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The BFS Vertical: Going Strong

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DQI Bureau
New Update

The Banking and Financial Services (BFS) vertical forms the

largest contributor to the total IT services revenue in India, and has

maintained its lead over other verticals for a considerable number of yearsalmost

38% of the $24 bn IT services business, according to Nasscom. Despite its size,

the demand from this sector continues to grow faster than many other verticals

and is unlikely that in the medium term this position will change.

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Reasons for this pre-eminent position are also well known. The

banking sector was one of the firsts to incorporate automation, and continues to

be a leader in usage and outsourcing. Further, IT is a critical, if not

necessary, input to any banking or financial services operation, and

consequently the demand for services is least impacted by economic cycles.

All the major software services companies have large BFS

practices, and continue to grow them aggressively. At the same time, there are a

number of companies that focus on this vertical alone and have grown over the

years to reach a critical mass. These companies belong both to the services and

product segments, and have been successful in their fields despite competition

from the biggies. This is largely due to their concentration on certain niches

within the vertical that are not well served by their larger counterparts.

Nucleus Software Exports: Q1

Sales Grow 34%




Nucleus Software Exports (NSEL) provides software solutions to the BFS industry.
IT provides solutions on retail banking, corporate banking, cash management,

trade finance, Internet banking, and credit cards. NSE also provides other

services like consulting outsourcing software solutions, software support and

maintenance, customized software development, and BPO. Its software products

include FinnOne, Cash @ Will, Trade Facto, BankONet, and Power CARD. Revenue for

the Q1 ending June 30, 2007 increased by 33.96% to Rs 66.66 crore as compared to

Rs 49.76 crore for the corresponding quarter of the previous year. The net

profit after tax increased by 4.54 % to Rs 14.01 crore as compared to Rs 13.40

crore for the corresponding quarter of the previous year. Product business

revenue for the quarter stood at Rs 44.17 crore, an increase of 82.67% in

comparison to Rs 24.18 crore in the corresponding quarter of the previous year.

Whereas the projects and services business segment revenues for the quarter has

decreased 12.11% at Rs 22.49 crore against Rs 25.58 crore for the corresponding

quarter last year.

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Consolidated Financials

Particulars

Quarter

Growth (%)

Year ended March 31,07

June 07

June 06

Sales

67

50

34

221

Other Income

3

2

23

6

Net Profit

14

14

5

55

Share Capital

16

16

-

16

EPS

9

8

4

34

All figures in Rs crore

unless indicated otherwise. All figures are rounded-off

During the quarter, NSEL got eight new product orders for

twenty-three product modules and the company added six new clients. Orders for

product business were bagged from a financial institution in Dubai, South East

Asia, Sri Lanka, and other banking and financial institutions in India. The

company bagged a large order from GMAC, a subsidiary of GM Motors and ACOM of

Japan. The company added thirty-nine new employees, taking the total global

strength of employees to 1,571. The flagship product, FinnOne, was recognized as

the "No. 1 Best Selling Retail Lending Software" by IBS Publishing for

the year 2006. The stock currently trades at Rs 302.

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Polaris: Declining Profits



Located in Chennai, Polaris Software Lab, a Nasscom Top 10 company, is a key
player in application development for the banking, financial and insurance

sectors, with its portfolio of products, outsourcing and modernization services,

and consulting. Polaris has staff strength of close to 9,000. The company has

product suite and seven banking platforms under the brand name Intellect.

Polaris has offices in Tokyo, Sydney, Hong Kong, Singapore, India, Dubai,

Bahrain, Riyadh, London, Belfast, Zurich, Frankfurt, Toronto, New York, Chicago,

Fremont, and Chile. For the quarter ended June 30, 2007, the consolidated

revenue was Rs 257.45 crore compared to Rs 232.05 crore in the corresponding

quarter last year, a growth of 10.95%. During the quarter, profit after tax was

Rs 14.42 crore compared to Rs 20.27 crore in the previous year, down by 28.86%.

One of the main reasons for low profit was the appreciating rupee value. The

Intellect-led business contributed 20.90% to the revenue, while BPO subsidiary,

contributed to 3.90% to the revenue.

Consolidated Financials

Particulars

Quarter

Growth (%)

Year ended March 31,07

June 07

June 06

Other Income

9

0.35

2,354

6

Net Profit

15

20

-29

101

Share Capital

50

50

-

50

EPS

2

2

-

10

All figures in Rs crore

unless indicated otherwise. All figures are rounded-off

During the quarter, Polaris added fourteen new clients, which

include six deals for Intellect platform. The deals came from Western Europe,

Middle East, and Asia Pacific. The company signed a Master Services Agreement (MSA)

for specialized outsourcing services with two global banks. The company launched

a super-specialty center for the risk and treasury business in Mumbai to provide

highly-specialized products as well as end-to-end solutions for modernization of

global treasuries. The company entered into a strategic partnership with Ementor

Denmark A/S to deliver IT solutions tailor made for the Nordic market. Also, the

company started the cooperation of a Near Shore Application Center, and a Global

Performance Engineering and Certification Lab at Mississauga, Ontario, Canada.

The stock currently trades at Rs 125.

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