Tata Infotech unveils damage control measures

NetScribes/Ganesh Ramamoorthy

After putting up a poor show during the year ended March 31, 2000, followed by another dismal performance in the first quarter of the current financial, Tata Infotech Limited, one of the oldest Indian software companies, has finally started damage control measures.

For the first quarter just ended, the company posted a net loss of Rs 8.9 million as against a profit of Rs 104.9 million in the corresponding period last year. In 1998-99, TIL posted a huge profit of Rs 472.13 million, its highest ever. The scrip has been beaten down from a high of Rs 1,115 on January 5, 2000 to Rs 202.50 on August 17, 2000.

As a first step, the company has cut down about 300 of its 1,000-odd idle employees to slash its huge personnel cost. More staff reduction is expected in the coming quarters. TIL is also planning to add more customers to its portfolio. It added 50 new customers last year, while another 10 were added in the current first quarter. Notably, some of the clients are Fortune 500 companies and almost 50 per cent have the potential to give sustained high revenues to the company.

While the fire-fighting measures are still on, analysts say that the company seems to have achieved some early success in terms of increasing its billing rates. In the first quarter, billings grew to Rs 620 million from Rs 470 million in the preceding quarter. Consequently, the loss at the pre-tax level in this quarter has declined to Rs 8.9 million as against a pre-tax loss of Rs 81.8 million in the preceding quarter.

TIL, which used to work mainly on the legacy systems, has now begun working in new technology areas like e-commerce, imaging, wireless application protocol, decision support systems, etc. The company has also partnered with Kale Consultants to integrate Business Objects' decision support systems and tools for the airline, banking and healthcare industry.

In the coming months, the company will increase its focus on the e-commerce business to boost revenues. Revenues from this business accounted for about 20 per cent of the total revenues during the quarter, up from a mere 5 per cent in the last quarter of the previous year.

Moreover, TIL is revamping its sales force for the overseas market and expects about 50 per cent growth in its overseas revenues. TIL also hopes to achieve SEI-CMM Level 5 certification during this fiscal for some of its establishment, which will hopefully add to its standing in the industry.

"The last fiscal was a difficult one for TIL. But the company seems to have learnt its lessons. It is now focusing on the overseas markets with a thrust on marketing, getting into new technologies with better growth prospects and forging new partnerships and alliances. The impact of all these initiatives may not be visible immediately as it will take some time for the relationships to mature and add to the top and bottom lines," said an analyst with a Bombay-based securities firm.

However, the TIL management is confident the turnaround plan will work. As TIL chairman F K Kavarana declared recently at the company's AGM: "We intend to get back on track and become profitable this fiscal though not as much as in 1998-99."

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