No doubt the largest vertical in the IT services sector, the banking and financial vertical contributes 40% of this $50 bn industry. It has been the mainstay of this industry and even during the bleak days of the dotcom crash, this vertical continued to grow, helping the IT exports industry to survive.

Even in the domestic sector, the rapid growth of the BFSI sector has made it the largest vertical for the home market, contributing 31% of revenues of the market.

Finally, the contribution of this vertical in helping the sector develop intellectual property is again unparalleled, providing impetus to products from companies such as i-flex, TCS, and Infosys. While all major companies have a large BFS vertical, only few are totally focused on this sector. Among the listed companies, well known are Nucleus Software and FT.

Nucleus Software:Profits Decline By 13%
Nucleus Software provides software solutions to the banking and financial services industry. They provide solutions on retail banking, corporate banking, cash management, trade finance, Internet banking, and credit cards. Nucleus also provides consulting outsourcing software solutions, software support and maintenance, customized software development, and business process outsourcing. Their software products include FinnOne, Cash@Will, TRAde facto, BankONet, and PowerCARD. Standalone revenue for the quarter ended December 30, 2007 increased by 26% to Rs 48.3 crore as compared to Rs 38.3 crore for the corresponding quarter of the previous year. Standalone net profit after tax (PAT) decreased by 13% to Rs 10.3 crore as compared to Rs 11.6 crore for the corresponding quarter in the previous year.

During the quarter, Nucleus bagged contract from Bank M (Tanzania) for implementing its Cash@Will solution, which will enable the bank to efficiently offer its corporate customers modernized cash management services. Similarly, Nucleus announced setting up of a new development center at Ambattur Industrial Estate, Chennai, with a capacity of over 200 seats. Recently, Nucleus has entered into an MoU with a renowned developer for 16 acres of land in a notified SEZ in Rajasthan.

The company also decided to exercise its option to sell its 25.1% of shareholding held in GMAC Financial Services India. Nucleus was placed among the top 15 most exciting emerging IT/BPO Companies to work for under a survey conducted by Nasscom and was listed among the 200 Best Under A Bn Companies in Asia by Forbes Asia magazine. The stock currently trades at Rs 290.75.

Financial Technologies:Major Jump in Profits

Financial Technologies (FT), a leading technology IP, is the domain of trading on financial markets. FT facilitates price transparency, efficient trade, and structured finance mechanism. Standalone revenue for the quarter ended December 30, 2007 for financial year 2008 increased by 32% to Rs 41.25 crore as compared to Rs 31.24 crore for the corresponding quarter of the previous year. Standalone net profit after tax increased by 1,337% to Rs 536.94 crore as compared to Rs 37.36 crore for the corresponding quarter in the previous year. The stupendous increase in the net profit is due to the stake sale by FT in MCX to leading institutions.

During the quarter, FT received approval from the Central Electricity Regulatory Commission (CERC) to set up Indias first national level power exchange Indian Energy Exchange (IEX) for trading electricity. FT recently acquired 4,50,000 equity shares in the National Stock Exchange of India for a total outlay of Rs 125 crore. Also, FT submitted its expression of interest to invest up to 5% of the relevant paid up capital in some of the regional stock exchanges. Recently, FT issued GDRs with a Green-shoe Option and successfully allotted 1,445,923 and 216,888 equity shares respectively. ICICI, IL&FS, Kotak, Merrill Lynch, and Citigroup conglomerates acquired 3.55%, 5%, 1%, 5% and 5% equity stake respectively in the Multi Commodity Exchange of India, a subsidiary of FT at an enterprise valuation of $1-1.1 bn. MCX, an FT company, emerged as the Exchange of Choice globally for commodities. The company plans to invest proceeds in green field ecosystem ventures such as the National Spot Exchange (NSEL), the National Bulk Handling Corporation (NBHC) among others. The University of Mauritius Trust (UoM) has tied up with the FT Group to establish a Center for Organized Markets in Mauritius. The stock currently trades at Rs 1,941.

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