Polaris Software Lab

Dear Shareholders,
 
 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 ( MM and above), AA
 (-MM), A ( - 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
 Forresters 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 Universal Banking in these regions and are seeing good
 traction in these markets. Your companys 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 worlds
 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
 whos 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. 340crore, 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 worlds first super
 specialty centre for Capital Markets and Wealth Management is based out
 of Hyderabad. The Corporate Banking centre of excetferrce 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
 companys emotional content, the Ullas Trust was set up in 1997 that
 anchors the companys Corporate Social Responsibility initiative.
 
 I am happy to share that this year your company has won the
 BSE-NASSCOM- TIMES 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.
 
 Warm Regards,
 
 Arun Jain
 Founder, Chairman & CEO