"Polaris Software Lab Limited Q1 FY2009 Earnings Conference Call"
Polaris Software Lab Limited Q1 FY2009 Earnings Conference Call July 18th 2008 Operator: Thank you for standing by and welcome to the Q1 FY '08-'09, Polaris Investors Earnings Conference Call, presented by Polaris management. At this time, all the participants are in listen-only mode. There will be a presentation followed by a question-and-answer session. At which time, if you wish to ask a question pleases press “star” “one” on your telephone. I would like to hand the conference over to Mr. Srikanth, CFO, Polaris. Over to you, sir. Srikanth: Good morning ladies and gentlemen. Welcome to Polaris Earnings Call FY '08-'09. I would like to give the financial highlights. To start with , revenue for the current quarter ‟08-‟09 was at Rs 316.98 crore as against Rs 286.16 crore in Q4 ‟08 showing an increase of 10.77% on Q-on-Q basis, and 23% on Y-on-Y basis. Same quarter last year, our revenue was Rs 257.45 crores. In dollar terms, revenue for the current quarter was about $ 76 million as against $ 71.85 million for the immediately preceding quarter, hence registering an increase of 5.77% on Q-on-Q basis and 21% on Y-on-Y basis. (Q1 ‟08 $62.72 million). PAT for the current quarter is at Rs 27.01 crore as against Rs 21.45 crore for the immediate preceding quarter showing an increase of 26 % on a Q-on-Q basis and 87% on a Y-on-Y basis PAT for the same quarter in the previous year stood at Rs 14.42 crores. Our Intellect revenue contributed Rs 51 crore in current quarter representing 16% of our global revenue as against Rs 56 crore in the immediate preceding quarter. Optimus revenue grew by 80% from Rs 10.04 crore in Q1 FY „08 to Rs 18.07 crore in the current quarter. Optimus revenue contributed 6% of our total revenue in the current quarter. Revenue from our strategic customer Citigroup stood at 40.66%in the current quarter. Gross margin stands at Rs 104 crores in the current quarter compared to Rs 94.56 in the immediately preceding quarter showing an increase of 10% on a quarter-on-quarter basis. EBITDA stood at Rs 40.1crore in the current quarter, compared to Rs.36.21 crore in the immediately preceding quarter. Current quarter tax provision consisted of gross tax provision of Rs 5.29 crore and there was a MAT credit of Rs 0.91 crore resulting in a net tax provision of Rs 4.38 crore which is 14.26% of our PBT We have a deferred tax credit of Rs 1.31 crore during the current quarter and FBT of Rs 0.63 crore in the current quarter. Our gross tax for the current quarter stood at 17% [compared] with 17.46% in the same quarter last year and 16% in the immediate preceding quarter. EPS on an annualized basis stood at Rs 10.96 in the current quarter as against Rs 8.68 in the immediately preceding quarter. Dollar appreciated by 4.73% on a Q-on-Q basis in the current quarter. Our P&L average rate was Rs 41.71 as against Rs 39.83 in the preceding quarter. We have incurred about Rs 7.67 crore as a capital expenditure during the current quarter. Our on-site off-shore mix is at 58.94% : 41.06%. Utilization for the current quarter stood at 77.81%, showing an increase of 357 basis points as compared to the same quarter in the previous year. We had about 15 new account wins during the current quarter and our headcount at the end of this period was at 10,397, consisting of Polaris headcount at 7606, Optimus headcount at 2698 and Polaris Retail Infotech Ltd. (PRIL) headcount at 93. Attrition for the current quarter was at 16.67%. I would like to hand over the floor to Mr. Arun Jain, Chairman and Managing Director of Polaris. Arun Jain: Good morning to all of you and thank you for participating in the Polaris Earning Call. You can see that we have a good profit growth over the last year. We grew 87% on the profit growth from Rs. 14 crore to the Rs. 27 crore level. And that is a part of our overall strategy where we guide our business towards consulting, products and services business. We believe that integrated models will change to the better model and it will able to have more resistance with change in the market economy and market shifts and this will enable us to get into the new markets as well .The investment which we had done over the last three years, now, we can be leveraging it. Current quarter, in spite of product business, with some shifting of our product deals, we were able to grow 11% in rupee terms and 6% in dollar terms. We find that this as a model that can work. In some quarters we can get a good return from the product business and some quarters we can get good returns from the services business and that‟s where the balance can happen on annualized basis. And as I mentioned earlier, our business model is annual basis and not quarterly basis. Sometime the quarters will be better; sometimes some of the quarters may not be so good. So we are tracking ourselves against the year-on-year basis not quarter-on-quarter