Virtusa declares 27% rise in profits

Saturday, 2 October 2010 00:51 -     - {{hitsCtrl.values.hits}}

By Cassandra Mascarenhas

Chairman and CEO of Virtusa Kris Canekeratne proudly announced that the global IT services provider had truly emerged from the global recession triumphantly, with revenues of $211 million this year, an increase of 27% over last year’s $164.5 million.

Virtusa caters heavily to the banking, financial services and insurance market which make up 53% of its portfolio and has over 76% of its clientele based in North America. As a result, it was affected by the economic downturn and saw profits in fiscal 2010 falling from fiscal 2009’s $171 million. This year’s figures, however, show that it has recovered from the slump remarkably.

Virtusa’s CEO was also handed the honour of ringing the NASDAQ closing bell when visiting the world’s largest exchange company’s MarketSite in New York City’s Times Square, which Canekeratne described as very interesting and memorable experience.

“Looking at an overall revenue perspective, I would say that Virtusa has done well for itself, seeing that we listed on NASDAQ in 2007 – a tumultuous time as the economic downturn began around then and almost the beginning of the economic downturn. Now that the US has officially come out of it, I feel that Virtusa will grow tremendously in the near future,” Canekeratne asserted.

This obstacle has not stopped the company from reaching compound annual interest growth of 25% over the past five years. It currently has over $90 million in cash and zero debt and is thereby very profitable.

Around 80 to 90% of Virtusa’s revenue comes from its existing clients and the company’s impressive clientele includes five of the world’s top 10 banks as well as five of the top 10 telecommunications service providers.

Dealing heavily with companies in the US with 21% of its business coming from Europe, the rest of Europe has yet to pick up the pace, according to Virtusa’s CEO. Although the UK currently contributes more to overall revenue, he believes Europe will be a good market for Virtusa even though there is a lag in spending and the European markets have yet to match up to the spending powers of North America.

The other 3% consists of the rest of the world but small as the sector is, it has shown tremendous growth in the last quarter with a 66% increase in revenue.

The overall growth of the IT industry has been 17% this year, with the banking and financial services sector leading the recovery, being the largest contributor to the IT industry in terms of spending.

Headquartered in Massachusetts, Virtusa conducts its operations from India — both Hyderabad and Chennai – as well as from Colombo. The two centres in Colombo are based at Cinnamon Lakeside and a much larger centre at Sri Lanka’s first and only IT park. Employing over 4,000 world class professionals, the company hopes to grow in scale even further within its current centres itself.

Commencing operations in Sri Lanka in 1996 at which time there was basically no IT industry in the country, Virtusa has always played a key role in Sri Lanka’s IT industry, working closely with all the universities and companies and professionals in the field.

“Over the years we have continued to spread our influence and expertise to all the universities in the country, enhancing their curriculums, providing teaching assistants – with many of our Virtusans themselves teaching and training staff, carrying out training programmes, etc. We also do a lot of other work such as helping students with projects and have provided over 1,700 internships within the company over the last several years,” explained Vice President of Virtusa Sri Lanka Madu Ratnayake.

All these activities are conducted under its Campus Reach programme, which benefits the company as it recruits heavily from universities.

Ratnayake’s thinking was that Sri Lanka was advancing rapidly in the IT spectrum, but he felt that since it would be difficult for the country to be competitive on a broad global platform, it should look towards being competitive in a number of niche areas such as BPOs in finance and accounting.

This, he feels, is essential – especially if the country is to meet the target of reaching $ 1 billion in export revenue by 2015 as opposed to the current total of $300 million.