Exchange Commission (the US financial markets regulator) were in final stages. "We have made all submissions. The proceedings were at an ultimate stage," he said.

The BPO arm of the company reported a loss of Rs 1.3 crore each in both the quarters on revenues of Rs 27 crore and Rs 25 crore respectively.