basis. So last year, our EPS had grown to 7.4 and this year, we are looking at our EPS, to grow over 60 to 70% from 7.4 to 12.5 to 12.9. So our estimated number for the EPS of this year would be 12.5 rupees at least. That‟s what we are expecting and this is again in the line of our overall direction. When we look at our growth engine, it first gained momentum in 2003. We wanted to look at the growth as our major target. The second major target was profitable growth. In the last four quarters, we have done 10% growth quarter-on-quarter and that was the communication, I communicated to Mr. Arup and Mr. Srikanth that we will do 10% growth, quarter on quarter profit growth. We were able to do from last June quarter to now 10% quarter growth in CAGR terms. So that was a profitable growth and now the clear focus which is emerging for next four quarters is a profit growth. And we have a visibility that we can still maintain 10% quarter-on-quarter growth for next fourth quarters as well. So I think our systems are coming in place, operational infrastructure has come in place, IT infrastructure has come in place, sale infrastructure have come in place and I think we had a very good internal automation business gone in place there. On Monday morning, every manager has got all the reports on the table whether it is any product delay report or any customer discomfort report. I think those are the cases, which is making us different and we are able to have good output from the entire systems and we‟re able to deliver more value than some of our peers which are having a different model than us, a large service model than us and being a right size company we are able to create more value to us. And customers have started recognizing that Polaris, the right size company, can create more value. We are not seeing a significant slowdown in the BFSI segment. Our US business has grown in the last quarter. We know that their projects are getting delayed that‟s what I mentioned. There will be -- still uncertainty there in coming quarters so we can‟t say that everything is healthy for the next quarter. But overall there is a good shift of the business to offshore. So the focus is definitely higher on this amount that shifts the business offshore. And I think that will lead us through a better profitability as we go along when the business gets shifted to offshore. And second thing is this the time of lower spending. They are looking for specialized solutions more than general solutions so a trend is getting set on specialized solutions. In specialized solutions, budgets are not tight while on generalized solutions, their budgets may be getting tight. So that is the reason for which maybe we are getting a right traction right now On the other side, our focus is on profit growth. In continuation of profit growth, we are looking for monetization of assets. So we took an approval from the Board yesterday on real estate which is underutilized At any point of time, if you want to leverage it, you can leverage it. It‟s long tedious process of getting the real estate business and getting the right monetization for the assets which is there. to give the shareholder, the monetization value. So that‟s the purpose of monetization. So, I think with the growth of over 70% on corporate or the peers we feel that, that‟s what we are shooting for. And with that I‟ll leave the platform for you to ask any specific question you have. I think Srikanth has given all the statistics to you and still you need some more please feel free to ask on this call. Thank you. Question-and-Answer Session Operator: Thank you sir. At this time, if you wish to ask a question kindly press "star" "one" on your telephone keypad and wait for your name to be announced. If you wish to cancel your request, please press the “hash” or the “pound” key. Our first question comes from Ms. Jain from CNBC. Please go ahead ma‟am. Drishti Jain: Hi. I just wanted to know what you meant by the monetization of assets. Can you give more clarity, because last time you had spoken about, selling this off into a holding company, how that‟s going to be? Arun Jain: As of now in software business you need to have a provision, which Srikanth can answer that you need a system of approvals from a general shareholder. Srikanth: Basically we have a good real estate investment in the company. We have indicated actually in the last quarter after the Board meeting that, you know we have investments actually in Gurgaon and also in Chennai. And this is the process by which our existing assets can be really monetized. And as a regulatory process, that you know, this real estate business activity has to be approved by the Board. And under the regulatory strategy we thought it should also be approved by the shareholders and after that, the process of monetization of existing real estate investments can happen. So this is actually with a view to monetize our