The reason for the fall is attributed to the considerable shift in business from the onsite project model to the offshore project model. Further, the onsite and offsite billing rates are witnessing a downward trend. From $62.50 during the last quarter, the onsite per hour rate has come down to $60, while the offshore rate has fallen to $19.8 from 19.95 at the end of second quarter.

The onsite revenues have fallen to 33.9 per cent (31 December 2001) from 49.3 per cent for the previous years corresponding period. On the other hand the companys offshore revenue this year went up to 66.1 per cent despite the marginal fall in charges.

The company has registered revenues of Rs 215.96 crore for the nine months, as against Rs 191.26 crore posted during the previous year. The net profit after nine months of business has gone up by Rs 4.43 crore to Rs 46.26 crore compared to last years figures.

Addressing the equity analysts after declaring the companys half-yearly results Jain said: "Our long-term target is 30-per cent growth and we are confident of achieving that. The average growth, quarter to quarter, is expected to be around 7 per cent, though between the quarters the actual growth rates might vary."

"Companies like ours will largely benefit when clients go in for multiple vendors," he said. Recently, Polaris Software had bagged orders from the American Insurance Group (AIG), USA, and CommerzBank, Germany. Competing against 20 others, the Chennai-based company successfully outbid giants like Tata Consultancy Services (TCS) and Infosys to bag the premium AIG and some of its subsidiaries accounts. (TCS is, however, executing some projects for AIG.)

"These clients look at the vendors capability, and it involves multiple levels of presentations. Ten to 12 people evaluated our proposal," Jain said. The contract will include maintenance, migration and reengineering. Refusing to divulge the size of contract, expected revenues or the billing rates for these two clients, he said: "We are in the early stages of our relationship, and billing rates are not the basic issues for building relationships. Well, it will not be less than $10 million relationship over the next 18 to 36 months. These two are new contracts are certainly not pilot projects."

"Relationships can be divided into operational and strategic; the latter is long term. We look at AIG and CommerzBank tie-ups as strategic ones," he said. (Polaris Software executive director Govind Singhal, however, said that the two new contracts are not pilots). "We are hoping to clinch two more such strategic relationships," Jain said. Currently, the CitiBank group is the companys strategic client, contributing nearly 35 per cent of the companys revenues. Playing down the threat from OrbiTech, a Citigroup company, while competing for contracts in the same space, Jain said: "We will have collaborative business with OrbiTech. Polaris business exposure in Orbitech is around 10 per cent."

Replying to a query about projects that ended Overseas Union Bank and others he said: "The projects that we undertook in 1999 were operational, and Overseas Union Bank falls under that category. Out of our 93 clients, 24 come under our strategic relationship delivery units, which means the relationships is long term. As regards the NEC contract, it is still on and around; 220 professionals are on the job, while no new hands are recruited for the project."

Attributing the Rs 17-crore increase in staff costs this year to 10 per cent pay revision, he said the operating profit margin is expected to go up when the products developed by Polaris Software are sold. "Our development costs have come down as the product development stage is over."

Geographic revenue break-up

US/North America:   40.1% Europe:                     21.7% India:                        17.3% Asia Pacific, Japan:    20.9%

Technology concentration risks

Maintenance:                   21.5% Product enhancement:      22.0% New applications:            44.4% Migration, reengineering:  15.1% ERP and others:               8.0%

Domain concentration risks

Banking, finance, services, insurance:      71.3% Emerging verticals:                                 28.7%

Average billing rates ($/per hour)

Onsite:                60.00 Offshore:             19.90

Client concentration

Top client:     18.9% Top 5:           47.0% Top 10:         66.0%