Still a long way to go

Companies in the Rs 10-200 crore range account for just 8.8 per cent of revenues.

It's a real small world for software minnows if one compares them with India's top four software services companies - TCS, Wipro, Infosys Technologies and Satyam Computer.

In 2005-06, the minnows accounted for just 8.8 per cent of revenues and 6.6 per cent of profits of the top four software giants.

In other words, the 65 small and medium size firms which export software services to the US, Europe, West Asia, Asia-Pacific, Far East, Singapore and UK, generated revenue between Rs 10 and Rs 200 crore in 2005-06.

Their sales aggregated to Rs 3,400 crore compared to Rs 38,169 crore by the top four IT firms. Their profits aggregated Rs 575 crore compared to Rs 8,386 crore earned by the top four.

The sales and profit growth rate of the small companies were in line with the IT industry. Revenues were up 30 per cent and net profits rose at a higher pace of 60 per cent.

Out of 65 SMEs studied, only 10 reported revenues over Rs 100 crore. Although the top 10 among these account for 42 per cent share in sales and 37 per cent share in profits, their sales were higher by 19.9 per cent and profit increased at a slower pace of 14.77 per cent. The employee cost, which accounts for 32 per cent of total sales, increased at a higher pace of 23.96 per cent.

The 55 SMEs with sales between Rs 10 crore and Rs 99 crore each fared well with sales growth of 35.73 per cent. The net profit of these firms more than doubled, up 107.67 per cent. The employee cost, which increased by 23.94 per cent, accounts for 28.65 per cent of the sales.

Like the front-line IT companies, the IT SMEs are also in an expansion mode through acquisitions. They are planning to set up business parks and training centres in India and abroad. Aftek Infosys has generated revenue of Rs 193.3 crore (Rs 195.23 crore) and profit of Rs 64.31 crore (Rs 59.79 crore) in 2005-06 from software services business.

The Rs 200 crore Cranes Software had planned last month to merge its wholly- owned subsidiary, Engineering Mechanics Research India (EMRC India) with itself. Cranes acquired EMRC in May 2005 for $ 1.5 million.

In the present calendar year, the company has acquired the Bangalore-based analytical business solution provider, Analytix System for $ 2.5 million; Engineering Mechanics Research Corporation (EMRC), US, for $ 1.5 million through its wholly owned subsidiary, NISA Software and Karna Softek India for Rs 4.2 crore.

Subex Systems complete its acquisition of UK-headquartered Azure Solutions. With a deal size of over $140 million, it was the single largest overseas acquisition by an Indian software company.

Sonata Software received 8 acres of land in Hyderabad for setting up an IT campus. Under the Information and Communications Technology policy of the Government of Andhra Pradesh (AP), the IT&C department has allotted this land to the company in Poppalguda, Hyderabad.

Aztec Software plans to invest about Rs 40 crore in a 1,500-seat centre at Hinjawadi in Pune. Aztec, which currently functions from four locations in Karnataka and one each in the US and UK, will use the Pune facility to strengthen its existing businesses and woo new clients.

Geometric software, planning to acquire company in the engineering services space in the current fiscal, which is going to completed by July 2006.