Surging Exports Propel Software Companies Growth

The listed software majors followed the trend with an impressive 46 per cent growth in sales turnover during the year to March 1997.

The industry is now targeting a growth of over 55 per cent in the current year.

If it succeeds in doing so, it would have crossed a landmark Rs 10,000-crore sales.

The industry registered a 53 per cent growth in 1996-97 to notch up an income of Rs 6,400 crore.

This is on top of the 61 per cent growth the industry achieved during 1995-96. Software export from the country was up 55 per cent to Rs 3,900 crore, while domestic revenue was up 50 per cent to Rs 2,500 crore.

 

Tata Infotech, a major software company in the private sector, however, lagged behind with a growth of 22 per cent.

Pentafour Software with a 51 per cent growth, Infosys Technologies 57 per cent and Satyam Computers 72 per cent notched up impressive performance.

Like all other corporates, interest burden ate into the profit margins of software industry. A 123 per cent rise in the cost of funds resulted in a decline in profit margins.

GPM was down to 27.7 per cent from 29.6 per cent in the previous year and net rpofit margin declined marginally to 19.9 per cent from 20 per cent the previous year.

The large volume, however, jacked up gross profits by 43.6 per cent and net profit by 45. 2 per cent.

Infosys Technologies (1:1) and Tata Infotech (1:1) announced bonus issues to send their scrips northwards even as growth prospects of software industries attracted investment buying in the other software counters. Infosys Technologies soared up from a 52-week low of Rs 600 to the present level of Rs 1,900, while Tata Infotech from Rs 260 to Rs 900-plus and Satyam Computers from Rs 31 to over Rs 90.

Infosys Technologies clocked a 57 per cent growth in sales revenue and 59 per cent in net profit during the year to March 1997. Exports that accounted for 87 per cent of the turnover grew by 56 per cent.

During the year the company sold its quoted and unquoted investment worth Rs 5.77 crore in India, and after accounting for diminution in value, reinvested Rs 3.59 crore in its wholly-owned subsidiary, Yantra Corporation, incorporated in the US.

Software exports in a doller-term touched $1.15 billion ($0.73 billion) during 1996-97, up 52 per cent.

The National Association of Software and Service Companies (Nasscom) expects exports worth $ 1.78 billion in the current year, a growth of 55 per cent over the previous year.

The year 2000 date conversion projects added to the software exports from India.

Nasscom estimates that during 1997-99, Indian software industry may corner a market of more than $ 2-5 billion global opportunities from the date conversion projects.

The information technology industry received various sops in the 1997-98 budget. The country seems well set to make most of the tremendous potential.

Exemption of import tariffs on systems software, which was until now attracting 10 per cent, has come in as a short-in-the-arm for the industry.

The budget also extended various measures for the hardware and software exporters operating in electronic hardware technology park, export-oriented unit and export promotion zones.

The electronic hardware units operating from these parks are allowed to access domestic market.

The domestic sell value should be to the tune of 50 per cent of the price of their products during any 12 months. And such sales will attract excise duty equivalent to full custom duty, including additional customs duty.

Exempting import tariffs totally on system software can be a step in accordance with the World Trade Organisation (WTO) IT pact in March.

As such the domestic software industry will be ready to take up any competition arising therefrom.

The unified manufacturing scheme, which is incorporated in the new Exim policy effective from April 1, 1997, is a right step in the direction of augmenting growth potential.

BG Shirsat & Laxmikant Khanvilkar BS Research Bureau