Greetings. This is an annual tradition that I eagerly look forward to, as my leadership team and I reflect on the accomplishments and learnings of the year, as well as strive to understand the opportunities and challenges in the market place and set the direction for the coming year.
Globally, last year was a watershed year in the history of the financial sector that went through one of the most turbulent times and the principles of economics got challenged. Many of the events that followed from the failure of banks to bailouts to mergers were unprecedented. I am happy to share with you that in such a difficult business climate we were able to grow considerably and crossed the USD 300 million milestone.
More Focus. More Growth.
Same time, last year, I shared with you that Polaris is poised for Repeatable, Predictable and Profitable growth and that our focus will be on SIMPLIFIED EXECUTION.
This year, your company achieved gross revenues of Rs. 1378 crore, a growth of 25% over last year. I would like to appreciate all Polarites who took the challenge of growing the Company in difficult times and exceeding the market expectations.
We further simplified our Growth Framework significantly by focusing on four growth engines, i.e. Account Expansion, Product (Intellect) Penetration, Country Expansion and the Insurance business.
Growth Engine 1 - Account Expansion - In the last 5 years, we have focused on acquiring strategic customers and have been successful in entering and engaging with 10 of the top 15 Banks and 6 of the top 10 Insurance companies globally including 80 strategic accounts. This year we focused immensely on expansion in these accounts and cross-sell. Your company also expanded its customer base through 58 wins. In terms of the revenue earning potential, you may be aware, we had classified the strategic accounts into three categories AAA ($5 MM and above), AA ($3-$5MM), A ($1-$3 MM). We currently have 17 AAA, 20 AA and 27 A accounts. As of today, 200 customers across the globe trust Polaris for its ability to connect technology to business and value creation to their profit chains.
Growth Engine 2 -‘Intellect’ Expansion - Growth Engine 2 revolves around Intellect, our next-generation product suite and the only comprehensive pure play Services Oriented Architecture (SoA) suite in the marketplace, servicing all the lines of business of a bank -Retail, Corporate, Capital Markets and Wealth Management. We have launched 9 platforms in the last 4 years. Intellect Product revenue since then, has grown 5 times to Rs. 241 crores this year, from Rs. 48 crores in 2005. During this journey, Intellect has gone live at 61 major sites across the globe. Intellect suite registered a total of 21 wins during the year with the significant ones being, a large credit card player in Latin America, a global Top 5 bank in the US, 2 Fortune 10 banks in UK, Tamweel in Egypt, 2 leading banks in Middle East, Saigon Hanoi Bank in Vietnam and the leading public and private sector banks in India, to name a few. Several Tier 1 clients in US, Europe, India and Asia Pacific added modules to the existing platforms and we continue to see strong demand in our existing client base for Intellect. Intellect is now live in more than 15 countries validating Forrester's positioning of Polaris as a Global Challenger.
Growth Engine 3 - Country Expansion - With the comprehensive range of IP led Services and Products we are uniquely positioned to service developing markets. During the year, we identified 3 countries - Egypt, Chile and Vietnam as part of our country expansion strategy. This has allowed us to add 3 regional hubs to serve Emerging Markets in Latin America, Middle East and Asia Pacific more closely. We have launched Global Consumer Banking in these regions and are seeing good traction in these markets. Your company’s vision is to continue to expand and tap Financial Technology potential in developing countries.
Growth Engine 4 - Insurance Business - With strong success in Banking, this year, we have also laid a solid foundation for expansion in the Insurance Business. We completed the acquisition of SEEC Inc., a worldwide SOA based Insurance solution provider. After acquiring the services expertise in Insurance, it was a logical move to expand our Intellectual property in the Insurance sector. The combination of Polaris’ Intellect Banking Solution Suite and the SEEC Advantage Library of over 300 Business Component Software has created the world's largest library of software components tailored specifically to the Banking, Financial Services and Insurance markets – enabling customers to generate significant outcomes for their business more economically and rapidly than ever before. SEEC has also brought to Polaris the who’s who of Insurance business including New York Life Insurance, Nationwide Insurance, Bankers Life & Casualty, Canada Life Limited and North Carolina Farm Bureau Insurance to add to Polaris existing customers like American Insurance Group, Kiln Insurance, ICICI Prudential amongst others. With this acquisition, our customer base in the Insurance sector has leapfrogged and we now have 23 customers in Insurance space.
Strong focus in these 4 growth engines, i.e. Account Expansion, Country Expansion, Intellect (Products) Expansion and Expansion into the Insurance sector has not only enhanced customer value creation but has also provided a robust roadmap for predictable growth.
We will continue to scout for strategic acquisitions which will be in line with building one or more our growth engines mentioned above. Our cash reserves stand at Rs. 340 crore, providing another right ingredient for growth.
More Focus. More Value.
