Oracle Financial Services Software: Finely oriented

Offers strong parent, segment leadership, well-balanced product-service and geographically diversified business model which can withstand any short-term pressure comfortably

Oracle Financial Services Software (Oracle Financial) formerly i-flex solutions, is a world leader in providing IT solutions to the financial services industry. The company was incorporated in September 27, 1989 as Citicorp Information Technology Industries Ltd and later renamed as i-flex solutions. Now Oracle Global (Mauritius) Limited, the promoter of the Company holds 80.58% of the paid up equity stake in the company. Oracle Corporation is the world’s largest enterprise software company.

Oracle Financial is a world leader in providing IT solutions to the financial services industry. With the experience of delivering value-based IT solutions to over 825 financial institutions over 130 countries, Oracle Financial helps customers build competitive advantage through next-generation technology while they, simultaneously, adhere to the stringent demands of a dynamic regulatory environment. Together, Oracle and Oracle Financial offer financial services institutions the world's most comprehensive and contemporary banking applications and technology footprint that addresses their complex IT and business requirements.

September 2008 quarter results-sales up 23% and PBT before EO up 55%

On the back of 35% y-o-y growth in the product business, 6% increase in IT solutions business and 36% rise in KPO business, Oracle Financial reported 23% rise in the consolidated sales at Rs 707.40 crore. Operating margins improved 30bps at 16.9%. OPM for product business improved 220bps at 34.7% and that of IT services dipped 560bps at 4.6%. OPM of the KPO business turned positive at 12.6%. Thus operating profit grew 25% at Rs 119.60 crore.

During the quarter, other income (net of interest) was up 113% at Rs 44.10 crore with interest income at Rs 17.32 crore against Rs 12.03 crore. Deprecation & amortization charge for the quarter decreased 29% at Rs 13.80 crore, which took PBT before EO up by 55% to Rs 149.90 crore.

EO for the period was Rs 46.90 crore being provision towards settlement of a dispute. Thus, PBT after EO was up 7% at Rs 103 crore. For the quarter, provision for taxation was down 3% at Rs 9.10 crore with effective tax rate at 8.8% down from 9.7%. PAT after minority interest and share of associates was up 7% at Rs 93.40 crore for the quarter ended September 2008.

Branding and integration with Oracle helped drive synergies and expand operating margins

"The branding and integration with Oracle has helped drive synergies and expand operating margins sequentially as well as over last year," Makarand Padalkar, CFO, Oracle Financial said.

September 2008 six months results-sales up 23% and PBT before EO up 90%

For the half year ended September 2008, consolidated operating revenues grew 23% to Rs 1339.20 crore backed by 33% growth in product revenues at Rs 806.72 crore. Revenues from IT services grew 11% to Rs 500.63 crore and KPO business grew 21% to Rs 31.85 crore.

OPM dipped 100bps to 14.1%, with OPM for product business down 50bps to 28.2% and IT business down 400bps to 9%. OP in KPO business was Rs 3.94 crore against loss of Rs 7.33 crore.

Operating profit was up 14% at Rs 188.50 crore.

Net other income of the company was up 764% at Rs 108 crore, which includes interest income of Rs 32.03 crore up from Rs 23.73 crore. Depreciation charge decreased 23% at Rs 27.60 crore taking PBT before EO up 90% to Rs 268.90 crore.

EO for the period was Rs 46.90 crore being provision towards settlement of a dispute. Thus, PBT after EO was up 57% at Rs 222 crore.

Provision for taxation was up 27% at Rs 21.90 crore.

PAT for the period grew 61% at Rs 200.10 crore. Net profit after minority interest and profit/loss of associated companies was up 60% at Rs 199 crore.

Signs new license fees of $ 27.4 million in the quarter and adds 16 new customers

Oracle Financial signed new license fees of USD 27.4 million (approximately Rs 137 crore) in the quarter.

It also added 16 new customers across product and services business spanning across multiple geographies.