existing assets and, to give the benefit actually to the shareholders. Ms. Jain: Could you just shed some color on what exactly it means, maybe you will take three months time to get this permission both from your Board. I think your Board has given the approval so now you need to just get the shareholder approval. My sense is that how are you going to take this forward? Is it going to be a joint development program? Are you going to build it on your own? Are you going to take it into a separate company? Some color for you shareholders. Arun Jain: We are appointing a consultant for this and whatever the advice -- best advice will be there for this real estate business from our side we will take it forward. So we are going step by step as of now. Ms. Jain: How long will you see this whole process taking? Arun Jain: It‟s not a critical priority for us; it‟s one of the agendas. I would not be putting too much of a real priority for this kind of agenda, but this is a underleveraged asset lying in the balance sheet that is why we are doing it. Ms. Jain: Mr. Arun Jain, last time also I asked you the same question. Arun Jain: Yes. Ms. Jain: I had asked you have you put any value to the 20 acres that‟s lying with you. You had said you will get back to us by this quarter. So have you got any color to it, because you said your investment banker should give you the report and you shall get back to us at due time. Arun Jain: Yes. Sorry, I couldn‟t give you the information about it and I still don‟t have any information about that content. It was not really the, such a critical agenda on my priority. I am looking for the business growth more than real estate growth. Ms. Jain: Mr. Arun Jain, coming to your business I just wanted to some clarity on the BFSI side, because last time you had said that, you are targeting all this Tier 2 banks. How will this time client wins be? Arun Jain: Yes. They have various proposals which is there in the Tier 2 clients. And still some of the proposals which were expected to close last quarter have not being closed. So, I think we start getting entries in the Tier 2 clients quite healthily. Ms. Jain: Some color on the clients that you have added right now. What has been the pricing like? Have you been asked for pricing cut, because the Tier 1 players here have said that they are seeing price renegotiations coming in? Arun Jain: I have not seen, Arup, you would like to answer this? Arup Gupta: Yes. As Arun had articulated that obviously our product mix is solution, then the second one is domain consulting and third one is the services, I think the thing that you are referring to possibly the Tier 1 vendors and possibly even the services there. Our strategy is to enter through the solution and domain led consulting. Clearly our experienced have not seeing any price challenges there, in fact we are seeing fairly good billing rates. And as we entered through that we are able to get good pricing in the services business. So overall, in the entire mix of our offering we are not seeing any billing challenges. Ms. Jain: Also, outlook on margin Sir. Arup Gupta: The margins continue to be fairly healthy and competing. One is because our mix of offering and secondly is because of the macro economic conditions and the market sentiment. And with a lot of goods to offshore which is really resulting in the overall margin improvement. Both the things are contributing, the offering mix as well as move to offshore and improving the margin. Ms. Jain: Okay, thank you. Operator: Thank you ma‟am. Our next question comes from Mr. Srivathsan from Spark Capital. Please go ahead sir. Srivathsan: Yeah. Hi. I just called to ask you on the product list. The number of product lists as of March 31st have dropped. I don‟t see any provision or any order softness which we have, so what‟s the status of it, is it more options or can you just give us some insight into that piece? Arun Jain: Yeah, we have done total cumulative hedging as of now is about $90 million and this is primarily exclusive cater to our three quarters foreign exchange inflow and at the average rate of 40.08 rupees as of now. And since we have only covered about say 50% of our now foreign exchange inflow. Therefore, that we have kept actually a balance in paper. So by and large that we don‟t really foresee any major -- because we are not into the exotic deals, we are not into the speculative deals and we are not into the derivative segments in our billing rates. But we are into simple conservative hedging policy which we are allotting actively to [forward costs]. So therefore that you know we don‟t find any major issue and if the dollar really appreciates beyond that, we will get compensated because we invested in valued assets or our foreign assets So therefore this will not really be a very significant event which will affect our earning. Srivathsan: Okay. I want to know the overall demand scenario