At a time when the the Indian information technology (IT) services industry is facing the heat of the global slowdown in the banking and financial services (BFS) industry, Chennai-based Polaris Financial Technology is confident its ambition to be among the top five players globally in the space is achievable in the next five years.
The company that announced its first quarter numbers recently, reported a revenue growth of 26 per cent year-on-year and 9.4 per cent sequentially. Moreover, FT Intellect, its product portfolio, grew 23 per cent with nine new clients. Licence revenue for the quarter grew 6.4 per cent and contribution to revenue was up at 13.3 per cent. The company is confident it will grow 15 per cent for 2012-13, higher than the National Association of Software and Services Companies (Nasscom)’s prediction for the industry.
“We started to invest in the product business in this sector from 2005 onwards. So far, we have invested Rs 800 crore in becoming a domain specialist with building a product portfolio. Because of our products today we cater to nine out of 10 banks and seven out of the top-10 insurance companies globally,” said Arun Jain, chief executive officer and chairman.
In 2005, Jain took a call to invest in developing products for the financial sector. On an annual basis, Polaris has been investing close to Rs 100-115 crore for research and development. This has resulted in creation of intellectual properties in the form of a product suite called Intellect — Global Universal Banking. This is a service-oriented architecture-based application suite comprising 10 key platforms and over 95 products. It has solutions for retail banking, corporate banking, treasury and liquidity management, core banking, capital markets, asset and wealth management and insurance.
Within this, the corporate banking unit makes margins of 35-40 per cent. The core banking and credit card segment will hit margins of 20 per cent by the end of this year and capital markets will be a mature segment by the quarter ending September 2013. The company does not give a break up of growth rate of each of these segments.
Jain agrees the BFS segment is under pressure, but banks are also looking for innovative technology that will reduce cost. “The outsourcing industry has hit a saturation point. It is similar to the early 2000 period, when the Y2K buzz began. If companies still want to get the pie of tech spends then they need to differentiate,” he added. The domain focus allows the company to target the three distinct worlds of opportunities. First, includes companies from the highly developed economies like the US and Europe. World two consists of emerging countries where banks embarked on the technology journey in the 1990s. And world three consists of small banks from both developed and emerging markets.
But the shift to a product and solutions focused company has not been easy both from investors’ perspective and from operations’. “Building a good product is just one part of the business, marketing it is another thing. Over the last four years I have personally focused on the marketing of our products. Unlike some of the American and European companies we cannot afford to have large marketing budgets, we have had to look at marketing at lower budgets to global companies,” added Jain.
It seems the efforts are paying off
According to Jain, over the last four years, the company has been able to get requests for proposal on its own from leading global banks. This has changed. As Jain said, four years back the company had to ‘knock on every door’ to get business. “Our win ratio has also improved to one in two,” he added. One of the biggest wins in India was with the Reserve Bank of India (RBI). Polaris’ end-to-end Intellect Core Banking System implementation at RBI includes system integration and maintenance of software for a period of 10 years and the deal is valued at $55 million.
But Jain says investors and analysts continue to discount too many things. “It is a tough call to shift your focus, as the market starts measuring the company based on the stock performance. Analyst are always breathing down our neck and say we are not performing well,” he said. Jain also says despite investors’ concern he would continue to invest in marketing and R&D.
The next step for Jain is to get into the $100-million deal size. “Five years back, we were signing $1-5 million deals. Today, we have moved up the chain and easily access deals worth $20-50 million. We want to get into the $100-million bracket,” said Jain.