The Hindu Business Line : Polaris Q3 net at Rs 32 cr; strong rupee drags margins

Contribution to revenues from Europe was 31.59 per cent against 28.27 per cent in the immediately preceding quarter. The contribution from the US went down to 35.03 per cent (38.36 pc) and Citigroup's slumped to 43.80 pc (48.78 pc).

Advertisement

Chennai Jan. 22 Polaris Software Labs has recorded a 34.8 per cent rise in revenues for the third quarter ended December 2006 at Rs 273.97 crore compared to Rs 203.28 crore for the same period in the previous year.

Net profit came to Rs 32.29 crore against a loss of Rs 5.71 crore in the December 2005 quarter.

In comparison to the quarter ended September 2006, revenues rose 7.2 per cent (Rs 255.57 crore), while net profit rose 19.12 per cent (Rs 27.10 crore).

The company has also declared an interim dividend of 20 per cent.

In the nine months ended December 2006, revenues grew 21.6 per cent to Rs 761.59 crore (Rs 626.22 crore), while profits grew over four times to Rs 79.67 crore (Rs 19.18 crore).

A statement from Polaris said that in the quarter, it had won two large product deals, one with a global bank in southern Europe and the other in Latin America, offering Intellect Cash Management Platform and Intellect Credit Card Platform, respectively.

Revenue contribution

Contribution to revenues from Europe was 31.59 per cent against 28.27 per cent in the immediately preceding quarter. Contrastingly, revenue contribution from the US has gone down from 38.36 per cent to 35.03 per cent. Citigroup's contribution to revenues slumped from 48.78 per cent in September 2006 to 43.80 per cent in December 2006.

Quarterly sales and marketing expenses grew nearly 60 per cent year-on-year to Rs 30.54 crore (Rs 19.13 crore) and grew about 15.16 per cent quarter-on-quarter (Rs 26.52 crore). The company has added about 40 people to its global sales and account management force.

Commenting, Mr Arup Gupta, Chief Operating Officer, told Business Line, "We expect those expenses to grow in line with revenues. Some quarters, you might see a blip when we establish teams in new geographies. Now, South Africa is one such where we are seeing client interest."

The rupee appreciation against the US dollar and increased sales costs caused an impact of 180 basis points on margins. After absorbing that impact, Polaris's gross profit margin stood 38.1 per cent, remaining flat, compared to the September quarter.

Mr R. Srikanth, Chief Financial Officer, told Business Line, "Had the US dollar remained stable, we would have had gross profit margins of 39.1 per cent." Also, pound sterling and other Asian currencies have gained against the rupee.

Hedge position

The company had taken a hedge position for $50 million at Rs 46.23 to the US dollar. Mr Srikanth said, "We were able to record a foreign exchange gain of Rs 2.73 crore. This trend could continue in the quarter ending March 2007 since we have again taken a hedge position at Rs 46.10 to the dollar. The maximum ceiling for the amount to be hedged is a quarter's revenue."

The company added 18 new clients in the quarter and increased headcount by 569 to reach 8,408 people.

It also plans to enhance its corporate banking Centre of Excellence in Mumbai with a capital expenditure of Rs 45 crore.

Revenues from Optimus, the BPO arm, grew 13.87 per cent to Rs 8.78 crore (Rs 7.71 crore).