3i Infotech bags govt deal for setting up 12,000 IT kiosks

10 Sep 2008, 0144 hrs IST, The Economic Times 

MUMBAI : With major IT players focussing on the Western markets, mid-sized IT company 3i Infotech is tapping the domestic market. It has recently bagged large contracts from various state governments to set up 12,000 kiosks across the country.

?We see large growth and business opportunity in this sector. We have started investing in the e-governance business and will set up 12,000 kiosks in India. But it will take another 18 months before the revenue will start flowing into our profit and loss statement.?

 We have invested around Rs 125 crore in this project,? said CFO Amar Chintopanth to ET.

As the project will take over a year to get started, the company?s margins might see a marginal drop from 14.5% to 12% over the next financial year. ?Margins will be affected due to new businesses we are investing in, namely e-governance.  Net margins could drop by 2%,? he said.

 E-governance as a service has been around for two years, but Mr Chintopanth says that now is the right time to scale up the process. ?It?s picking up only now. We have done projects for the central government earlier and the state-level kiosks are part of a central government-sponsored scheme,? he said.

The pricing model for the e-governance is based on the frequency of each service transactions taking place across kiosks. TCS is the only large IT player in this space competing with 3i Infotech.

The company also sees potential growth in the transaction service business and infrastructure management services. ?Infrastructure management service (IMS) is a new growth area and currently accounts for only 6% of our revenues.

The share of this business segment would also grow in the future. The transaction services will contribute to 33% of our total business,? said the CFO. Speaking on the company?s hedging policy, Mr Chintopanth said: ?There are reasons for not taking any hedge position.

One, many of our overseas operations has a significant cost portion in the same currency as that of the revenues. This provides a natural currency hedge. Second, our operations is spread across a number of geographies and this again provide a natural diversification for the currency movements.?

The slowdown in the US has not impacted the company?s financials as the exposure to the US clients is not too high. ?Our client portfolio is very diverse as no single client contributes more than 1%. We also do not have much exposure in the US finance sector,? he said

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