Polaris Financial Technology Ltd, today announced the demerger of its Products (Intellect) business into an independent entity 'Intellect Design Arena Ltd (Intellect), with a focus on Global Universal Banking; Risk and Treasury Management; Global Transaction Banking and Insurance businesses. The new entity is expected to double its business in the next three years from the current around $100 million. The growth will be backed by around Rs 100 crore in R&D and another $10 million in sales.
Arun Jain, executive chairman, Polaris Financial Technology Ltd, which will continue to run the Services Business with solution focus, said this is a decisive step towards unlocking the potential of the company to respond to emerging opportunities in Financial Technologies in the coming decade.
He said Boston Consulting Group (BCG), which was advising the company to work on the Change Design and finally the business of the company, advised the change some time back. "But the question was whether we can take a such a high jump and what kind of impact it can have it the company". The impact he was referring to was whether the top management, employees or clients would leave the company.
Last two quaters the company tested and results were positive, so the company decided to demerge, which the company describes as Vertical Split.
"It is like how Cognizant become a separate entity from Dun & Brandstreet. It is always better to have separate entities, when the DNAs are different," said Jain, said the growth of product business will be higher compared to service. "Our target is to double this business from $100 million in the next three years".
He once again reiterated that the company is not looking for any investors or partners. It may be noted the company has been making headlines in the recent days stating that the company is liekly to be acquired. Almost all the IT majors names were linked including Cognizant, Tech Maindra, NEC and others. Jain said the company is not for "sale".
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To support the growth the company is planning to invest around $10 million in sales, while it would continue to invest Rs 100 crore every in Research and Development, said Jain. The new company will have around 3,000 employees. Manish Maakan will continue as Chief Executive Officer of the Intellect Global Transaction Banking (iGTB) business operating out of London.
As consideration for the Demerger, every shareholder of Polaris Financial Technology Limited, will receive one share of Intellect. The company said it has decided to offer a special option to the shareholders of Intellect to exchange the shares (should they wish to) allotted pursuant to the Demerger against fully secured non-convertible debentures (NCD). These NCDs shall have a
face value of Rs 42 , with a coupon of 7.75 per cent p.a., redeemable at par after 90 days
The company announced the next phase of its growth journey, i.e., Polaris 4.0, as the culmination of its annual visioning exercise (Lakshya) in Januar 2012. Since then, the company has taken measured steps in four stages that led to the decision to de-merge, including identifying major opportunities and the constraints in leveraging them, focussed on Strategy design, anchored by the Polaris Board and Boston Consulting Group (BCG) , a special Task Force was set up internally to work on the Change Design and finally the business of the company was re-organised into distinct Services and Products businesses, with independent CEOs.
"It will be a win-win for customers, employees and investors alike," he said, while narrating that from the customer perspective, this new structure aligns investments, competencies, decision making and processes to drive the next level of value creation. On one side, the customer will be able to enjoy deeper focus for his specific needs, say Services, while he would be able to accelerate his change-the-business agenda with truly next-gen Products, said Jain.
From an employee perspective, alignment to their individual talent and interests will become a lot sharper, opening up clear streams for career advancement. From an investor perspective, on one hand, the shareholder will get an additional share of Intellect, a new horizon business. On the other hand, expanded leadership capacity, greater customer centricity and sharper focus will drive higher value in each of the Businesses. "
Jitin Goyal will continue as Chief Executive Officer of the Services business, and will be based in London.
Jaideep Billa and Venkatesh Srinivasan will continue to be Joint Chief Executive Officers of Intellect Global Universal Banking and Intellect Risk & Treasury business, operating out of Singapore and Mumbai respectively; and Pranav Pasricha will continue to be Chief Executive Officer of the Intellect