Banking and Finance Vertical: The Bigger the Better

No doubt the largest vertical in the IT services sector, the banking and
financial vertical contributes 40% of this $50 bn industry. It has been the
mainstay of this industry and even during the bleak days of the dotcom crash,
this vertical continued to grow, helping the IT exports industry to survive.

Even in the domestic sector, the rapid growth of the BFSI sector has made it
the largest vertical for the home market, contributing 31% of revenues of the
market.

Finally, the contribution of this vertical in helping the sector develop
intellectual property is again unparalleled, providing impetus to products from
companies such as i-flex, TCS, and Infosys. While all major companies have a
large BFS vertical, only few are totally focused on this sector. Among the
listed companies, well known are Nucleus Software and FT.

Nucleus Software:Profits Decline By 13%

Nucleus Software provides software solutions to the banking and financial
services industry. They provide solutions on retail banking, corporate banking,
cash management, trade finance, Internet banking, and credit cards. Nucleus also
provides consulting outsourcing software solutions, software support and
maintenance, customized software development, and business process outsourcing.
Their software products include FinnOne, Cash@Will, TRAde facto, BankONet, and
PowerCARD. Standalone revenue for the quarter ended December 30, 2007 increased
by 26% to Rs 48.3 crore as compared to Rs 38.3 crore for the corresponding
quarter of the previous year. Standalone net profit after tax (PAT) decreased by
13% to Rs 10.3 crore as compared to Rs 11.6 crore for the corresponding quarter
in the previous year.

During the quarter, Nucleus bagged contract from Bank M (Tanzania) for
implementing its Cash@Will solution, which will enable the bank to efficiently
offer its corporate customers modernized cash management services. Similarly,
Nucleus announced setting up of a new development center at Ambattur Industrial
Estate, Chennai, with a capacity of over 200 seats. Recently, Nucleus has
entered into an MoU with a renowned developer for 16 acres of land in a notified
SEZ in Rajasthan.

The company also decided to exercise its option to sell its 25.1% of
shareholding held in GMAC Financial Services India. Nucleus was placed among the
top 15 most exciting emerging IT/BPO Companies to work for under a survey
conducted by Nasscom and was listed among the 200 Best Under A Bn Companies in
Asia by Forbes Asia magazine. The stock currently trades at Rs 290.75.

Financial Technologies:Major Jump in Profits

Financial Technologies (FT), a leading technology IP, is the domain of
trading on financial markets. FT facilitates price transparency, efficient
trade, and structured finance mechanism. Standalone revenue for the quarter
ended December 30, 2007 for financial year 2008 increased by 32% to Rs 41.25
crore as compared to Rs 31.24 crore for the corresponding quarter of the
previous year. Standalone net profit after tax increased by 1,337% to Rs 536.94
crore as compared to Rs 37.36 crore for the corresponding quarter in the
previous year. The stupendous increase in the net profit is due to the stake
sale by FT in MCX to leading institutions.

During the quarter, FT received approval from the Central Electricity
Regulatory Commission (CERC) to set up Indias first national level power
exchange Indian Energy Exchange (IEX) for trading electricity. FT recently
acquired 4,50,000 equity shares in the National Stock Exchange of India for a
total outlay of Rs 125 crore. Also, FT submitted its expression of interest to
invest up to 5% of the relevant paid up capital in some of the regional stock
exchanges. Recently, FT issued GDRs with a Green-shoe Option and successfully
allotted 1,445,923 and 216,888 equity shares respectively. ICICI, IL&FS, Kotak,
Merrill Lynch, and Citigroup conglomerates acquired 3.55%, 5%, 1%, 5% and 5%
equity stake respectively in the Multi Commodity Exchange of India, a subsidiary
of FT at an enterprise valuation of $1-1.1 bn. MCX, an FT company, emerged as
the Exchange of Choice globally for commodities. The company plans to invest
proceeds in green field ecosystem ventures such as the National Spot Exchange (NSEL),
the National Bulk Handling Corporation (NBHC) among others. The University of
Mauritius Trust (UoM) has tied up with the FT Group to establish a Center for
Organized Markets in Mauritius. The stock currently trades at Rs 1,941.