Products Business is growing rapidly

During the quarter ended September 2008, the Product Business grew 35% y-o-y. For the six months, it grew 33%.

Of the product revenues 22% (19% in corresponding previous quarter) was from license fees, Implementation fees and enhancement fees were 56% (64% in corresponding previous quarter) and AMC was 22% (17%).

In the Products Business Banco do Brasil, Latin America's largest bank, selected Oracle FLEXCUBE for its international operations. The win demonstrates Oracle Financial Service Software’s continued leadership in multi-country deployment of FLEXCUBE as a standard operating platform

Bank SNORAS, of Lithuania, selected Oracle FLEXCUBE as its Core Banking Solution.

The company expanded its APAC customer base with new customer wins in CIS, Vietnam and China.

Oracle FLEXCUBE Private Banking, launched earlier in 2008, has won orders from a London- based bank and another leading private sector bank in India.

Services Business grows steadily

During the quarter ended September 2008, the Service Business grew 6% y-o-y. For the six months, it grew 11%.

In September 2008 quarter, PrimeSourcing won two new clients in Japan.

PrimeSourcing also won an engagement from one of the largest retirement and investment managers in the United States for enabling and assisting renewal of their application platform to SOA architecture.

"Overall revenue stream is well diversified geographically"

Geographically for the product segment for the quarter, USA contributed 16% (16% corresponding previous quarter), Middle East & Africa 19% (18% corresponding previous quarter), Asia Pacific 15% (25% corresponding previous quarter), Europe 49% (40% corresponding previous quarter) and Latin America & Caribbean was 2% (2% corresponding previous quarter).

Geographically for the services segment for the quarter, USA contributed 55% (58% corresponding previous quarter), Middle East & Africa 5% (3% corresponding previous quarter), Asia Pacific 28% (20% corresponding previous quarter) and Europe 12% (18% corresponding previous quarter).

"During the quarter, we continued to demonstrate our strong value proposition through new signings across our portfolio of offerings. Our past investments have helped grow products license fees by 55%, compared to the same period last year. The overall revenue stream is well diversified geographically. The combination of domain knowledge and technology leadership of Oracle allows us to address banks’ current and future needs in ways that no other vendor can," said N.R.K. Raman, Managing Director and CEO, Oracle Financial Services Software Limited.

Benefiting from the Business Partner Program

Much of the company’s marketing diversity and success can be attributed to its Business Partner Program. Oracle Financial’s partners work across various geographies with a clear focused approach, motivation and continuous skill enhancement.

Oracle Financial ensures that products and services remain technologically contemporary. They do this by forming alliances with leading international organizations, which include Hewlett Packard, IBM, Intel, Microsoft and Sun Microsystems.

The company lays a great emphasis in building and expanding its partner network with organizations which can promote, sell, implement and support its offerings around the world. The partner network currently comprises 33 resellers and 20 implementation partners. The expansion of partners has been prominent in the East European region, especially in Russia and the CIS countries.

Leading System Integration (SI) Partners play an active role in delivering solutions to customers of the company. The SI Partners deliver projects in the CIS, Latin America, Middle East, Japan and India.

The company aims to enhance its partner presence and graduate its partners from being 'marketing associates’ to ‘partners in implementation’.

Customer concentration-not much dependence on any one client

Customer concentration wise for the company as a whole, the top customer contributed 5% (6% corresponding previous quarter) of the operating revenues, top 5 customers 17% (16% corresponding previous quarter), top 10 customers 27% (26% corresponding previous quarter) and Citigroup & its entities 22% (21%).

Falling debtor days

Trade Receivables as per days of sales outstanding were 102 days (110 days corresponding previous quarter).

Details on revenues from onsite, offshore and fixed price and time & material

The onsite & offshore revenue breakup stood at 66:34 (64:36 corresponding previous quarter). As far as timing of revenues is concerned the ratio of Fixed price and time & material basis stood at 10:90 as against 11:89 in the corresponding previous quarter.

