3i Infotech plans to build their staff in India and reduce working hours for their onshore employees to manage cost. No different than some of the other outsourcing firm or onshore firms which are trying to manage onshore cost , specially if it is non billable.

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Software services firm 3i Infotech Ltd sees revenue from the United States doubling to 50 per cent in this fiscal year following the acquisition of Regulus Group LLC, a top official said on Monday. Revenue from the US market, excluding Regulus, was 25 per cent last year, Chief Financial Officer Amar Chintopanth, who is also the executive director of the company, told Reuters in an interview.

Regulus was acquired in April for a total consideration of up to $100 million, to boost 3i Infotech’s transaction services business. Transaction services, which the company recently entered into, is growing into a significant revenue earner for the software  firm.

Last year it contributed about 12 per cent to its revenues. “In the IT business, revenues are equally split between products and services. Transaction services will form one-third of our business after Regulus,” Chintopanth said. Transaction services include documents, bill and payment processing.

The company also expects to exceed its revenue guidance this year, which was set at 17 billion rupees, Chintopanth said, though he did not disclose actual numbers. 3i Infotech is also setting up kiosks to dispense financial services through connectivity to state data centres, he said.

The revenues from the e-governance project is expected to start from the third quarter of this fiscal, he added. It currently has about 850 kiosks set up while it has committed to setting up 12,000. The company is investing about Rs 100 crores this year on e-governance projects, which is a major focus for the company in India.

Energing markets growth “Growth is not happening in traditional IT services areas, so we are trying to identify growth areas where we can invest.” 3i Infotech has a joint venture agreement with China’s Yucheng Technologies to provide software services, revenues from which would come in from the third quarter of FY09, he said.

“China is a market by itself. We are not looking at it as a low-cost centre. A lot of banks over there are getting automated, while a lot of insurance licenses have also been issued,” Chintopanth said. 3i Infotech is looking to invest in other emerging markets.

Apart from China, it is looking at CIS nations, specifically Russia, in the areas of insurance and banking. “We are in the initial stages of identifying prospects there,” he said. Europe, largely the United Kingdom, contributes about 15 per cent to its revenues, about 13 percent comes from the Middle East and Africa while the remaining is from India. Shares in 3i Infotech closed up 1.73 per cent at Rs 111.95.

Indian IT giant, 3i Infotech, a global provider of IT solutions and services company, today opened its office in Dhaka to cater to the growing needs of financial and insurance sector of Bangladesh.

Having expertise in financial and insurance software development, 3i Infotech is the first Indian information technology firm to open its office in Bangladesh, aimed at promoting its award winning BFSI (banking, financial services and insurance) products and related services in the growing Bangladesh market.

“We are happy to open 3i Infotech`s office in Dhaka as we see a vibrant market and enthusiasm in Bangladesh to adapt global best management practices,” said Mr. Anirudh Prabhakaran, Executive Director & President – South Asia.

The core banking software solutions of 3i Infotech have already been successfully implemented in Bangladesh for treasury, trade finance, and asset liability management for a large government-owned bank in Bangladesh, which is also the only government bank to have online core banking solutions. The company`s other solutions like universal lending, Kastle™ Treasury and asset liability management have also been implemented in one of the most dynamic private sector banks of Bangladesh.

“Our software products for the BFSI industry have years of global experience and domain expertise built in, especially those learnt from various developing countries. We believe that as Bangladesh develops in all areas, the adaptation of technology in business strategies would become faster, leading to all round benefit to customers,” he said.

3i Infotech, a $300 million dollar IT company, provides technology solutions to over 600 customers in more than 50 countries across five continents, spanning a range of sectors including banking, insurance, manufacturing, contracting, retail & distribution and government.

The company also offers a broad range of software services such as Custom Software Development, IT Consulting, IS and IT Security Consulting, Enterprise Application Integration (EAI), Managed IT Services, and specialized services such as Product Re-engineering, Compliance Consultancy, Application Rehabilitation and e-Governance.

DATE: June 13^th, 2008

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IT solutions provider 3i Infotech on Wednesday said it had acquired a 51% stake in FinEng Solutions with an option to acquire the remaining stake later.  The company has acquired a majority stake of 51% in Mumbai-based FinEng Solutions with a commitment to acquire the remaining stake in two tranches over a period, 3i Infotech said in a filing to the Bombay Stock Exchange. However, financial details of the transaction were not disclosed.  FinEng Solutions is a software services company providing software solutions to clients in the financial sector like commercial and investment banks, mutual funds, insurance companies, software product companies and financial institutions. Shares of 3i Infotech closed at Rs 111.20, up 2.54% on the BSE.   

The acquisition is an all-cash deal, funded by debts raised on Regulus and guaranteed by 3i Infotech, to be serviced over a period of seven years, the company said. The company plans to close the deal within three months. “We expect revenue from Regulus to start accruing to us by the end of second quarter this year,” 3i Infotech managing director and CEO V Srinivasan told ET. Regulus had reported $148 million in revenue for the year-ended December, 2007.

Commenting on the synergies behind the buyout, Mr Srinivasan said: “This acquisition would help us increase our footprint in the payment processing industry both in the US and in emerging markets like India and China. It also allows us with cross-selling opportunities to Regulus’ BFSI (banking financial services and insurance) clientele.” Currently, the BFSI space accounts for 48% of Regulus’ total clients. 3i Infotech currently earns $130-140 million in revenue from its US businesses, said 3i Infotech CFO Amar Chintopanth.

