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| The Chennai-based Polaris Software Lab Ltd was recently in the news for looking at niche acquisitions of small companies with strong marketing strengths in G-7 countries. |
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| Polaris was also looking to enter China as an entry point to the software markets of East Asia. Arun Jain, chairman and managing director, Polaris Software, talks about the new opportunities for business growth. |
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| Polaris posted a net profit of Rs 21.66 crore for the quarter ended September 30, 2003, compared to Rs 16.42 crore for the June quarter 2003. The stock trades at Rs 188 on the BSE at a P/E of 32x. |
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| Citigroup accounted for over 58 per cent of Polaris's revenues in Q2FY04. What is the company doing to reduce its dependence on it? |
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| Yes, 58 per cent is on the higher side from a single client but the revenues are actually distributed over 12 large relationships within Citigroup, thereby minimising the risk significantly. |
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| The percentage of business from Citigroup will come down in the next 18-36 months because of expected higher growth in the product business, and other customers. |
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| Has the company bagged any major new clients? What is the client position of the company? |
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| The acquisition of clients is a continuous process. Since competition is becoming stronger, we would not like to divulge client names. We had signed eight new customers in the last quarter. The product sales funnel is looking very good at the moment. |
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| So far, the product traction has been quite good in all markets, including Europe, the US and Asian markets. We are seeing encouraging signs in the market for our products and solutions business. |
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| There are concerns that the OrbiTech merger has had an impact on the HR front. Attrition rates have risen to double digits for the last two quarters. How does the company plan to tackle this? |
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| In any merger of this magnitude, it is natural for the associates involved to be apprehensive about the prospects of the merger. |
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| It is true that we had to take some harsh decisions and there has been some attrition as some members were not comfortable with the reorganisation. |
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| However, being one of the largest of such mergers in the IT sector so far, this was something we had anticipated and factored in. |
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| We have initiated new HR programmes like the 'Mark to Market' exercise on the salary front, and performance and goal-oriented exercises that have helped communicate the objectives of the organisation to associates. |
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| This is to allow them to understand their roles within the larger organisational framework. We have been able to address the attrition issue to a large extent. |
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| How is the BPO outfit Optimus doing? What is the prognosis going forward? |
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| Govind Singhal, executive director, Polaris Software has taken additional charge of Optimus as its CEO and, for the past two quarters, has been developing the business strategy and bringing in senior management to lead the company. |
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| Our BPO initiative will focus on the transaction processing segment covering credit cards, lending and mortgaging solutions within the banking segment. We will be providing voice-based processing only as a client value provider rather than as a core solution. |
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| Going forward, what are the growth drivers for the company? |
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| Polaris' sharp focus on the BFSI sector has been its differentiator and has helped the organisation carve a niche for itself in the global IT solutions marketplace. |
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| We have added new dimensions to our BFSI focus by partnering with key technology players and complementary solutions providers. |
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| With the acquisition of OrbiTech Solutions from Citigroup, we have a whole range of powerful products (OrbiOne) that complement our solutions expertise. |
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| The OrbiOne product suite consists of eight product lines, which comprise 64 saleable GeneS (Generalised Systems), developed and used within Citigroup during the last 10 years. |
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| Extending this basket of offerings into the operations side, we have established Optimus, which will focus on solutions for banking operations. |
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| We see significant leveraging of the IPRs (Intellectual Property Rights) of the OrbiOne product framework, and the IP-led solutions business driving future business revenues. This will supplement revenues from our strong software services business. |
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| What is your view on billing rates? |
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| The entire IT outsourcing business is stabilising - most clients in the western markets have already experienced outsourcing and know what to expect. |
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| At the same time, Indian software companies have also mastered the art of providing high quality solutions at low cost. These two factors, combined with the impact of the recent economic downturn, have resulted in a rationalisation of billing rates for outsourced software services. |
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| We expect the margins to stabilise for pure IT services at present levels of around US$ 20/hour, even though volumes will grow. However, high-end activities like consulting, products and IP-led solutions will continue to demand higher billing. |
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| Do you see an improvement in the company's profit margins in the coming quarters? |
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| Margins should improve going forward because of the growth in the product business as well as optimisation in operational costs. |
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| What is the prognosis on the IT sector on the whole? |
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| The IT sector in India will grow in the coming quarters. In the next few quarters, we foresee manpower supply to be a constraint to business in India. |
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| How much of an effect has the rising rupee had on Polaris? What measures does the company plan to tackle this problem? |
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| In Q2 FY04, we have been able to successfully contain the impact of a strong rupee on our export earnings. As a step towards mitigating the diminution in the value of the US dollar, we have taken forward covers for a major portion of our receivables. |
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| We also have a task force put in place to mitigate the currency loss and to implement adequate proactive measures with regard to hedging. |
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| Does the company have any Capex plans in the near future? |
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| Polaris Software Lab is planning to set up a campus in Hyderabad, which will accommodate over 1,000 software engineers. The campus will be built on a seven-acre plot of land close to the Indian School of Business in Hyderabad. Polaris Software will be investng between Rs 22-25 crore in the campus. |
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| The campus will become operational in the first quarter of 2005-06. Expansion in our Corporate Banking Centre at Mumbai is also envisaged in the near future. We have over 5,00,000 sq ft of infrastructure as of date. |
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