During the year, we saw significant improvements in Operating Margins and Profits, as we sharply focused on leveraging the investments we had made in the past. For simplified execution, our mantra was to stay focused on delivering ‘On Time and In Full’(OTIF) on our projects. Our Projects are categorized into 9 star, 7 star and 5 star projects, based on the size, tenure and complexity factors. 9 star projects are anchored by Polaris Partners, while 7 star and 5 star projects are anchored by Konarks**. While on one side, the leadership structure is indeed the best in the industry to provide the focus such mission critical projects require, on the other hand, we also have a time tested certification methodology for our delivery fraternity, to ensure that they firmly connect our services to the profit chains in the financial institutions that we are privileged to serve. In the words of the CIO of one of the largest treasuries that we serve, "Polaris programmers have gone beyond Java and C++ and actually talk Yield curve and cross currency options…hard core language of the traders".
With our focus in OTIF and domain led services, we achieved a substantial improvement to the Operating Margins (EBITDA) which grew by 98% to Rs. 234 crore from Rs. 118 crore. Net Profit of your company grew to Rs. 131 crore, an increase of 79% over the previous year.
During the year, our investments have come down and thus, cash flows have substantially improved. Higher quality of delivery has resulted in better collections. Your company has achieved the lowest days of collection at 52 days.
** Konarks are chosen associates who represent energy and excellence and lead mission critical projects in Polaris
More Focus. More Returns.
Over all, your company and its subsidiaries, delivered predictably and profitably in one of the most challenging years in recent times. You company continues to enjoy a balanced mix of revenue base across all three major geographies i.e. 39% from Americas, 30% from Europe and Asia-Pacific contributing to 31% of our revenue base. The reason why your company is able to withstand the financial tsunami sweeping the industry is because, our performance has been built on the solid bedrock of Intellectual Property augmented by World Class Application Management skills. As a company we are constantly evolving our leadership position in the marketplace by providing winning solutions to customers - by unique combination of Products and Services combined with deep domain knowledge. Such a bedrock is built by being obsessed by the 3-year performance, 5-year performance and by the 10-year vision and not by succumbing to compromises demanded by vagaries of quarterly forces. With this solid foundation, I would reiterate that your company envisages being among the Top 5 Financial Technology companies in the world. Currently, we have been rated amongst the Top 8 in IT services in Banking.
I would like to call this year as the beginning of the journey towards Market Leadership. Within Polaris we have called it ‘Polaris 3.0’.
Polaris 1.0 captures our infrastructure building years, 1993-2000, where collective vision and passion saw Polaris building the Physical infrastructure, the Process infrastructure and the People infrastructure. Polaris 2.0, ie., between 2000-2008 can be summarized as the Institution building years, where our focus remained on building a treasure trove of Intellectual Property based services and products, creating a 200 strong customer asset and a robust corporate governance infrastructure – all ingredients of a global financial institution.
We foresaw very early in our journey that the future was never for ‘generalists’ and ‘pure cost arbitrage’ business, therefore micro-vertical specialization combined with scale was going to be our differentiator. Today, we have seven business solution centres in India, fully owned by your company. The Retail Banking centre of excellence, Retail Products centre of excellence, Insurance and Testing Centre of excellence are based in Chennai. The world’s first super specialty centre for Capital Markets and Wealth Management is based out of Hyderabad. The Corporate Banking centre of excellence and the Risk Management centre of excellence are based in Mumbai, while the Enterprise Solutions centre of excellence operates out of Delhi.
Since inception, your company has focused on Corporate Governance and has implemented global best practices in this area. We appointed a Big 5 auditing firm early in our journey in 1997 and set up a solid & Independent Board and a Holistic Governance framework. Over the last few years, your company has pioneered a Partnership structure that has a 28 member strong team across Delivery, Sales and Corporate functions coming together in all aspects of Business Planning, Execution, Governance and Financial Reporting. On a monthly basis, 22 units including the business units, geographies and corporate functions certify critical financial processes including revenue recognition, booking of expenses, balance sheet review, receivables and project and service delivery. Incidentally, all our investments in building Intellectual Property have been written-off, following conservative accounting practices.
Emotional resilience plays an important a role in Institution building. In order to integrate Polaris with a larger community and enrich your company’s emotional content, the Ullas Trust was set up in 1997 that anchors the company’s Corporate Social Responsibility initiative.
I am happy to share that this year your company has won the BSE-NASSCOMTIMES Foundation Social and Corporate Governance Award for 2008 under the Best CSR Practice category.
Yes, we have all the right ingredients for Repeatable, Predictable and Profitable Growth.
I would like to convey my sincere gratitude to each and every one of you for trusting and supporting our dream of becoming global leader in Financial Technology market place. Your patience has paid off with your company outperforming the market in a defining year.
The time ahead is interesting for us. Filled with opportunities. And a few challenges. Your strong support has given us the extra dose of adrenalin whenever we needed it the most. On behalf of 9000 Polaris families, I thank you for your belief in our journey.
For your company, the journey of Global Financial Technology Leadership has begun.
Founder, Chairman & CEO