Arun Jain Bets on Product Development to Drive Growth at Intellect Design
Arun Jain is betting on R&D at Intellect Design to double revenues by 2018.
Arun Jain is charting a growth trajectory for his financial products company, Intellect Designs Arena Ltd., eight months after he sold his stake in Polaris Software Services Ltd. to U.S.-based Virtusa.
Jain spun off Polaris’ businesses into products and software services in early 2014, before exiting the software services business in November 2015.
Intellect Design is an end-to-end banking and financial products company, and caters to the banking, and financial services segments. At the time of listing, Jain guided for its product business to grow at 24-25 percent every year and for revenue to double by 2017-18. Intellect Design will have revenues of over Rs 1,000 crore in financial year 2016-17 and will hopefully be profitable, Jain told BloombergQuint on the sidelines of a product launch in Mumbai.
The company plans to launch two new products every year. Jain says product revenues are lumpy and hence the street should not look at quarter-to-quarter revenue growth.
The company has been spending 12-15 percent of its revenue on product research and development (R&D) every year. Intellect began capitalising R&D expenses in the fourth quarter of financial year 2015-16. It will now amortise this expense once the product goes commercial. This will lead to optically higher profitability, HDFC Securities says in a June 2016 research report.
The company has decided to capitalise new product development cost from Q4FY16 and reported positive EBITDA for the first time. While this is in line with global practices, it will certainly lead to optically higher profitability.HDFC Securities Institutional Research
Intellect Design is also in the process of raising Rs 300 crore through issue of shares. The company currently has day sales outstanding (DSO) or revenue it receives for the work it does after 146 days. This is in line with global competitors, and the money raised would help to augment the working capital of the company, Jain said.