Valuation

For the FY 2009 we expect the company to register sales and PBT before EO of Rs 2867.86 crore and Rs 642.79 crore respectively. On equity of Rs 41.88 crore and face value of Rs 5 per share, adjusted EPS (after EO and relevant tax) works out to Rs 68.8. The share price trades at Rs 450. P/E works out to just 6.5.

Oracle Financial Services Software: Financials- Consolidated Indian GAAP

 

	0603 (12)	0703 (12)	0803 (12)	0903 (12P)
Sales	1482.30	2060.9	2380.2	2867.86
OPM (%)	22.0	21.5	19.6	18.2
OP	326.20	442.40	467.30	523.28
Interest / Other Inc.	28.40	36.00	64.00	174.95
PBDT	354.60	478.40	531.30	698.23
Dep.	51.80	65.30	70.70	55.44
PBT before EO	302.80	413.10	460.60	642.79
EO	0.00	0.00	0.00	46.90
PBT after EO	302.80	413.10	460.60	595.89
Tax	56.00	41.60	44.20	59.29
PAT	246.80	371.50	416.40	536.60
MI / share profit / loss of associates.	0.60	0.80	0.00	1.50
Net Profit	247.40	372.30	415.60	533.50
EPS* (Rs)	29.5	44.4	49.6	68.8
* EPS on current equity of Rs 41.88 crore; Face alue: Rs 5 (P): Projections All figures as per Consolidated Indian GAAP unless otherwise stated Figures in Rs crore Source: Capitaline Corporate Databases

 

Oracle Financial Services Software: Results- Consolidated Indian GAAP

 

	0809 (3)	0709 (3)	Var. (%)	0809 (6)	0709 (6)	Var. (%)	0803 (12)	0703 (12)	Var. (%)
Sales	707.4	575.8	23	1339.2	1089.1	23	2380.2	2060.9	15
OPM (%)	16.9	16.6		14.1	15.1		19.6	21.5
OP	119.60	95.40	25	188.50	164.70	14	467.30	442.40	6
Int / other Inc.	44.10	20.70	113	108.00	12.50	764	64.00	36.00	78
PBDT	163.70	116.10	41	296.50	177.20	67	531.30	478.40	11
Dep.	13.80	19.50	-29	27.60	35.90	-23	70.70	65.30	8
PBT before EO	149.90	96.60	55	268.90	141.30	90	460.60	413.10	11
EO	46.90	0.00		46.90	0.00		0.00	0.00
PBT after EO	103.00	96.60	7	222.00	141.30	57	460.60	413.10	11
Tax	9.10	9.40	-3	21.90	17.30	27	44.20	41.60	6
PAT	93.90	87.20	8	200.10	124.00	61	416.40	371.50	12
Share profit/loss of Ass. Co.	-0.20	0.20		-0.80	0.10		-0.40	0.80	PL
Minority interest	0.30	0.00		0.30	0.00		0.40	0.00
Net Profit	93.40	87.40	7	199.00	124.10	60	415.60	372.30	12
Prior period items	0.00	0.00		0.00	0.00		0.00	0.00
PAT Adjusted	93.40	87.40	7	199.00	124.10	60	415.60	372.30	12
EPS (Rs)	#	#		#	#		49.6	44.4
* EPS on current equity of Rs 41.88 crore Face Value: Rs 5 # EPS not annualized due to seasonality of business All figures as per Consolidated Indian GAAP unless otherwise stated Var. (%) exceeding 999 has been truncated to 999 LP: Loss to Profit; PL: Profit to Loss Figures in Rs crore Source: Capitaline Corporate Databases

 

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Subu, if you visit PP's site you'll get more info. His brokerage has started covering this company.

Originally posted by subu76 This is cool. Thanks for the link Hitesh Sir.

Please note that sir Chimak 10 ji has taken objection to the gratuitous use of sirs & jis and combinations thereof.

To the extent that a person doesn't demand being addressed with such honorific prefixes or suffixes, I second sir Chimak 10 ji's objection. Of course, what good is a rule without an exception and so I think Basantji will stay as such!)