Soffia Software Ltd. (SSL) incorporated in 1994 as a public limited company is an intelligent IT solution provider specialising in areas like Industrial Engineering Applications, ERP, Custom Application Development and other cost effective solutions. Soffia Technologies Inc., USA holds 35% stake in the company. During the year the company has achieved SEI CMM Level 3 and plans to achieve Level 4 by the end of the current year.
The company is promoted by a core group of management professionals and software engineers having commendable knowhow in their concerned areas of activity. Mr. R. Venkata Subramani, MD is a top-notch professional chartered accountant having extensive domain knowledge. He has over 15 years of rich experience in the field of computer software and is well aware of rapidly growing technologies. Mr. C.K Taneja, COO (Chief operating officer) has worked with leading companies like Infosys and Singapore Telecom and has more than 12 years of experience in the IT & telecom field. The company has also constituted an advisory board with eminent personalities. To name a few Prof. Kannan Srinivasan of Carnegie Mellon University, USA, head of IT and marketing department, Mr. Ashish Pant of Alfa Capturing, USA. It is the people who make difference in any knowledge corporation and these intangibles in the form of intellectual capital will drive the company’s future growth.
SSL’s business is divided into 5 SBUs (Strategic Business Units) of projects, products, training, overseas operations and e-commerce. The company has expertise in financial application products and Internet/Intranet products. SSL’s packaged software for taxation (SOFIA), human resource management system (HRMS), payroll and time management (SofPay) and asset accounting (Fassets) are widely accepted. All these packages provide complete solutions, flexibility and control to alter them.
SSL is entering into high technology areas of telecom where the company’s focus is on computer telephony integration, VOIP, WAP, VPN and call centres. It also plans to enter into fast growing banking & insurance and network management areas. During the year it has added more than 30 clients in the US and a number of which are Fortune 500 companies. In terms of client concentration the company has de-risked its business by restricting revenues from top 5 clients to less than 5% of its total revenues.
The company has achieved a spectacular growth in its financials in the past three years. Its revenues in the past three years have grown at a compounded annual growth rate (CAGR) of 382% and profits at a CAGR of more than 1,600%. The company has targeted to grow its topline at a CAGR of 149% in the next two years. SSL is a zero debt company and more than 60% of its revenues are from exports.
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Further it has excellent geographical mix where US contributes 52% of its revenues, India 38%, Europe 6% and the balance from rest of Asia. In FY00, e-commerce accounted for 36% of its business, ERP 24% and training business contributed 12%. The margins in training and ERP business are thin and are declining with fierce competition. As a result the company has decided to spin off its training division, Soffia Infology as a separate company from FY02 onwards and to reduce revenues from ERP to 21% till FY02. The reduction in the revenues from these two areas will be compensated by 25% contribution from networking solutions (FY00 – 9%) and 15% from banking and insurance products (FY00 – Nil). Although the company’s plans seems to be a bit ambitious, it may be able to achieve the targeted growth rate with a team of 252 software professionals backed by expert management and its focus on state of art technologies.
At the current market price of Rs 172, SSL is trading at a P/E ratio of 17 times its FY00 earnings and 4 times its FY01 projected earnings. Its profit margins compares well with top IT companies like Infosys, NIIT and Hughes Software. The company’s future valuations are dependent on its ability to change its business mix by successfully executing the projects in the areas of telecom and banking software. Also making a blockbuster product is just part of the story for a software product company. The real challenge is in marketing it successfully to an international audience. For this the company will have to tie up with global software marketing and distribution companies, which entails considerable investments. The company’s strength in future will be to successfully generate the returns from these investments in technologies.
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