Polaris posts Q2 profit of Rs 154.17 m

CHENNAI: Polaris Software Lab Ltd., a mid-sized Indian software services

company, reported on Thursday its July-September profit rose 9.9 per cent from a

year ago, slightly below expectations.

The Chennai-based company, which mainly writes code for the banking,

financial services and insurance sectors, posted a second-quarter profit of Rs

154.17 million or Rs 3.00 a share.

Total revenue in the past quarter rose 12.4 per cent from a year ago to Rs

724.13 million. The average forecast of three analysts polled by Reuters for

second-quarter net profit was Rs 157.7 million and the average revenue estimate

was Rs 744.7 million.

The company said it expects to post revenue of Rs 3.0 to 3.2 billion in the

year to March 2002, with the net profit margin seen at 20 to 23 per cent of

revenue, according to a statement quoting the chairman, Arun Jain. "The

results are in line with expectations," an analyst with a foreign brokerage

said. "And the full year revenue forecast is ahead of our expectation of Rs

2.9 billion, so there are no real negatives except an on-quarter decline in

profit."

In the first quarter this year, Polaris posted a profit of 155.5 million, or

Rs 4.56 a share.

Shares seen up in near-term



The company's shares were likely to rise in the near-term on the results,
analysts said. Polaris shares closed down 6.1 per cent, prior to the

announcement of results, at Rs 71.25. The benchmark Bombay index ended down 2.05

per cent.

"I see the stock going up in the short run on these results," said

M. Ravichandran, an analyst at Anush Shares and Securities.

"But the revenue number is lower in comparison with last year's third

and fourth quarter numbers of about Rs 730 and 746 million, so one has to be

realistic. Also, for the full year, a profit margin of 20 per cent will give

flat growth."

The company posted a profit of Rs 601.04 million on revenue of Rs 2.70

billion in the year ended March 2001. The company's shares have underperformed

the Bombay index by about 50 percent since the first week of September.

Client wins, offshore work up



The company said it had signed up seven new clients in the past quarter,
including four in its core financial services area. "One of the seven is

Japan's Hitachi, where we expect revenue inflows from this quarter,"

Polaris' chairman Jain told Reuters.

Polaris said the proportion of revenue from offshore projects, which are done

at development centers in India, had increased to 59.6 per cent in the past

quarter, slightly up from 58.2 per cent in the first quarter. Earlier this

month, the company said it had maintained its average billing rate for offshore

work at the previous quarter's level of $19.9 an hour.

Most Indian companies have indicated that billing rates could be under

pressure, and have hoped to counter the slowdown in technology spending in their

main US market by touting the cost advantage of having projects done in India.

Polaris, which began as a writer of code for Citigroup's Citibank operations

in India and still earns 30 per cent of its revenues from the group, said it had

signed up two large relationships for its proprietary banking application,

BankWare.

"BankWare's contribution to Polaris revenues is anticipated to be around

Rs 80 million for fiscal 2002," it said.

(C) Reuters Limited.