Chennai: Polaris Software Lab, the city-based software company, closed its first quarter with a consolidated revenue of Rs 153.68 crore and a profit of Rs 16.42 crore after taking into account the loss of Rs 12.94 lakh by associate companies.

For the previous quarter (ending March 2003) Polaris had declared a revenue of Rs 155.91 crore and a profit of Rs 13.03 crore (after extraordinary write-offs like the Rs 6.39-crore provision for diminution in value of investments and the Rs 51-lakh loss made by associate companies).

The revenue of Rs 73.54 crore and the profit of Rs 14.36 crore for the corresponding quarter of the last year are strictly not comparable figures as the Polaris-OrbiTech Solutions merger took effect in November 2002. Nevertheless, it throws up an interesting comparison. While the revenue went up by Rs 80.14 crore the profit shows a meagre increase of Rs 2 crore.

While the general and administrative expenses went down as a percentage of the revenue resulting in a net saving of Rs 1.47 crore, the staff cost for the first quarter went up by Rs 6 crore due to post-merger revision in salaries. The annual impact of the revision is around Rs 24 crore.

Polaris Software - Key Metrics
Geographic Revenue Break-up	Q1 FY04		Q4 FY03		V		Client concentration	Q1 FY04	Q4 FY03
US/North America	41.9%		42.5%				Top Client	9.9%	18.2%
Europe	24.4%		25.6%				Top 5%	42.7%	37.5%
India	10.1%		9.1%				Top 10%	59.6%	50.4%
Asia Pacific & Japan	23.6%		22.8%				Citigroup	63.3%	65.5%
Total	100%		100%		VI		Average Billing Rates (USD/hour)	Q1 FY04	Q4 FY03
Domain concentration risks	Q1 FY04		Q4 FY03				- Onsite	57.00	57.95
BFSI	86.6%	85.4%				- Offshore		19.75	20.20
Emerging Verticals	13.4%		14.6%
Total	100.0%		100.0%		VII		Human Resource Mix	Q1 FY04	Q4 FY03
Product Contribution	14.1%		14.2%				Manpower (end of period)	4270	4248
Client data	Q1 FY04		Q4 FY03				Software Professionals (%)	90.5%	89.5%
New opportunities initiated	58		44				Support Staff (%)	9.5%	10.5%
Repeat Business	85.3%		87.3%				Overall Utilisation	79.0%	74.2%
							Attrition Rate (%)	14.3%	9.3%
Revenue Mix	Q1 FY04		Q4 FY03		VIII		Efforts Mix	Q1 FY04	Q4 FY03
- Onsite	42.7%		40.22%				- Onsite	20.5%	19%
- Offshore	57.3%		59.78%				- Offshore	79.5%	81%

Nevertheless, the attrition rate has gone up by 5 per cent at Polaris, including at the top management level. Not long ago, the company declared with pride that the top executives didn't seek greener pastures despite a freeze on their pay.

Says Polaris CEO and chairman and managing director Arun Jain: "The last quarter has been a busy one and a very challenging one, too. We successfully accomplished the task of communicating the strengths of the merger internally."

He agrees that litigations consumed more management time than anticipated. "The competitive pricing at the market place has led to lower margins. The average billing rate has come down to $57/hour onsite and $19.75/hour off site as compared to $57.95/hour onsite and $20.20/hour earned during the previous quarter ending March 2003."

In addition the rupee appreciation has resulted in a net exchange loss of around Rs 3 crore, mainly on the receivables. The company has set up a task force to mitigate the currency loss.

According to Polaris Track I in Chennai and Polaris Towers in New Delhi have become operational in during the first quarter, resulting in an increase in charge on depreciation and amortisation to Rs 8.32 crore.

During the quarter under review, Polaris expanded its board size by inducting Citigroup Investments vice-chairman Dipak Rastogi, Ajit Bhushan, managing director IT and IT-Enabled Services Pvt Equity, Citigroup, Venky Krishnakumar, vice president and regional director operations and technology, Asia Pacific at Citibank NA, and Ram Bhagwat as additional directors. Consequently, the size of the board has increased to 12 directors.