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Oracle Financial Services Software (BOM:532466) |
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WIKI ANALYSIS
Oracle Financial Services
Oracle Financial Services (OFS) is India’s premier software products company, focused on the banking and financial services (BFSI) vertical. The company’s portfolio of offerings comprises products (62% of FY09 consolidated revenues) like Flexcube, an end-to-end product suite for retail, corporate and investment banking, asset management and treasury. The company also provides software services (36% of revenues) like application software development and deployment, maintenance and business and IT consulting.
The company recorded a topline growth of 23% YoY in FY09, which was mainly a result of strong growth of 31% YoY in the products division. Growth for this business was led by 28% YoY increase in implementation fees (which formed 59% of product revenues). The company also saw a strong 28% YoY growth in sales of new licenses for its products. As for the services business which contributed 36% to the revenue, sales increased by 11% YoY during FY09. The KPO segment registered growth of 51% YoY, though it contributed less than 3% of the company’s revenue. The operating margins expanded by 7% YoY, largely due to factors like change in accounting policy for revenue recognition and cost containment. I-flex’s net profits grew by 77% YoY during FY09 on back of improved margins and other income component, which grew by 134% YoY.
The management of OFS has already acknowledged the cross-selling opportunities it is witnessing after the Oracle acquisition. Secondly, the company has already invested heavily in Islamic banking, which has started showing results. During FY09, OFS strengthened its customer base for Flexcube in Asia, Europe and EMEA by cross-selling its financial services to product customer base. The company acquired 56 new customers in FY09 along with inking more deals with existing clientele which gives good revenue visibility going forward.
| Consolidated financial performance snapshot | ||||||
| (Rs m) | 3QFY09 | 4QFY09 | Change | FY08 | FY09 | Change |
|---|---|---|---|---|---|---|
| Sales | 8,012 | 7,949 | (0.80%) | 23,802 | 29,276 | 23.00% |
| Expenditure | 5,283 | 4,808 | (9.00%) | 19,130 | 21,521 | 12.50% |
| Operating Profit | 2,729 | 3,141 | 15.10% | 4,672 | 7,755 | 66.00% |
| Operating Profit margin (%) | 34.10% | 39.50% | 19.60% | 26.50% | ||
| Other income | 270 | 150 | (44.40%) | 640 | 1,498 | 134.20% |
| Depreciation | 145 | 137 | (6.00%) | 706 | 558 | (21.00%) |
| Profit before tax | 2,853 | 3,154 | 10.50% | 4,606 | 8,695 | 88.80% |
| Tax | 203 | 413 | 103.10% | 442 | 835 | 89.10% |
| Share of profit in associate | 4 | 0.4 | 4 | 13 | 205.10% | |
| Minority Interest | 10 | 0.2 | 4 | 13 | 192.10% | |
| Profit after tax/(loss) | 2,636 | 2,740 | 4.00% | 4,156 | 7,834 | 88.50% |
| Extraordinary income/(expense) | () | () | () | (469) | ||
| Net profit including extraordinary item | 2,636 | 2,740 | 4.00% | 4,156 | 7,365 | 77.20% |
| Net profit margin (%) | 32.90% | 34.50% | 17.50% | 26.80% | ||
| No. of shares (m) | 83.9 | 83.8 | ||||
| Diluted earnings per share (Rs)* | 87.9 | |||||
| P/E ratio (x)* | 14.3 | |||||
| Segmental Analysis | ||||||
| Revenue break up | ||||||
|---|---|---|---|---|---|---|
| (Rs m) | FY08 | FY09 | Change | |||
| Products | 13,872 | 18,131 | 30.70% | |||
| % share | 58.30% | 61.90% | ||||
| Services | 9,371 | 10,426 | 11.30% | |||
| % share | 39.40% | 35.60% | ||||
| KPO | 475 | 719 | 51.20% | |||
| % share | 1.60% | 3.00% | ||||
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