Disappointing the markets was the performance of CMC Ltd. For the third quarter ended 31st Dec 2009, the subsidiary of TCS, posted a consolidated net profit of Rs 36.25 crore, which is above the revenue of Rs.34.65 crore posted in Q2FY10. Consolidated net sales declined to Rs.211.18 crore from Rs 218.95 crore on a QoQ. What was encouraging to note though that the EBIDTA margins rose to 20.7% and this was on the back of an improved business mix and continued focus on margin improvement.

In terms of geographical distribution, US business grew 29% on a YoY and 8% on a QoQ. The company derives over 60% of its revenue from India. This is a good point in favour of the company as it gets hedged from risk associated with dollar fluctuations.

The company is not too perturbed by the decline in revenue as it says that it is in line with its business plan. The company is slowly moving away from equipment sales, which is evident from the declining sales. And it is now moving towards becoming a complete IT solutions company. Having previously worked on many Govt projects, CMC has a distinct advantage, given the huge IT drive being undertaken by the Govt.

The company hopes to end FY10 with an EBIDTA margin of around 20%. The synergistic advantage which the company derives on account of being a subsidiary of TCS is why it remains high on the bourses.  Its passport eSeva project with TCS is an example to that effect. CMC will provide infrastructure management, digitisation services as well as training and support services for the project. And hopefully in the coming quarters, we will see the benefits getting translated into the bottomlines.

During the quarter, the company added three new clients in US and one client in UK. It added 12 clients in India which were primarily in e-governance, insurance, ports, and security. So the pipeline does look encouraging.

It is not exactly a trailblazing stock but more of a slow and steady kind.