especially for the product space. There have been comments that there is some delay in terms of decision making, especially for taking our core product extended vis-à-vis closes. What sort of -- do you see any delays happening because of which clients, who is scheduled to be signed in the first quarter is getting delayed to second quarter, that sort of delay in contract signing is happening? Arun Jain: I think that's a basic nature of the product business, because sometimes product businesses got these decisions that are significant decisions. The product cost may be only $1 million but the investment from the bank side is close to five times the value of the license they pay to us. So those decisions are big decisions from the banking perspective and their installation business. And that's where some delays can be possible and I will just ask Arup to clarify specific details for me. Arup Gupta: And just to add to what Arun said, the fact that now we have got several of our implementations gone live, major implementations on the credit card based in Chennai and the core banking space in Middle East and the liquidity and the corporate banking space in Europe, etc.. Now we are in a position to now bid for very large engagements. The engagement sizes are now running into $5 million, $10 million to $15 million size and that is where some of the delays because those type of deals do take multiple levels of approvals. And that is where a couple of months here and there. We are now also trying to streamline to keeping that out, but that‟s possibly the reason for some of the things that Arun said. Srivathsan: In terms of Middle East, just want to get some more insight, because having n number of Lighthouse implementations in Middle East, lots of traction things but that apparently what comes as most progressed in the world at this point of time and if we increase spending from Middle East especially draining good amount of the growth both in terms of revenue and profitability for the near-term future? Arup: Yes, we started with Dubai and Abu Dhabi. Now we are seeing a lot of increased demands from even places like Egypt and Saudi Arabia. The overall, both the Middle East and APAC are looking very healthy for our product pipeline. Srivathsan: In terms of, is it possible for you to give us some color on what sort of profitability in the product space have you -- I guess you are beyond regional market of margins in your outlook for your product with the increase in product scenario? Arun : I think the products margins, the license revenue which -- all these things have been written off in our books as we have conservative policy. We have spent out, almost near to 300 crore over the last four years in building the product. So our license revenue as and when they start kicking in, those are the margin kicker for us. And that significant number will start kicking in because as of now it is a mixed model of services and it‟s around 15% right now on the product model. As soon as it‟s back to 25, 30% model, it will give me the at least 400 basis point difference in my margins as we go along. Srivathsan: Okay. Just as a way of studying, are you looking at sort of bundling our product on Optimus piece together, that you are looking at more of, platform sort of play or anything like -- something similar to what the price over processing capability? Arun Jain: Where are you working right now? You should join Polaris. Very few people in the industry are, understanding this model, because that was the whole objective of the company, when I set it up in 2003. The major module will be transaction based services model. But India is not ready for it. It is taking time to be ready for it. Asia is not ready for it and it will take some more time I would say. Here build up is three units, only to convince the transaction based technology and financial technology on demand. That‟s what we wanted to do it. That‟s a next decade model for us. We were then very aggressive sometime in 2003. But we [found] and we reflected back that if the market is not ready we are investing over till there. But I think 2010, 2011 the market will be ready and by the time our products will be ready. By the time our -- as of now its still international market, that‟s how they are outsourcing. Which, i was using this term some time in 2005. I am not using it anymore, I will say that may be 2010, that market will be ready and maybe some players, some new players, if they start marketing these services. It will be, we can go behind them to sell. So that‟s another good game for us too. But having our own product, having our own Optimus and our services -- and actually we are done, we are doing it for two customers silently. Srivathsan: Okay. Arun Jain: Two large customers they are doing platform based outsourcing in investor services today. Srivathsan: Okay, sure. Thanks a lot, Arun. All the best. Arun Jain: Yeah. Operator: