Kale Consultant’s MPS business grows by 43%

Kale Consultants Limited, India's leading provider of products-based software solutions, has recorded 19% growth in revenue to Rs. 94.11 million and 45% growth in segment Margin to Rs. 29.21 million for its core airlines division for the quarter ended 30 th September, 2003 as compared to the corresponding quarter of the previous year.

Sequentially, revenue and segment margin of the airlines division grew by 18% and 29% respectively.

For the first half ended September 30, 2003, the airlines division recorded 14% growth in revenue to Rs. 174.14 million and 47% growth in segment margin to Rs. 51.85 million as compared to the corresponding half of the previous year.

The company has reported total revenue of Rs. 117.07 million and net profit of Rs 0.49 million for the quarter ended September 30, 2003. The export revenue stood at Rs 99.63 million and formed 84% (73% in Q2 FY03) of the operating income of the company. The operating profit margin (excluding other income) improved to 18.3%. For the first half ended September 30, 2003 , the company recorded total revenue of Rs. 230.74 million and net profit of Rs. 3.05 million.

In line with business strategy, the company sold its Banking Products division effective October 1, 2003 so as to focus on the huge opportunity for its products and outsourced business services in Airlines and Travel & Transport verticals.

Operational Highlights for the Quarter ended September 30, 2003
	Airlines division contributed 80% to revenue against 65% in the corresponding quarter in the previous year. Banking segment contributed 15% and Other segments 5%.
	Airlines products revenue was Rs. 39 million.
	Managed Process Services (MPS) business grew by 43% to Rs. 51 million.
	Airlines Segment margin improved to 31% from 25.3% in Q2 FY03 and 28.3% in Q1 FY04.
	Top 5 customers accounted for 56% of revenue.
	Europe contributed 31% (14% in Q2 FY03), followed by Middle East/Africa with 32%, Asia Pacific with 18%, India with 16% and USA with 3%.

Commenting on the performance, Mr. Vipul Jain , Managing Director said, "We continue to grow in airlines business. With sale of banking products division, our energy will be even more focused towards increasing the growth momentum of airlines business.”

Airlines Division
Kale presently offers end-to-end Revenue Accounting and Sales Audit services to the Airline industry. It plans to expand its airline services portfolio to include Ticket Proration, Cargo Sales Audit and Interline Billing among others.

The company has built a niche in the outsourcing value chain through its IPR based MPS business. The business model is not based on a per seat pricing, but on a per transaction cost and thus the productivity benefits accrue to the company. The state-of-the-art MPS centre uses Kale's award winning software products (REVERA™, APEX™, FAREGAIN™ and PRISM) to provide outsourcing services.

The recurring revenues from AMC and growing MPS business have reduced lumpiness of earnings significantly. The combined revenues from MPS and AMC accounted for 64% of operating revenue during Q2 FY04 as against 47% in Q2 FY03.

Business Outlook
Kale is the only India-based software player with a complete integrated suite of products for the Airlines industry, targeting the Passenger, Cargo and Organizational level requirements.

Kale will continue to focus on its core strategy and expects significant increase in top line in airlines division due to an improved external environment. Simultaneously, the company expects to improve it's profitability in the current year due to sale of banking products division and productivity gains.

Offshore outsourcing is becoming a priority for global airlines industry due to restrictions on capital investments and pressure to reduce operating costs. Revenue accounting is one of the functions best suited for outsourcing since it is labour intensive. Even a fraction of the revenue accounting volume outsourced to India can be huge for the limited number of players in this space. Due to its IPR driven business model, Kale has acquired competitive edge in the revenue accounting space.

The MPS growth plans are based on a three-prong strategy - increased customer acquisitions, increased service offerings in the Airlines domain and penetration into new verticals like Travel & Transport. The MPS center will be ramped up in two phases by increasing the people base from 180 to 1000 by FY06.

The multi-year MPS contracts – Qatar Airways-4 years, Air Luxor-3 years and Canadian North-3 years, enhance the long-term visibility of revenues. Thus more than Rs 250 million per annum of revenues are signed and committed business with a long term visibility. Total committed business is estimated at Rs 1000 million over next 4 years, putting Kale on a sustained growth path.

For additional information, please contact:

Mr. Sumeet Nadkar
Chief Financial Officer
Kale Consultants Ltd.
Tel: 91-22-28259580
Email: Sumeet_Nadkar@kaleconsultants.com

Safe Harbor

Certain statements in this release concerning our future growth prospects are forward-looking statements which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the company.