>ORACLE FINANCIAL SERVICES SOFTWARE (SBICAP SECURITIES)

Oracle Financial Services Software (Oracle FSS) declared Q4FY09 numbers significantly surpassing our estimates backed primarily by strong license fee bookings. Profitability also showed a marked increase partly due to the depreciation of the Rupee v/s major currencies. In view of the run up in price we downgrade the stock to Outperformer.

■ Product business posts strong growth
The company’s product business segment registered revenues of Rs. 7949 mn for Q4FY09, growing by 6% QoQ and 25% YoY. Noteably, a larger part of the growth was contributed by higher license fees bookings (Rs.1490mn) which grew 59% QoQ, a rare feat in the current uncertainties. However continued INR depreciation v/s major currencies has also been a contributing factor to this growth due to the company’s no-hedge policy.

■ Higher margin maintenance income increasing
Oracle FSS earned maintenance fees of Rs. 3627 mn for FY09 a growth of 48% YoY. Share of maintenance revenues has increased to 20% from 18% in FY08. We expect this to further go up to 22%.

■ Jump in margins
Operating margins for FY09 increased by 7% to 26.5% backed by cost curtailment measures and benefits from INR depreciation. This was in spite of a Rs. 291mn impairment loss taken by the company in Q4FY09. Net margins also improved by 770bps YoY. The company also recorded a higher interest income of Rs. 771mn on higher free cash flows resulting in higher net margins of 26.8% compared to 17.5% reported last year.


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