Thank you, sir. Our next question comes from Mr. Pradeep Joshi from Irevna. Now, please go ahead. Pradeep Joshi: Hello, good morning gentleman. Yeah, just couple of quick questions on your top line Citigroup, could you give some sense on, how the revenue output has happened this time around, what‟s different, that has really, cost our growth in the revenue ,top line?. Arun Jain: Yeah, as we stated in our last call, in the Citigroup question we have vendor consolidation. They have invested about 11 wide placement vendor and then three strategic partners. And Polaris is one of those three strategic partners and because of the domain specialty and the relationship and the understanding of Citi. We are very well positioned to meet some of the demands, in terms of setting up, some specialize centre of excellence, which are very domain specific, for structural product etc, which possibly the other partners may not be able to meet. And also coupled with moved to offshore that I just mentioned earlier, that is what is resulting in very good growth within Citi itself. And also coupled with a very strong account management structure and etc, which we are anyway putting in place for all the customer, the combination of all these things is, there has been a fairly strong growth within Citi. Pradeep Joshi: Okay and any comment on Bear Stearns‟, JPMorgan account. Arun Jain: Again, as we mentioned in the last call, the fact that we already have it and that‟s in JPMorgan‟s care. And the fact that we have done some excellent work for Bear Stearns including some of their very strategic initiative rollout. So those are also being now recognized by JP and in fact, [large] as part of this merger. And I am very pleased to say that only we have not lost any work within the Bear Stearns. We are able to leverage some of that good work in penetrating and holding JPM as a whole. Pradeep Joshi: Okay. Yeah, just one clarification like, you are mentioning about time to target by Tier 2 banks in North America but at the end now we are seeing actually this full issue of credit cycles its actually penetrating through to the next level. Is that what you are saying delaying some of the client additions in the Tier 2 and how do you see that going forward if this credit cycles continuous to impact the Tier 2 banks? Arun Jain: As of now we have not done a significant study done on that area, we have just finished - - we just kind of -- just three months back we look at Tier 2 market, too early for us to really comment on it. Pradeep Joshi: Okay. Just final data point on the peak business I just wanted to have, what‟s the percentage like this quarter? Arun Jain: 88%. Pradeep Joshi: Okay. Yeah. Thanks a lot. All the best. Operator: Thank you, sir. Our next question comes from Mr. Ruchit Mehta from HSBC Asset Management. Please go ahead. Ruchit Mehta: Hey, good morning, gentlemen. Can you remember what the product revenues were in this quarter, please? Srikanth: It‟s Rs 50.94 crore for the current quarter. Ruchit Mehta: And in Q4, how much was that? Srikanth: Q4 was Rs 56 crore. Ruchit Mehta: Okay. Any reason for the declines in the product business in this quarter or it is simply quarter-on-quarter fluctuation? Srikanth: Yeah. There was deferment and delay in executing the contract. Ruchit Mehta: Okay. Srikanth: But it gets simpler between service and products actually. Ruchit Mehta: Okay. Srikanth: And year-on-year as a whole, it will be very comfortable but on a quarter-on-quarter basis, it comes to a small slip here and there, and then incentives is what really but certainly next time. Ruchit Mehta: So, on a full year targeting in terms of product revenue per se, I mean, from overall revenue perspective I mean? Arun : I think in the integrate service model, business and product service model we are looking over 20% growth definitely. So that‟s what we are looking at it whether it comes from product and services. You know as long as Citigroup account has, somebody asked earlier a question, why isn‟t that we are increasing the business because we are now consulting, because we are advising to the Citi- we have product arm where we can put in some products along with our services. And that‟s why these are the differentiators in the marketplace, that yes we have been seen as a supermodel of financial, technology and services. And if you ask us, really product business to be separately monitored. I highlighted two years back also, it is not an issue for us because sometime the products will get services business. So it‟s a kind of a model where we want to where our client relationships are managed well and we are ready to give a higher value to the customer. And look at the total bottom line. If bottom line can grow more than 10% quarter-on- quarter, that‟s our only broker in our business monitoring. Ruchit Mehta: Okay. Can you help us as to what will drive that product and the future growth in