The company said it would retain the 1,300 employees of Regulus, but is also planning to offshore services like data entry and technology development to 3i Infotech’s India operations. “We are hoping that the volumes from the US business would grow exponentially in the coming 2-3 years and thus the need to retain Regulus’ employees,” Mr Srinivasan said.

However, post the acquisition, the US company’s present CEO Richard Long would step down and the company’s president and current COO would take over as the CEO of the company. Moreover, 3i Infotech is also looking to spend nearly $60 million on further acquisitions in the BFSI space. “We have spent nearly $40 million on acquisitions and other growth plans further to which we still have some balance left from the FCCB issue last year, from that kitty we would look at more $5-6 million sized deals in the BFSI space to build on the service offerings we have had so far,” Mr Srinivasan said.

The company had raised nearly $100 million though an FCCB issue June last year. 3i Infotech last week said its net profit last year grew 75% to Rs 183 crore. The company’s stock rose 10% post the announcement on Tuesday to close at Rs 131.75 on the BSE.

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Mumbai, April 17 City-based IT solutions firm 3i Infotech has raised around Rs 500 crore in debt over the last three-four years, in order to fund its domestic inorganic growth and working-capital requirements.

This debt has been raised by the company, in addition to the Rs 890 crore raised through FCCBs (of which Rs 247 crore was converted till March 31, 2008).

Mr Amar Chintopanth, Executive Director and Chief Financial Officer, told Business Line that his company has utilised some part of the debt for financing domestic acquisitions.

“We are not permitted to bring FCCB money into India for domestic acquisitions, as per RBI guidelines; funds raised through FCCB have to be deployed for overseas buy-outs only,” said Mr Chintopanth.

Growth strategy

Acquisitions have been an integral part of 3i Infotech’s strategy. In the previous financial year alone, the company spent about Rs 500 crore for acquisitions, enabling it to enter niche segments such as factoring software solutions and consulting. The company has utilised about Rs 100 crore of debt in the last few years for making about six-seven domestic acquisitions, Mr Chintopanth said.

Working capital needs

Debt is also deployed for the upfront payment (related to working-capital requirements) the company has to make owing to its business model. Working capital measures how much liquid assets a company has available to build its business. Since 3i Infotech has a near-equal products-services mix in its IT offerings, it has a higher component of revenues that are of a fixed price nature.

In the software products business, clients make payments to the vendor on completion of milestones. However, the vendor has to invest in salaries and other working capital requirements upfront, thereby creating a gap in the cash flow timing, said Mr Chintopanth.

“This gap is funded either through cash credit lines from the banks or working capital term loans from the banks which get repaid with revenues coming in from clients on completion of milestone,” he said. Crisil has assigned a rating of ‘A-/Stable/P1’ to 3i Infotech’s bank facilities.

The company expects to continue pursuing its acquisition-led strategy, said Mr Chintopanth. It is open to acquisitions that will enhance its BPO capabilities.

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By Ravi Jagannathan, Global Head – BPO, 3i Infotech

Today, the business models followed by Indian service providers have some semblance of the Business Process Outsourcing (BPO) models used the world over. However, it would be inaccurate to start comparing the two, right now, as it would definitely take some time before our service providers reach that level of stability and maturity. To ensure stable growth one must be able to transform a platform that will enable him to provide needed value to the customer’s business. This will also help the customers to overcome the challenges in accomplishing their growth. The past five years have been a learning experience for Indian service providers in view of the flood of outsource-able activities in the domestic market, availability of resources and swing in the Indian economy.

India is now poised for real, substantial and sustainable growth. The best part is the uniform agreement, which says that the recent trends are only the tip of the iceberg – once the next generation of young earners enters the system, the volume of business is expected to multiply, leaving the entire customer-oriented industry to rely on the service providers to address this growth. With the rise in business complexity, high volumes and internal issues customer behaviour has shifted towards the value-addition aspect. As the business volumes grow organisations are forced to focus on their core activities, hence de-coupling all non-core, non-critical processes for outsourcing. While doing so, they aim to reap multiple benefits in end-to-end outsourcing, rather than just the economic ones. Today, majority of the processing is done in-house with high costs and low efficiency. Instead of outsourcing the entire process, few activities are outsourced. Another issue is that the vendor’s quality practices are inadequate. Hence, customers are also afraid of ramping up the volumes in view of vendors not having scaleable models and nation-wide presence. In order to change the current scenario, organisations and service providers should work in collaboration towards a common goal of mitigating the myths and clearing all obstacles from their path. An appropriate, transformed business model should be non-linear – to service high growth with erratic volumes the processes should be automated. Customers will expect high degree of accuracy and adherence to certain business rules. Hence, domain specific Business Process Management tools and Standard Operating Procedures should be implemented to deliver end-to-end processes. As most of the growth in economy is envisaged from rural and suburban areas, service providers should, either directly or through collaborations with other service providers, be present in multiple locations. A suitable Hub and Spokes infrastructure is required for this purpose. It is also important to have a robust IT Platform to host large databases and secured networks to connect with customer systems. The Critical Success Factor of the transformed model should address the business needs and challenges of the customer’s business, namely, reduced or no capital cost, keep the operating cost variable rather than fixed, ensure high degree of compliances and accelerated processing to stay ahead of competition.