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Engineering Services: Gathering Momentum

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DQI Bureau
New Update

The market potential for outsourced engineering services is estimated to be

$7-12 bn and around 20% of the value is being outsourced to third-party vendors

in countries like India, Taiwan and China, that highlights significant untapped

potential for Indian companies to establish a strong presence in this area.

According to Nasscom, Content development, Animation and CAD/CAM/GIS services,

which accounted for revenues of $465 mn (approx Rs 2,139 crore) for 2002-2003

are estimated to grow to $2.5-3 bn by 2008 (approx Rs 19,550 crore, a growth of

over 800%. The three major public companies, which operate in the CAD/CAM/GIS

and engineering services segment, include Geometric Software, Rolta and Infotech

Enterprises. Other listed companies that have significant revenue contribution

from these services include TCS, Wipro, Satyam Computer Services and Patni

Computer Services. Since data relating to their CAD/CAM/GIS business is not

available, these have not been included.

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Geometric Software



Geometric Software Solutions provides end-to-end Product Life Cycle

Management solutions for mechanical design, manufacturing and industrial markets

through the three strategic business units namely Geometry, Information

Management and Collaborative Engineering. The company also offers services based

on CATIA, eMatrix and other CAD/CAM/CAE/PDM software platforms. Geometric along

with Dassault Systemes have formed a subsidiary company, 3D PLM Software

Solutions, to provide software development services for the Dassault Systemes

group, wherein the former holds 70% of the stake. The company is also a 80%

shareholder of Teksoft which develops CAD/CAM software products for use in the

metalwork industries.

While revenues grew 28%, net profit dropped by 46% for the quarter ended

September 2005. The slowdown in profits for the quarter is due to a number of

factors including increases in staff salaries, appreciation of the rupee as well

the impact of consolidation of Teksoft performance in its results. However, the

company believes that the performance will improve in the coming quarters.

During the quarter, the company added two new customers in the product

development space and two clients for its subsidiary Nestlib. The company also

launched Application Maintenance Services (AMS) that would provide regular

income to the company. Geometric shares change hands at Rs 91.

Consolidated

Financials

 

Three months ended

Growth

Full year ended

Particulars

Sep-05

Sep-04

(%)

Jun-05

Sales

51.0

39.8

28

168.2

Other Income

-0.2

0.1

-118

5.1

Operating Profit

9.5

12

-20

51.7

Operating Profit Margin (%)

19

30

NA

31

Net Profit

3.4

6.3

-46

27.4

Equity

 

11.1

Earnings Per Share (Rs)

4.9

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Rolta (India)



The Mumbai-based company provides services in the CAD/CAM/GIS conversion

area, manufactures and sells engineering workstations in addition to providing

Internet services. The company earns majority of its revenues from domestic

operations providing CAD/CAM solutions to central and state government and their

agencies.

Rolta's full year performance for 12 months ended June 2005 was quite

encouraging (see box). Rolta recently entered into a strategic alliance with CA

for providing e-security services in North America. Rolta will be providing

implementation of CA's Unicenter as well eTrust, BrightStor and other custom

integration solutions. The company also signed with Intergraph Corporation, to

provide expert services to GIS customers worldwide. Under the agreement, Rolta

will provide specialized GIS services for its clients in North America. Rolta

currently trades at Rs 178.

Consolidated

Financials

 

Three months ended

Growth

Full year ended

Particulars

Sep-05

Sep-04

(%)

Jun-05

Sales

91

75

21

346

Other Income

1

1

8

10

Operating Profit

52

44

18

157

Operating Profit Margin (%)

57

58

NA

45

Net Profit

32

25

26

103

Equity

64

Earnings Per Share (Rs)

16

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InfoTech Enterprises



Infotech Enterprises is a software services company based in Hyderabad that
delivers with strengths in geographic information systems (GIS), engineering

design and IT services. It has also developed IPR relating to spatial products

and technologies. The company has several centers of excellence in engineering

services with specific focus on the aerospace industry in addition to providing

design analysis, manufacturing and after-market support.

Infotech's performance was encouraging for the quarter ended September 30,

2005. While revenues grew 20% to Rs.82.4 crore, the net profit was up 46% to Rs

9.7 crore. The company's performance has improved both due to the revenue

growth as well as slight improvement in margins and the share of profits from

its subsidiary. The company was awarded a major contract from KPN Telecom and

Alstom for GIS conversion and engineering design respectively. During the

quarter, the company added 11 new clients. The share of Infotech Enterprises

currently trades at Rs 435.

Consolidated

Financials

 

Three months ended

Growth

Full year ended

Particulars

Sep-05

Sep-04

(%)

Mar-05

Sales

82

68

20

257

Other Income

1

1

-53

4

Operating Profit

17

14

21

51

Operating Profit Margin (%)

20

20

NA

20

Net Profit

10

7

46

27

Equity

 

15

Earnings Per Share (Rs)

19

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