Coded For Growth

When information technology firm, Kale Consultants, first tapped the capital markets in September 1999, it created a storm. Its shares, which were offered at Rs 120 apiece, were oversubscribed 72 times. The company raised Rs 38.25 crore to finance working capital, strengthen its infrastructure, invest in overseas subsidiaries and facilities and to prepay its loans.

The scrip, which is currently traded on the Bombay and Pune stock exchanges, listed at Rs 340 in November 1999. Like other software companies, it has followed the market trend, having a good initial run and touching a high of Rs 815 in January 2000. But since then, it has been on a downward trend, wiping off most of its gains to quote at Rs 143 today.

 

At first glance, the company's performance in the first year since its initial public offering (IPO) looks good. Total income has grown 38 per cent to touch Rs 30.43 crore in 1999-2000 while net profit has risen 25 per cent to Rs 6.56 crore. But a closer examination of the figures reveals a different picture.

For instance, the bottomline has been spruced up by a huge other income component. Of the total other income of Rs 6.46 crore in 1999-2000, as much as Rs 4.20 crore is the interest earned on share application money, a non-recurrent revenue stream. So if you remove this, the performance pales.

Analysts, however, expect the company to post a better show this fiscal. That's because Kale Consultants has nearly Rs 75 crore of sales in the pipeline with an order book of another Rs 22 crore.

The company's core competency is software products and projects for the airline, banking and healthcare industries. In the airlines sector, it is ranked number one globally while in banking and healthcare, it is second in terms of the volume of business generated. And it will continue focusing on these domains.

Kale currently has a unit in the software technology park (STP) at Pune and has also just registered a unit each at the Mumbai and Chennai STPs. More importantly, its products to projects revenue share is a healthy 60:40. The company currently has nine products in its portfolio including Praxis, Apex and RevERA for the airline sector, Winbank, Plutus and Seva for banking and InCare and Chirayu for the healthcare sector.

In airline software, its strength is passenger revenue accounting systems. Clients include Jet Airways, Air India, Continental Airways, Emirates and a host of carriers from Europe, Africa, South America and USA. In banking, it has computerised over 500 branches of various banks in India.

Now, Kale has lined up two new products: FareGain, a fare audit software that will help airlines recover dues from travel agents, and Prism, a business intelligence software that they can be used to analyse data for trends and customer preferences. The company is still negotiating for prospective customers for FareGain while it has already signed on the first customer for Prism.

Besides, it will launch Finance One, a product licenced from Australian firm, Tech One. This is a bank-wide software while Kale's WinBank is a branch-wide software. In fact, Kale is relaunching WinBank and will be supplying it to a Sri Lankan bank. Kala has also entered a host of alliances. In healthcare, it has a strategic alliance with Internet start-up, Health Access, for the B2B and B2C healthcare portals that the latter is launching soon.

Then, it has forged a partnership with Citibank to co-develop a banking product that will be used in 40 countries similar to India. Kale will set up a dedicated technology centre for the development work. It has also tied up with Atraxis, the infotech arm of Swiss Air, which will distribute Kale's airline products for a commission.

The company has three overseas subsidiaries in New Zealand, Australia and USA. Only the first is making profits while the other two, set up recently, are still cost centres. In fact, although the Australian and American subsidiaries have generated revenues of around $600,000-700,000, they are still in investment phase. Now, Kale expects to grow around 75 per cent this fiscal. Further investments are lined up in both the subsidiaries and in infrastructure while the headcount is expected to go up from 447 today to 600 by the year-end.