3i Infotech Ltd is eyeing the growing spending of government in an attempt to improve its performance.

The company, which has a debt-to-equity ratio of 1.7, is hoping that the Government, along with its mainstay BFSI sector, will pull it out of its difficult times and reduce the debt-to-equity ratio to 1.1 by March 31, 2012 or sooner, though some analysts have expressed scepticism regarding this.

Speaking to Business Line , Mr Pankaj Chawla, President, India, APAC and MEA Markets, said, “In calendar year 2012, 40- 50 per cent of the India business will come from Government spending.”

He said that though BFSI (banking , financial services and insurance) accounts for around 70 per cent of its revenues both globally and in emerging markets, the growth of Government spending was higher. “While BFSI is growing at around 15-20 per cent, Government spending is growing at double the rate and in India it is growing at a rate of 40-50 per cent.”

Note of concern

However, analysts do not share his optimism. Ms Srishti Anand, IT Analyst, Angel Broking, said, “The company has concentrated primarily on BFSI and also done a lot of work related to Government, such as installing kiosks at railway stations. However, its efforts have failed and it had to take a hit in its P&L to the tune of Rs 260 crore capex. It has also sold off Regulus and the management's vision is not clear.”

A report from Sharekhan Ltd echoes Ms Srishti Anand's words. “Over the years, 3i Infotech has heavily disappointed the Street with its lacklustre earnings performance. On the other hand, the management's strategy to garner growth through inorganic initiatives has failed miserably on several counts,” it stated.

The company has a debt of around Rs 2,000 crore, including Rs 550 crore of FCCB (Foreign Currency Convertible Bond). “They have to repay the FCCB next year. They also have another Rs 1,500 crore of debt. Selling Regulus should help them to do away with the FCCB.” (3i Infotech sold Regulus, its billing and payments unit, for $137 million [Rs 617 crore] in May 2011).

She, however, disagreed with Mr Chawla's contention that the debt-to-equity ratio will be bought down from 1.7 to 1.1 by March 2012. “It will take them two years,” she said.