‘C’ Class: The Big Five



These five companies account for barely Rs 1,266 crore of the Rs 62,134-crore
IT industry. But in Indian IT’s worst year–when the industry grew by just
14%, against the previous year’s over-65% growth–these five companies
registered over 100% growth (see table). Given that the base for revenue growth
in these companies is small, the significance of their success is limited.
However, considering that a majority of smaller players found it extremely
difficult to sustain themselves in the year of the downturn, their performance
is creditable. So what is it that Moser Baer, RMSI, IS3C, Orbitech and Axes
Technologies have in common and what were the factors that contributed to their
success?

Except for Orbitech, which saw a significant increase in revenues on the
domestic front too, a major chunk of the revenues of all these companies came
from exports. In fact, the domestic revenues of iS3C Consultancy Services were
down by 51% last year. But domestic revenues of just Rs 48 lakh, against export
revenues of Rs 121 crore did not affect the company’s finally tally in
2001-02. Overall revenues still jumped from Rs 52 to Rs 121 crore.

The Strom Busters
IT companies that showed over
100% growth in 2001-2002

And except for Moser Baer, all these companies operate in the software
exports segment, which incidentally registered a growth of just 20% this year
(excluding ITeS). RMSI for instance, has 100% of its revenues coming from the
off-shore (India-based) business. The company says it created a relatively
risk-free business model by staying away from the ‘body-shopping’ on-site
model. Just Rs 83 crore of Moser Baer’s revenue comes from the domestic
segment and Rs 595 crore comes from hardware exports. Incidentally, for Moser
Baer, even the the growth in the domestic market was 241%.

Despite the high revenue growth, the number of employees these companies
added this year is proportionally low. RMSI grew from 646 employees in 2000-01
to 681 in 2001-02. Axes Technologies too added about 100 employees. IS3C grew by
149 employees and Orbitech added 348. Moser Baer was the exception, having added
900 employees.

So belt tightening and a marginal increase in the number of people but more
business, meant greater productivity. "Our over 100% growth in revenues is
primarily because of the change in billing process. There has been more work,
more employees and more billing–but this does not mean more customers or a
greater geographical spread, " says S Udaya Kumar, vice chairman
operations-Axes Tech.

iS3C Consultancy Services President and CEO Udai Kumar attributes the company’s
growth in a challenging year to three factors–"Focusing on global 1000
accounts helped us build relationships with 26 Fortune 1000 clients. A focus on
the high-demand EAI area helped us deliver high-value-added projects. Our
investments in the European and Japanese markets yielded results and showed a
three-fold and four-fold growth, respectively."

Ashish Sinha, head, business development at OrbiTech Solutions explains that
the company’s revenue growth is due to the COSL-GSU merger. "The GSU
revenues got added during the last fiscal year. The figure of Rs 128.6 crores
(for 2000-01) was for COSL alone," he says.

OrbiTech, which grew 157% last fiscal is now part of Polaris Software.
Polaris incidentally, showed just 7% growth last year but total revenues were Rs
284 crore as against Orbitech’s 330 crore.

Having just started since last November (2001), OrbiTech has notched six non-Citi
customers in the last six months. While one of Orbitech’s greatest strengths
is the importance and expanse of the vertical it caters to, RMSI’s success can
be attributed to the fact that it is a recognized player in the niche Geographic
Information Systems (GIS) segment.

"Our GIS division was able to capitalize on this specialization during
the last year. Our software services divisions also focused on a few verticals,
i.e. insurance, media, and engineering–a key factor responsible for our good
results" says RMSI CEO Ajay Lavakare. Also, a relatively smaller client
base, "but with deeper relationships" as Lavakare says, helped too.
However, he cautions that just sustaining last year’s revenues from the US
seems difficult in the year to come as the GIS industry is expected to be
negatively impacted in 2002-03, particularly in North America. "As a
delayed impact of the fall-out of September 11, 2001, the US government budgets
for April ’02-March ’03, which may have been spent on GIS projects will be
diverted to ‘Homeland security’ projects," says Lavakare adding that US
government agencies now prefer to have the work done in the US, by US companies.
The big success story among these companies is that of Moser Baer. Launched in
1983, this hardware manufacturing company focussing on magnetic recording media
and optical recordable media, jumped over 30 ranks in the past two years to
enter the DQ Top 20 club for financial 2001-02. Not only sales, profits were up
60% to Rs 221 crore.

During the year the optical media market was growing at more than 30% per
annum. Moser Baer added capacity to 760 mn to become one of the largest players
in the global market with a current market share of 11%. Developing the
proprietary process PC12D XT helped the company slash manufacturing costs by
10-15% as well as complete the capacity expansion in record time and below
project cost. Moser Baer MD Deepak Puri plans to match the rapid growth in the
optical media market by raising the company’s capacity to 1 billion per annum
by March 2003. ‘‘We are also looking at the fast growing DVD segment (recordable,
rewriteable and prerecorded ) which is expected to boost both the top line and
bottom line.’’ he says.

Given that the clouds of recession have cleared and things are looking better
for most IT companies, let’s hope there are many more whose growth figures
cross that magical 100% mark.

MANJIRI KALGHATGI in New Delhi

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