posterity? I mean what will drive our margin percent? Also looking from the cost savings and is tax going to be gained? But this time with tax based initiatives further for the sequential basis of? Srikanth: Yeah. The simple operation has been taken we are at the lower end. If you just simply look at the backhand stage, we are -- our tax margins are less 10%. Ruchit Mehta: Okay. Srikanth: We can definitely go to 15% without any major by operation efficiency because our investment in product is getting reduced. And the new client penetration has now happened in last year. So our investment in new client penetration and liquidation cost is coming down as well as our investment in product business is coming down. So if both the elements are coming down, our margins can come to 15%, no big science, no rocket science. I don‟t know. Ruchit Mehta: So basically we are looking more over operational efficiency with improved margins? Srikanth: Yeah. Ruchit Mehta: So for the…. Srikanth: Mentioned in our revenue growth, top line growth is one of focus points for the entire organization and profit growth is most important factor actually from our perspective. The profit growth will come primarily from our revenue growth primarily followed by our product process and followed by our operational expense. Ruchit Mehta: Okay. And just to clarify, when you say 20% revenue growth -- basically you‟re targeting US dollar revenue growth? Arun: Yeah. At annual revenue. Ruchit Mehta: On an annual basis revenue on it was ownership would that grow by 25%? Srikanth: Yes. I think that it will be better than that. 20% is definitely we are giving guidance, minimum. Ruchit Mehta: Okay. And then the clarification you know your associate company line that‟s (inaudible) business. They used to be negative from a few quarters, I mean, to keep that process on, could you just elaborate please on that? Arun Jain: Sure. We have one of the associate companies of as for now significant results actually during the current quarter. Ruchit Mehta: Okay. Arun Jain: And so that has resulted actually higher profits actually during the current quarter for the associate company. Ruchit Mehta: Okay. You expect them going far on this either I mean what do you expect for the full year of being associate company and therefore what you mean is our bottom line? Arun Jain: I think its looks like you know a sustainable model because that is also a service company. Ruchit Mehta: Okay. And what‟s your outlook on the tax segment return followed on this quarter as well so where do you see taxes going forward? Arun Jain: Going forward, the tax will be in the range of 15% of our PBT and so in this quarter actually there was only 91 lakhs tax credit actually which we have observed. And otherwise actually that number would be in the range of 15% on our PBT. Ruchit Mehta: Okay. So what is the tax covered in this quarter Srikanth: Primarily, there was a MAT credit of 91 lakh. Ruchit Mehta: Okay. Srikanth: That lowers the tax actually from accounting percent actually to 14%. Ruchit Mehta: Okay. And also you are decreasing in this quarter 6% sequentially any particular reason or? Srikanth: Depreciation is that, you know, there some impacts. We adopted actually two quarters ago we announced to the investors and also the fund managers that we are going to adopt the on demand surfing and in time actually our recruitment plans. Ruchit Mehta: Okay. Arun Jain: You know, with all our revenues being brought up but we are managing it within our own infrastructure and within our own facilities and so on so forth. Ruchit Mehta: Okay. Arun Jain: Before -- that‟s what -- that you know, during the last years that we managed our capital expenditure well under control. So because of that our depreciation impact has gone down by about 1 crore rupees during the current quarter. And it may likely to happen at least for next three quarter. Ruchit Mehta: I mean if you are not spending any more than the depreciation reflects after the decline and why it‟s declining in some. Arun Jain: I think that we have invested heavily in 2003, 2004. I mean, lot of assets are now depreciating itself. So, at the time post merger and now we are still seeing improvements in networking technology industry in severs are quite significant at that point of time. You can see still lot of it. Quarter-on-quarter, so we had expected it to come down in the next three quarter as well. Ruchit Mehta: Okay. Arun Jain: To some more extent. So we‟re optimizing all these elements. Ruchit Mehta: Okay. And just finally, if you can also comment a bit more about the demand environment specially non-certifying I mean, you mention about some delays in the product side of the business but what kind of -- I mean what is the extent of the delay that we‟ve been hearing this commentary from the other players larger players? And so how are you seeing environment like those figuring that you are more