Polaris banks on the Intellect

Arun Jain, CMD and CEO,
10 June 2004

Chennai: Challenges are not new to the 45-year old Arun Jain, CMD and CEO, Polaris Software Lab Limited. He has built Polaris from the scratch, and now he plans to transform the business — essentially a software services company — into a product / services / solutions marketing company.

Towards this end, Polaris recently launched a banking software product Intellect globally, a product on which the company is betting its hopes and has spent around Rs48.5 crore in development, branding and marketing.

In the short term Jain has to convince his investors to continue to back Polaris and wait for the business to show results, which according to him, is twelve quarters away.

At a time when companies are being forced to show results every quarter, this is a major challenge. Moreover, the year-end financial results for 2004, too, were insipid. While the turnover increased by Rs218.14 crore to Rs646.42 crore, net profit went up by a meagre Rs3.43 crore to Rs72.20 crore. More important, despite an increase in the total income, Polaris' fourth quarter profit dropped by nearly half to Rs10.52 crore compared to the last quarter of 2003.

Moreover, the company's expenses increased dramatically, though some like the software development expenditure of Rs.408 crore (up by Rs148 crore) could be termed normal. Others like bad debts at Rs2.84 crore (an increase of Rs1.36 crore) and the spurt in the debtor position from Rs148 crore at the end of 2003 to Rs. 171 crore at the end of last fiscal.

The company also incurred a huge foreign exchange loss of Rs.9.35 crore, (up by Rs.5.47 crore). Similarly, other expenditure heads like salaries, insurance, legal expenses, professional charges, finance charges too grew while the margins came under pressure.