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.