Cranes Software International: Sticking its Neck Out

The Indian IT sector is now known globally for its skills, focus
on quality, and advantages of cost. Until now, most companies have leveraged
these in the services delivery business model and choosing to ignore the product
or IP business model that are riskier and also required greater capital.

The times, however, are changing. The very advantages that
helped the Indian software services companies are now being employed by a new
breed of companies, which are focused on products rather than services. These
companies have typically focused on niche markets, and slowly and steadily
acquired other companies to broaden their offerings.

Among such new breed of companies that have chosen to stick
their neck out is Bangalore-based Cranes Software International.

Cranes Software International, incorporated in 1991 in
Bangalore, began business mainly as a distributor of scientific and mathematical
software products from Mathlab. Fifteen years down the line, the company
provides enterprise analytics and engineering simulation software products and
solutions across the globe. The company has offices in the US, the UK, Germany,
India, Singapore, and UAE, and has a worldwide re-seller network and a web-based
channel. Cranes increased its global headcount to 715 engineers and scientists
as on March 31, 2007. Cranes is actively investing in R&D initiative in core
domains and other emerging technologies like MEMS and Nanotechnology. The
company offers a range of proprietary products including SYSTAT, SigmaPlot,
SigmaStat, SigmaScan, TableCurve 2D, TableCurve 3D, PeakFit, NISA, XID, XIP,
Survey ASYST, iCapella, and InventX among others.

Rudra Pratap is the chairman of Cranes Software International.
He heads Cranes Softwares MEMS research initiative and also plays the role of
chief scientific advisor. Asif Khader is the managing director and has been a
key person behind the growth of the company. The shareholding pattern as on June
30, 2007: promoters hold 37.67%, FIs/MFs hold 0.90%, FII holds 38.47%,
Corporates hold 11.67%, Indian public holds 9.63%, and others hold 1.66%.

For the financial year ending March 2007, the company reported
excellent performance. Revenues were higher by 35% to reach Rs 284.86 crore,
compared to Rs 210.98 crore for the FY 2006. Overseas sales were up 38% to Rs
225.14 crore, whereas domestic sales were up 21% to Rs 58.59 crore. Net profit
was up 39% to Rs 87.12 crore from Rs 62.49 crore 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. Cranes signed an MoU with Structural
Engineering Research Center to co-develop products for the scientific and
engineering community in India. The company also tied up with the Statistics
Department of the University of Pune as part of its industry-academia
partnerships to promote the development of a highly skilled statistical talent
pool in India.

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 Q1 ending June 2007, total revenues increased by 32%
from Rs 63.65 crore for the same quarter in the year to Rs 84.07 crore. Net
profit grew by 29% to Rs 24.60 crore, compared to Rs 19.02 crore reported during
the same period last year. Overseas revenues were up 27% at Rs 67.36 crore,
constituting 80% of total revenues. Domestic revenues rose substantially from Rs
8.85 crore to Rs 16.29 crore in the current quarter. During the quarter, the
company was granted patent for two inventionsMEMS Based Electrostatic
Acoustic Transducer and Methods of Sensing Sound Pressure. The company also did
major acquisition during the quarter. The company acquired Caravel Info Systems.
The acquisition includes suite of IPs that Cravel holds in its portfolio.
Similarly, the company acquired Proland Software.

Recently, the company acquired Dunn Solutions Group and Tilak
AutoTech. These two acquisitions will boost the companys competency and
revenues. in enterprise data analytics and engineering simulation business
space. The shares of Cranes Software currently trade at Rs 104. The long-term
prospects of the company certainly call for a better valuation.

Sushanto Mitra

The author is director, Techcap India

sushanto@techcapIndia.com

The views reflected here are of the author and not of this publication.

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