Tata Infotech needs time for full recovery

Rosemary Arackaparambil

MUMBAI: Software services, hardware and training firm Tata Infotech, one of

the few Indian IT firms to show negative growth rates last year, will take

another year to get firmly back on track, said, managing director Nirmal Jain.

Founded by the Tata Group, one of India's largest industrial houses, its

outlook could also be hit by the slowdown in the United States, though it says

it is getting mixed signals. "It will take another year or so before we can

get (fully) back on track (in terms of profitability)," managing director

Nirmal Jain told Reuters in an interview.

In the year ended March 31, 2000, the firm's profits slumped 74 per cent,

while revenue grew just eight per cent - hurt by lower demand from former

shareholder and key partner, Unisys Corp, and excess employees with resultant

high costs.

Indian software firms in contrast posted an average of over 50 per cent

growth, with leading firms posting over 70 per cent, boosted by strong US-demand

and broad client bases. Jain said Tata Infotech had stepped up its sales and

marketing efforts overseas to rectify the situation.

The company posted a loss in the first quarter of the current year, but has

since recouped to show strong growth in the third quarter. It made a net profit

of Rs139.5 million in the first nine months of the current year compared to Rs

183.9 million in the year-ago period. This was helped by a third quarter profit

of Rs 83.8 million, sharply up from 18.7 million year-ago.

Jain said he expects it will turn in a similar performance in the fourth

quarter. It had a loss in the fourth quarter last year. "Looking at the

situation in the US we would expect in 2001-02 a (revenue) growth of 25-30 per

cent," he said, which is the same growth expected in the current financial

year ending on March 31. Jain forecast profits to be better than last year's Rs

122 million.

"We should look at 70-80 per cent growth from there and next year again

similar growth," he said. "We put in lot of effort to strengthen our

sales network. We have added on more than 50 new customers last year. That has

been a major thing," he said.

Tata Infotech now services a total of 166 clients. Jain said his firm's

international business would have grown 40-50 per cent by the end of the current

financial year. But he said Tata Infotech, which had more employees than it

needed last year, faced the opposite situation now. "We had a very heavy

bench last year. This year we are facing an attrition problem, lots of people

have left. "That has been a problem because anytime anybody goes, we are

losing people and experience."

US slowdown impacts some



Jain said his company was getting mixed signals from US clients in the current
economic slowdown there. "There are customers who say we want double the

work, triple the work. There are others saying we are not sure what is going to

happen so let's slow down, let's not increase," he said.

"There is a third kind who say okay we have a problem and we want to

close the current contracts as soon as they are over," he said. While Tata

Infotech was responding by increasing its marketing effort, he said there could

be an impact, though not much, if the slowdown was for real.

(C) Reuters Limited 2001.