Crane Software International Limited : Making It Big

The onward march of the Indian software product brigade is now increasingly
making more waves than that of its larger peers from the services side of the
business. As Indian IP oriented companies expand their operations via mergers
and acquisitions, as well as improve or at least maintain margins with
increasing size of operations, the new heroes of the Indian IT industry could
very well be making a major breakthrough in the global product markets.

Among the companies that have been a pioneer in building an intellectual
property focused business model is Bangalore-based Cranes Software
International. The growth of the company from a distributor of scientific
software products to a dynamic software product company has been both dramatic
as well as inspiring.

Cranes Software International, incorporated in 1991 in Bangalore, began
business mainly as a distributor of scientific and mathematical software
products from Mathlab. The company has offices in the US, the UK, Germany,
India, Singapore, and UAE, and has a worldwide reseller network and a Web-based
channel. Cranes increased its global headcount to 715 engineers and scientists
as on March 31, 2007 and is actively investing in R&D initiatives in core
domains and other emerging technologies like MEMS and Nanotechnology.

For the financial year ending March 2007, the company reported excellent
performance. Revenues were higher by 35% to reach Rs 284.86 crore, as against Rs
210.98 crore for FY 2006. Overseas sales went up by 38% to Rs 225.14 crore,
whereas domestic sales went up by 21% to Rs 58.59 crore. Net profit was up 39%
to Rs 87.12 crore from Rs 62.49 crore as achieved last year.

During the year, the company acquired intellectual property rights of Capella,
a business and enterprise-reporting product. Capella is an automated, report
writing, scheduling, and distribution tool, offering organizations a dashboard
for managing business information. Cranes merged Analytix systems and business
of Analytix would be reorganized to take advantage of Cranes brand equity to
attract fresh talent and build relationships with customers. The company also
entered into an agreement with Engineering Technology Associates (ETA) to
distribute and support ETAs, DYNAFORM, and VPG products across India. As part of
this alliance, the company will also distribute and support Livermore Software
Technologys LS-DYNA. The company launched new versions of NISA Civil version 15
for structural engineers, a Linux compatible version of NISA 14; SigmaPlot 10, a
scientific graphing and data analysis; SYSTAT version 12; and InventX Strategic
Project Portfolio Management 4.0, a customizable solution.

During the year, Cranes received several accolades for its performance and
innovative approach. Cranes was honored with the United Kingdom Trade and
Investment award as the new market entrant of the year. The company was also
recognized for its business model acquire-enhance-expand, as it received the
Innovation for India award, an award instituted by Marico Foundation and
Business World.

For the third quarter ending December 2007, total revenues increased by 45%
from Rs 71.75 crore for the same quarter in the year to Rs 103.84 crore. Net
profit grew by 39% to Rs 31.38 crore, compared to Rs 22.50 crore reported during
the same period last year. Overseas revenues were up 47% at Rs 71.75 crore,
constituting 82% of total revenues. Domestic revenues rose from Rs 15.89 crore
to Rs 17.45 crore in the current quarter.

During the quarter, Cranes acquired Engineering Technology Associates, a
tier-1 vendor to the top three US car manufacturers. With this acquisition, the
Company has strengthened its foray into the Chinese auto market. The company
will have access to the established Chinese design centers and can leverage its
core design testing, virtual simulation, and product design skills across a
broader range of engineering needs. This acquisition will also enable Cranes to
expand distribution of its flagship NISA suite of FEA products. Earlier this
year, Cranes acquired Caravel Info Systems. The acquisition includes suite of
IPs that Cravel holds in its portfolio. The company also acquired Proland
Software.

Cranes launched MYSTAT 12, a freely downloadable statistical analysis
software package designed specifically for use by students and the teaching
community. Cranes also released NISA 64 bit version (NISA V15.5x64) on Microsoft
Windows. This version is targeted towards the enterprise customers enabling them
to solve large size problems and also introduces the multi-core/multi-processor
computing capability to NISA. Recently, Fractal Analytics, a provider of
predictive analytics and Cranes, announced an alliance to develop Predicta, a
retail risk management software.

Shares of Cranes Software currently change hands at Rs 121 discounting its
fiscal 2009 revenues by 11 times and leaving sufficient scope for appreciation
in the medium and long term.

Outperformer.

Sushanto Mitra

The author is director, Techcap India

sushanto@techcapIndia.com

The views reflected here are of the author and not of this publication. No
liability is accepted for losses based on the information presented here