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Intellect Design Arena Ltd, a Polaris Group company providing banking and insurance technology products, will be profitable on a quarterly basis in the fourth quarter of this financial year, according to its Chairman and Managing Director, Arun Jain.
As part a de-merger, Polaris Financial Technology spun off Intellect Design last December as a separate entity to focus on product business and Polaris Consulting and Service in software service. Both are now listed companies.
Intellect Design, came with an initial cash of around ₹300 crore, currently has around 3,400 employees, Jain told BusinessLine .
“In the fourth quarter of 2015-16, we will be profitable on quarterly basis but not on annual basis. This is because, if the third quarter is profitable and the fourth quarter is not, the licence can shift from one quarter to the other,” he said.
Revenue for Intellect Design on quarter-on-quarter is $25 million. Last quarter, it reported a loss of ₹30 crore loss on revenue of ₹157 crore. “We should be doubling revenue in three years and that’s what we planned at the time of Intellect Design going public,” he said.
Intellect Design competes with Infosys and Tata Consultancy Services on core banking systems. In global transaction business, it competes with Fundtech and ECI, in capital market treasury with Misys and Sunguard and in insurance with Guidewire.
The company has around 125 clients and across all the businesses with clients across 45 countries. The anchor clients are all top four UK banks Lloyds Bank, Bank of Montreal in Canada, he said.
Intellect Design gets revenue through a one-time licence fee, annual maintenance contract fee and implementation service, he said.
Jain said that in Europe and the US, the company is focusing on corporate banking and insurance. Recently, the company won a central banking deal for a Swedish Bank. The company also serves Citi Bank in Europe, he said.
Nearly 50 per cent of the revenue comes from the America and Europe and the balance from other geographies, he said.
The US is very difficult market because Intellect Design competes with local American companies like Fundtech and Mysis for treasury. Their rate card is very different when compared to Indian companies. “If we don’t compete with Infosys and TCS, I am better off and I have a better pricing advantage to clinch deals. So that’s where the initial hurdle of establishing our footprints as reference clients,” he said.
Key issue The biggest issue for any product business is establishing reference clients. If anybody wants to buy a product, they always look at a reference within their own country. This is true to India as well, he said.
In the product business, the operating margin is around 50 per cent with a goal to increase it to 55 per cent in the next two years. Gross margin in the US and Europe is 60 per cent and would like to increase to 65 per cent. In Asia-Pacific, it is 40-45 per cent, he said.
On the Bombay Stock Exchange, Intellect’s share priced closed at ₹105.70, a drop by 3.95 per cent.
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