'Our focus is on banking and financial services'

SMART TALK: Vishnu R Dusad, MD, Nucleus Software Exports

Vishnu R Dusad

Nucleus Software Exports, a solution provider in the banking and financial services space, recently bagged a $10-million contract from the financial services arm of General Motors (GM).

The New Delhi-based company also became one of Oracle Corp's certified partners, apart from getting into a joint marketing pact with Sun Microsystems India.

It has turned in an impressive performance for the last quarter with net profit going up 74.67 per cent to Rs 8 crore. Total income went up 32.44 per cent to Rs 22.17 crore. For FY05, net profit rose 53 per cent to Rs 15.82 crore on a total income of Rs 67.03 crore, which went up by 23.9 per cent.

The stock has surged more than 435 per cent to the current levels of Rs 265 and is trading at a trailing 12-month P/E of 20.41. Managing director Vishnu R Dusad spoke to The Smart Investor about the company's future plans. Excerpts:

Nucleus bagged a four-year contract from GM's financial services arm. What is the size of the deal and what are the technical aspects involved?

The contract value is in excess of $10 million. According to the pact, Nucleus Software has granted a corporate software license for FinnOne (Nucleus' flagship banking product) to GMAC's (General Motors Acceptance Corp, a wholly owned subsidiary of General Motors) international operations for a worldwide rollout, excluding USA and Canada.

Currently, GMAC is present in 41 countries. FinnOne is an integrated suite of applications designed to support business offerings of banks and financial services companies. It provides core financial accounting and customer service, and solutions for both asset and liability sides of the business.

This is one of the biggest orders for a worldwide rollout of banking products by any Indian company. We will see the products implemented in Europe, Latin America and Asia Pacific over the next three years.

This is also the biggest single product order for Nucleus Software till date. Strategically it strengthens Nucleus's position as a leading global provider of banking and financial software. Specifically, it increases our penetration in the automotive finance markets.

The company recently became one of Oracle Corp's certified partners. How is that going to help you going forward?

Nucleus has become Oracle India's 'certified advantage partner'. The alliance gives us an opportunity to be a part of Oracle's elite group of independent software vendors. It will now promote Nucleus to its portfolio of leading banking and financial institutions globally. Oracle will also provide market management and technical assistance to Nucleus.

You have also signed a pact with Sun Microsystems India for deploying Sun Java Enterprise System in your products. Can you elaborate the nature of the agreement and the advantages to Nucleus?

Nucleus has entered into a 'joint marketing agreement', which will offer us scalability and flexibility in our choice of platform to our customers. Sun will enable porting and benchmarking exercises of Nucleus' products on its (Sun's) applications.

The agreement aims at combining marketing and technical efforts to ensure support to Nucleus' solutions running on Sun Enterprise servers and the Solaris operating environment. Both companies will offer technical training and support besides creating joint marketing and sales initiatives.

Are you looking at increasing your manpower going forward?

We have added 173 new employees in FY05, taking the overall strength to 878. We plan to add 200 persons in FY06 to utilise market opportunities and for product development.

Is the company planning to get into any other areas than financial services products?

No. We are focused on the financial and banking sector and we would like to enhance our expertise there. From consultancy and services, to the creation of innovative solutions, the transformation of Nucleus Software into a products company has been clearly thought out.

Today, Nucleus can boast of a series of product offerings in addition to the array of IT services that has been its strength from the beginning. However, our focus still remains to be the banking and financial services segment. Our domain focus has been sharp and this has paid rich dividends for our stakeholders.

What is the size of your clientele? How many clients have you added in FY05?

We have added 18 new clients worldwide this year, taking the overall client count to 97.

Can you give us the break-up of domestic and export revenues for FY05?

Of the total consolidated revenue of Rs 103.1 crore for the year ended March 31, 2005, the domestic division generated Rs 8.6 crore whereas the exports division contributed Rs 94.5 crore.

What are the products launched during the previous year? What are the new products you are working on?

We have, over the last two years, launched several products. Last year, we launched three products "� BankONet (Internet banking solution), fraud management system (FMS) and customer acquisition system (CAS) "� aimed at strengthening our position as an IT company providing world-class banking products software.

What will make Nucleus competitive going forward, keeping in mind the competition in the banking and financial sector space? What is your advantage vis-à-vis players like i-flex and Polaris?

Our understanding of the banking sector makes us stand out among a basket of banking product companies. Our products are especially devised to meet clients' needs.

What is your outlook for the IT industry going forward?

The IT industry has been performing well so far. But now the industry needs to move up the value chain. Domestic companies need to look at attacking the consulting space, dominated by players like IBM, and moving into the products game.

The global market for software products is around $180 billion, and India, for all its spectacular progress in the software and services space, accounts for only a small percentage of it. As the Indian IT industry matures, it is time for both emerging and proven players to look at this space more aggressively.