focused on the -- I guess on the investor impact? Arup : Yeah. Again, I think we are using it as I said the product as intellect solution offering and the consulting to gain entry. And then the mileage products service that is the competition which is working very well and definitely as I mentioned earlier the demand in APAC and EMEA for our solutions can be enough for us solutions .And some of the accounts, because we have added, as we mentioned about 15 new accounts in the last quarter. The total number of accounts has now increased over hundred. So there is a very large space for mining and look at our mix of offerings we have, the mining is producing excellent result, because we‟re able replicate some of the other products, basically the place plus the consulting plus the services. As of now, I think the pipeline, as well as the orders book continues to look very good. Ruchit Mehta: Okay. And finally, what are the CapEx plans for „08? Srikanth : Capex plan, we plan about 70 crore for the current year. Ruchit Mehta: 70 odd crores. Arun Jain: 70 plus. Ruchit Mehta: 70. Arun Jain: Yes. Ruchit Mehta: Okay. Thank you so much. Operator: Thank you, sir. Next question comes from Asha kiran from Span Capital. Please go ahead. Asha kiran: Hello. Hello. Arun Jain: Yes. Go ahead. Kiran. Asha kiran: Good morning. Let me congratulate you on good number this quarter, what the cash flow is going to be this quarter? Srikanth : We paid actually our annual bonus during the current quarter, so that was a lumpy cash flow which, the capital really got paid in the month of May and that is one of the reasons. Asha kiran: And can you given the number of how much bonus you paid? Srikanth: Our annual cash flow of bonus is about over, you know, I think we‟ve given all the shares to you as well. That will be a very confidential. Asha kiran: Yeah. Srikanth: But that is the significant number. Asha kiran: Okay. Okay. And regarding the stock, two properties in Gurgaon and Chennai what the strategy you are going to play during in the quarter? Arun Jain: You will have to wait for some more time because right now we are in the process of -- we will have to start initiating the process of getting the shareholder approval. Asha kiran: Pretty well. Srikanth: After that you know, the process will start actually, the business process will start, after that, you know, we should be able to really get more business. Asha kiran: Okay. Okay. Now, can you give me a breakup of this products and service business? Srikanth : Our total revenue is about Rs. 316 crore. Out of this Rs. 61 crore is actually from product business and management services business. Asha kiran: Okay. And you are having the addition of 390 people? Srikanth: That‟s right. Asha kiran: Okay. Okay. And then the intellectual property, what is the impact of that product, how much revenues are given this quarter for intellect? Srikanth: Sorry, but when I mean product that is basically our Intellect brand. Asha kiran: Yeah. Srikanth: Our products are all branded and intellect. Asha kiran: Okay. I will ask you if I have anymore. Thanks. Operator: Thank you, sir. Next question comes from Janaki Krishnan from Reuters. Please go ahead. Janaki Krishnan: Hi. You said that you have a plan for spending 70 crores in FY09, where it would spend on? Srikanth: Going to be out of internal accruals. Janaki Krishnan: No, it will be spent on what or invested on what? Srikanth: Pattern of spending of business primarily another IT, infrastructure and on our BPO facility and also on our, you know building concerns. Janaki Krishnan: All right, okay. How much is the reduction in the rupee against the dollar. How much did it impact your profit last quarter? Srikanth: It actually… Arun Jain: Neutralized Srikanth: Neutralized. It has neither impacted the profit nor actually we had losses. Janaki Krishnan: Okay. Yeah. And did you have any kind of Forex measures, which… Srikanth: Yeah. I just now shared that with you guys, you know as of now we have about say $90 million. Janaki Krishnan: Yeah. Srikanth: And so we have actually $90 million, we provided there will be a reinstatement again and that will be, it will get mobilized Arun Jain: And just to add I told in the beginning of the year, we want to protect the company against the rupee fluctuation and we hedged most offshore dollar against 40 rupees, I think it‟s 40.08. Janaki Krishnan: Yeah. Arun Jain: Every quarter like $30 million is used for offshore. Janaki Krishnan: Yeah. Arun Jain: We will hedge at the rate of at around 40 billion rupees to our business plans to be… Janaki Krishnan: 40.8 rupees right? Srikanth : 40 rupees 8 paise. Arup Gupta: 40.8 rupees Janaki Krishnan: Okay. Okay. Arun Jain: So that is the risk we took and we have to take certain business calls and that was a part of the business call, so there could be some meeting opportunities for us if rupee goes to 45 or 46 and we have been looking for