Polaris Financial Technology has kick-started an exercise to revamp its business model.

This board-blessed move, it is learnt, is aimed at improving the shareholder value.

Facing some sort of an identity crisis, Polaris board apparently feels the company is largely undervalued by the investors.

A quarter of the company’s revenue comes from product business. The rest is accounted for by the services business.

According to Arun Jain, Chairman and CEO of Polaris, the board is worried over the underestimation of Polaris by the investing community, and, hence, sought the help of an outside consultant (BCG) to suggest the way forward. The consultant felt Polaris “has huge undiscovered value.’’ The consultant, he explained, saw “huge value sitting in products, services and client businesses.’’ In the light of the findings of the consultant, the board, he said, had asked the management team to explore options, including appropriate restructuring, which would provide “an impetus to the company for the next stage of its growth’’ even while maximising the shareholder value.

Mr. Jain told The Hindu that a seven-member management team had been entrusted with the task of exploring all options to revamp the business model of the company. “We will form a task team, and assign the job,’’ he added. The board, he said, had given the management team a 90-day time to come out with its proposal, which would then be placed before the board in its next meeting. Mr. Jain said Polaris was somehow unable to communicate to investors that the DNA of its two businesses (products and services) were completely different, and, hence, the company could not be viewed from the prism of “`quarter-to-quarter performance.’’ As a consequence, it was commanding only half the value vis-à-vis its peers in the industry, he pointed out.

Polaris, in the meanwhile, reported a flat growth in its revenues for the three months ended December 31, 2012 at Rs. 572.88 crore against Rs. 572.53 crore in the same period in the previous year. The profit after tax declined sharply to Rs. 40.67 crore from Rs. 61.07 crore in the year-ago period, mainly due to the loss of Rs. 11.89 crore suffered by the IdenTrust division.

Mr. Jain said, “This has been a challenging quarter. However, we continue to build momentum with 16 new business wins. These wins will lead to revenue accruals in the coming quarters.” Govind Singhal, President and COO, said, “Service business has been steady barring a $800,000 negative impact due to Hurricane Sandy. As regards our product business, though we won nine deals, the slowdown in Europe has impacted three deal closures and revenue recognition this quarter. “Our overall operational improvement agenda is on track and costs were contained at the levels of the previous quarter.”

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