The Hindu : Revamp impacts SSI software services revenue

Online edition of India's National Newspaper
Thursday, May 01, 2003

Business

Business

Revamp impacts SSI software services revenue

By Our Staff Reporter

CHENNAI April 30 Even as it has decided to hive off the education business and merge it with the recently-acquired Aptech, SSI has gone in for a major reorganisation of its consulting and software services business. The revamp will see SSI focussing on three areas — financial services, government services and enterprise applications. Additionally, it will seek to grow in the area of quality and testing practice.

According to Suresh Kalpathi, Chairman and Chief Executive Officer, this re-focus will lead to an optimisation of the client list and reduction in revenue in the near-term. He, however, expected this to result in more mature client relationships and improved profitability in the longer term.

Addressing a press conference here today, Mr. Suresh said SSI had thus far billed clients through its subsidiaries in Europe, APAC and the U.S. Now, all client relationships would be owned and managed by individual subsidiaries, which would use the offshore facilities and resources in India at competitive prices. The restructuring in billing mechanism would result in a decline in the stand-alone software revenues of the company. However, the consolidated revenues would remain unaffected. The restructuring, he said, would also improve efficiency and encourage migration of work offshore. The re-jig in the billing procedure, he felt, would help SSI "be on the right side of the transfer pricing regime".

Mr. Suresh said the company had disengaged itself from 20 clients during the quarter just passed. SSI has an active client base of 114. The cash position at the end of the March 2003 was Rs. 179.10 crores. The company's debt stood at Rs. 203.63 crores.

The separation of the education and software services lines of business would enable a one-time write-off of assets including intangibles largely contributed by past acquisitions and changes in the business climate during the last two years. This, he said, would improve the net profit and reduce the asset load on the balance sheet. The company, subject to regulatory approvals, would consider the adjustment of such changes against the share premium account.

He said there had been a change in revenue recognition in the education and training business in this quarter. "Education brand revenue" includes gross revenue from both partner centres and company-owned training centres. Education revenue included net revenue from partner centres and gross revenue from company-owned centres.

The total revenue for the third quarter ended March 2003, on a stand-alone basis, stood at Rs. 20.16 crores against Rs. 48.18 crores in the corresponding period in the previous year. Of the total revenue, software services accounted for Rs. 12.34 crores against Rs. 36.06 crores and education Rs. 7.82 crores against Rs. 12.11 crores. The net loss was Rs. 1.31 crores against a net profit of Rs. 4.06 crores. On a consolidated basis, the net loss for the three-month period was Rs. 3.99 crores against a loss of Rs. 6.48 crores. The total revenue was Rs. 51.76 crores against Rs. 77.39 crores.

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