opportunities. Janaki Krishnan: Yeah. Arun Jain: But I think that is a part of the business. We have to take some call and we took a call that for the whole year we may implement our business entire unit at 40 rupees. And that‟s what we did. Janaki Krishnan: How? Arun Jain: So, then really some fluctuations some more in the future quarter that we mentioned to everybody. It may be somewhere we had been to loss situation because if the rupee really goes to 45, 46 level, definitely you will have a loss situation in that scenario. But it was time to take a call and the management did. Janaki Krishnan: I see? Your -- I mean out of all the IT firms which have reported profits for Polaris the only ones in terms of the quarter, the high rise and the next level. How do you account for this in the recent Quarters? Arun Jain: Okay. Basically, I think it‟s a question of right sizing in the company. So I think the types of the companies are larger and there are a situation and as the company goes to various lifecycle. So this quarter means better quarter, like maybe there are quarter means better for them. So say question – there is no significant patterns on one quarter, one cannot just judge on the pattern. Janaki Krishnan: Okay. Arun Jain: I would like to be just neutral on this particular thing, this quarter was happy for us. Janaki Krishnan: Yeah. Arun Jain: Compared to other people. Janaki Krishnan: Yeah. Arun Jain: I am just [bringing] them back. Janaki Krishnan: All right. Okay. How much of your revenue loss in the US now? Last quarter how much was it? Arun Jain: 57%. Janaki Krishnan: All right. And do you see that going down or remaining or same loss? Arun Jain: It has actually grown up by 300 basis point compared the previous quarter actually. Janaki Krishnan: All right. Arun Jain: So we have -- are we believe that you know that may likely to continue. Janaki Krishnan: Okay. Thanks very much. Operator: Thank you, Ma‟am. Our next question comes from Jayana Kothari from Mangal Keshav Securities. Please go ahead. Jayana Kothari: Sir, just a quick question, its regarding a Citi Group, growth in this quarter, what kind of growth did you have, in your revenue? Arup: Yeah. Around the quarter and quarter we have to 3 million growths. Jayana Kothari: Okay. Srikanth: Almost goes 10% growth. Arup Gupta: Almost goes to 10%. Jayana Kothari: Sorry? Arun Jain: Almost goes to 10%. Jayana Kothari: 10%. And year-on-year? Srikanth: Year-on-year I think is from 25 million to 31 million, it‟s about 20%. Jayana Kothari: Okay. And the future outlook? Arun Jain: You know, I think it‟s likely to be fixed. Jayana Kothari: Okay. Thank you, sir. Operator: Thank you, Ma‟am. Srikanth: If there are no other questions probably we can conclude our earnings call. Operator: Sir, we have a follow-up question, do you want me to take up? Srikanth: Okay. Arun Jain: Sure. Operator: Mr. Srivasthsan. Please go ahead, sir. Srivasthsan: Yeah. My question is to be frank it involves again the salary hit for the staff from this quarter. What‟s the per value hit you are looking at? Arun Jain: Kind of the industry ways we are looking at so we are not doing anything significant at this time. Srivasthsan: So, yeah, because you had the goods there and you are taking from look at what the profits of 226 crores? Arun Jain: Yeah. Srivasthsan: Strong margin growth and what are the margin that you are looking at this point of time? Arun Jain: I think in terms of margins, the reverse is…. Arup Gupta: You know I had just mentioned to you. I think there is 25 crore on a revenue of – if 20% growth you are looking at is 1,400 crore, it‟s still less than 10%. So I think there are enough margin within the prior system, to be deployed. Srivasthsan: Okay. Just one last question. is a number that you have started Northern Ireland unit basically there is a rumor that there is some instability given for Northern Ireland offices, and you really need to run from this different units? Arun Jain: Yeah. We are getting some guidelines. Srivasthsan: Really for that? Arun Jain: Yeah. Srivasthsan: Thanks a lot. Arun Jain: Thank you, Operator: Thank you, sir. At this time there are no further questions. I would like to hand over the floor back to Mr. Srikanth for final remarks. Over to you, sir. Srikanth: Okay. I think, we sincerely appreciate the time and effort taken by all the investors and managers and analysts actually in the call. And we will look forward actually continuous participation and we are very thankful for the interest actually shown in Polaris. And should there be any specific questions that are based upon this, please feel free to really contact our investor cell. And we are more than happy to really answer to all your questions. Thank you very much again, and looking forward to seeing you in the next quarter. Arun Jain: Thank you. Arup Gupta: Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may all disconnect now. END