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Syntel revenues were affected in H1 2008, especially in the JAS quarter, as the transaction processing volume of its second largest KPO client India-based Reliance, went down substantially. While Syntel lost close to $1.6 mn due to this, it lost a further $1.2 mn due to the ramp-down of an e-business project, and reduction in a legacy team-sourcing relationship. These developments resulted in the company lowering its annual (Jan-Dec 08) guidance by 1-2% to $408-412 mn. Despite lower revenue growth, Syntels margin in this period increased as compared to the previous year. The high gross margin of Syntel has been possible largely because of its high margin KPO business (more than 50%). The company has also been working hard at productivity measures, reducing the SG&A (selling, general and administrative) expenses by over single digit percentage point over last Q3.

There was no major change in the services mix with applications outsourcing accounting for 68% in JAS, while KPO grew to 19% at the cost of e-business services that shrunk to 11% and team sourcing consulting to 2%. The vertical mix too remained stable with BFSI accounting for three-fourth of the revenue and healthcare for about 13%.

Since, much of its revenues comes from the US and it had major exposure to the financial services sector, it is commendable that Syntel has been able to grow revenues by 30%.

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