The Hindu Business Line : i-flex clocks 26 pc rise in Q4 net; to pay Rs 7

I-FLEX Solutions has reported a 26 per cent increase in net profit for the fourth quarter ended March 31, 2004, but increased expenses as well as doubling of provision for taxation has led to a 2.9 per cent drop in net profit for the 2003-04 fiscal.

Net profit for the fourth quarter amounted to Rs. 41.14 crore, up from Rs 32.59 crore reported during the corresponding previous quarter. Revenues increased 16.9 per cent to Rs 172 crore (Rs. 147 crore).

Net profit for the year stood at Rs 168.76 crore, down from Rs 173.96 crore; revenues increased 20.4 per cent to Rs 684 crore (Rs 568 crore).

The increase in revenues did not reflect on the bottomline on account of increased expenditure, largely on research and development, and on sales and marketing, said Mr Deepak Ghaisas, CEO, Indian Operations, and CFO.

Of the company's consolidated revenues under Indian GAAP, for which detailed figures were made available, net profit for the quarter increased 42.9 per cent and revenues 26 per cent. For the year, net profit was up nearly four per cent and revenues 28 per cent.

A senior company official said that the consolidated results were more indicative of performance since sales costs get booked in India while sales deliveries get booked at the foreign marketing offices of the company.

The company said that R&D expenses were mainly responsible for the topline growth not getting reflected on the bottomline, even in the consolidated performance.

"The increased expenditure is largely due to our R&D efforts which went into porting the flagship product, Flexcube, onto new platforms, as well as the development of Arabic and Spanish versions of it," said Mr Ghaisas, who added that the company did not recognise R&D expenses separately from other expenses.

Marketing expenses on account of the company exploring new markets and making a push into the US market as well would naturally be higher, he added. These investments would pay off only later.

Consolidated marketing expenses grew 33 per cent and general and administrative expenses 35 per cent.

The consolidated income from operations grew 9.2 per cent during the year to Rs 209.7 crore (Rs 192 crore).

This was further dented by a near doubling of tax provisioning at Rs 51.5 crore, up from Rs 25.3 crore the previous year.

"This is from certain benefits being not possible under Section 10A of the Income-Tax Act, on account of which many software companies have to provision for more tax," said Mr Ghaisas.

The board of directors has recommended a dividend of 70 per cent for the year under consideration, subject to shareholder approval.

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