Stock Fundamentals

Flop: 3i Infotech

K. Venkatasubramanian | Updated on September 03, 2011


BL04 COL Flop 3i.eps

Among the mid-tier IT companies, 3i Infotech has been a prolonged underperformer, with revenues not ramping up significantly after the 2008 slowdown.

Being focussed on the BFSI (Banking Financial Services and Insurance) segment alone, it did see some traction in its IT software and products division, though not to the extent of top-tier players or even some mid-tier ones. The company had anaemic single digit revenue growth in revenues, when most IT players — mid and large, had much better top-line expansion in FY11.

Its transaction processing division which was expected to be immune to fluctuations in discretionary spends did not quite deliver as anticipated. Its foray into the space was driven by two acquisitions — J&B Software in 2007 and Regulus in 2008, for a total of over $105 million. This increased the debt on its books substantially.

Volumes did not take off as anticipated and margins were anyway low for this segment. As a result, the management sold these two companies in May for a consideration of $137 million.

In the recent June quarter, the company had a 24.7 per cent decline in revenues and a similar fall in profits compared to the same period in the previous fiscal, partly due to the sale of these businesses.

Despite being available at rock bottom valuations, the stock has not enthused the markets, in light of its own growth challenges as well as the cautious environment prevalent as a result of the debt woes of the developed markets.

Published on September 03, 2011

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