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i-flex solutions - Research Report

Nov 6, 2003

i-flex solutions ltd. is India's largest software product company. Incorporated in 1989 as CITIL (Citicorp Technologies), it is focused on providing software solutions in the banking, financial services and insurance space. i-flex's portfolio of offerings comprise Flexcube, an end-to-end product suite for retail, corporate, investment and internet banking, asset management and investor servicing. The services portfolio comprise of custom application software development, maintenance and support services (both onsite and offshore) and IT consulting. In FY03, International Banking Systems (IBS) has ranked Flexcube as the number one selling universal banking solution in the world. Represented in over 50 countries through more than 30 corporate business partners, i-flex has gained the recognition of the first company in the world to cross the 100-installations mark for its product in less than 5 years. Reasons to buy

High barriers to entry:
The business of providing software solutions to the financial services industry has high entry barriers because of high level of technology expertise requirements. Over that, an intricate understanding of the global financial system also acts as an entry barrier. This point is vindicated by the fact that i-flex has relatively fewer competitors on the global scale (Infosys, Temenos and Misys). This compares favorably with the high levels of competition that basic software services providers face globally.

Provider of world-class banking solutions: As per a recent report from IBS of UK, i-flex's flagship product 'Flexcube' is world's number one selling wholesale as well as retail back-office banking solution. Flexcube has been rated among the top-selling banking solutions for the last four years. This is apparent from the fact that i-flex signed 29 clients for Flexcube in FY03, taking the overall Flexcube customer count to 140 financial institutions across 65 countries. Also, the company has signed a 100-country deal with Citibank. The product business continues to demonstrate strength and has witnessed a CAGR growth of 51% over the period FY00-FY03. The company also has an unbilled license fee tank-size of US$ 34 m (around 26% of FY03 revenues). As the global banking industry is in the process of upgrading legacy systems, we expect spending on package solutions (like Flexcube) to increase in the future, and this spells huge potential for i-flex.

Reasons not to buy

Conflict of interest with affiliates:
i-flex competes in the financial services solutions space with Polaris (engaged in providing solutions and services to the financial services industry). Polaris is another company, apart from i-flex, where i-flex's promoter and largest shareholder, OrbiTech Ltd., has a major stake. Thus, growth prospects of i-flex might be hampered going forward if any conflict of interest arises between the two entities.

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