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'Exports target unrealistic'

He started Polaris Software Lab in 1993 with Rs 10,000 and a dream. Today, it is a $180 million company with specialisation in banking.

india Updated: Oct 08, 2005 01:31 IST
Arun Kumar

Indian IT companies have a phenomenal success record in recent past, do you think that India is on track to achieve $50 billion exports by 2008 as projected by the Nasscom-McKinsey report?
Despite the good run rate in the recent past, which is going to continue in the near future, I strongly believe that the target of $50 billion by 2008 is slightly out of reach. Till March 2005, this figure was a little over $17 billion, which includes $12 billion from IT services and $5 billion from IT-enabled services. Although, we have a good growth rate, the $50 billion target in the next three years seems improbable.

More importantly, a large number of companies are doing business level I, which means most of the business they are doing is primarily due to cost arbitrage. In such a case the margins are going to be under pressure continuously. We are witnessing more and more business being grabbed by large Indian companies.

Do you think there will be space for the small or midsized companies like Polaris Lab?
I do agree with the fact that small or midsized firms are going to face an uphill task in getting business because of multiple factors. There are issues like credibility, longevity, quality and obviously pricing. It is important for such companies to upgrade their quality of offerings. So as to complete in more challenging environments.

In Polaris Software's case, we decided two years back not to engage in level-I business. We have built capability in the level-II outsourcing business. In the last two years we have made a lot of investments in developing product suites as per global banking requirements. We invested Rs 100 crore in the last two years on research and development.

Our focus is the intellectual property (IP) led business. We have 56 IPRs in the banking space. Although in the last two years we maintained our topline growth, our bottomline was adversely affected due to heavy investment in research and development.

So now is it harvesting time? When are you going to cross the $500 million mark?
We are going as per our original plan. After the acquisition of Orbitech, we have taken two years in completing synergies. Currently we have eleven accounts, each of these has a potential to convert into $10 million or more in times to come. Of the eleven accounts, six managed to break into the $10 million club only last year.

Going forward, in the next fiscal (2006-07), we are confident of cracking some good numbers in terms of revenues. Are you also looking at inorganic growth?

As of now our focus is to grow organ ically. But at the same time, we have kept our options open. In case opportunities present themselves in terms of right size, right technology and right price, we would certainly evaluate. Currently Citicorp is the largest shareholder in the firm.

Aren't you apprehensive it might divest its holding in the company as it did in i-flex Solutions' case recently?
We have very good relations with Citigroup. There is a clear understanding between us to increase shareholder value and to protect each other's interest at all times. Citigroup is also your largest customer.

How will you derisk your business?
I do agree a large part of our revenues comes from Citi. In the next 3 years, as we increase the total size of the business, this ratio will certainly come down to a comfortable level.

First Published: Oct 07, 2005 23:23 IST