Polaris unfazed by 2000 tech slump

Suresh Seshadri

CHENNAI: Indian software services firm Polaris Software Lab Ltd. said on

Tuesday it was confident of good growth despite a slump in the fortunes of US

technology and Internet stocks in 2000.

"Dotcom failures are of course there in the US and they have surely had

some impact on sentiment but for us nothing has changed. For the year to March

2002, we should grow (revenues) at about 70 per cent," the firm's chairman

Arun Jain told Reuters.

Polaris' shares were among a clutch of frontline Indian technology stocks

that slid sharply in the last half of December, with the firm's stock losing

close to 30 per cent in value over 11 trading sessions to the end of 2000.

The Bombay Stock Exchange's information technology index lost about 23 per

cent, declining from 3,444.54 points to 2,655.81 in the same period, reflecting

the mauling suffered by US technology stocks on the Nasdaq, which fell over 39

per cent in 2000.

A sectoral downgrade to "neutral" by Credit Suisse First Boston

last week and its downgrade of leading, but unspecified, stocks to

"hold", citing concerns about a slowdown in the US economy, also sent

chills through India's software sector.

Jain said Polaris was well insulated from the meltdown of several global

dotcom firms as the company had only three clients with Internet-based

businesses.

"We had only three clients in the dotcom space and even these are not

pure dotcoms but service and product firms in the dotcom space."

Fears misplaced, risks spread out



Jain said fears about Indian software firms being hit by a slowdown in the US
economy, especially among technology and Internet firms, were largely misplaced.

"Our business is a customer relationship business and is not market

related...Indian software companies are mainly in the software services business

meeting specific customers' services requirements and so it is not about US

dotcoms."

He said Polaris was also likely to be one of the Indian software firms least

affected by any slump in demand from US firms, sparked by a likely surge in the

number of unemployed software professionals entering the market from failed

dotcoms.

"If the onsite component in software projects (for an Indian firm) is

high, maybe the impact could be more," he said.

"But in our case, only 20 per cent of our people are onsite. So even if

this drops to 17-18 per cent, we can deploy our associates in other overseas

projects in Australia, Germany or the UK."

Polaris currently gets about 65 per cent of its revenue from the US.

New products, prospects buoy outlook



Jain said the firm, which recently launched a proprietary banking automation
software product, BankWare, was upbeat about its prospects.

"There is now a better (order) funnel for bankware, about Rs 50 million

for this year," he said.

"...and given the firm's current business levels even if we don't grow

at all, our business should be about Rs 3.0 billion ($64.3 million) over the

next 12 months," he added.

Polaris has said it expects to end the year to March 31, 2001, with profits

of about Rs 550-600 million from revenues of over Rs 2.65 billion. The firm

posted a net profit of Rs 372.7 million on revenues of Rs 1.46 billion in

1999-2000.

The firm's shares were up just under one per cent at 12:54 pm (0724 GMT) on

Tuesday, gaining Rs 3.30 to Rs 408.25, while the benchmark 30-share Bombay index

was up 0.03 per cent at 3,956.42 points.

Polaris shares hit a 12-month high of Rs 1,612.5 on February 23 before a

two-for-one stock split. It hit a 12-month low of Rs 368 on December 26.

($1=46.68 Indian rupees)

(C) Reuters Limited 2001.