Blue Star Infotech witnessed a free fall for the second day in a row on Thursday as net profit dropped a voluminous 15% on a sequential basis.

The scrip of the software company sank 9% to Rs 151 on BSE in mid-morning trades, near the day's low of Rs 150.45.

On Wednesday, the scrip shed 2% to Rs 165.90 after BSIL's Q3 results hit the market towards the fag end of the session. It came 18.3% off the recent high of Rs 207.45 on 29 November 2002 to Rs 169.30 on 21 January 2003.

BSIL has shown a sequential fall in both consolidated revenues and net profit for the quarter ended 31 December 2002. While sales fell by 13% to Rs 18.17 crore, PAT fell by 15% to Rs 3.73 crore.

Sequentially, revenue and net profit were lower mainly due to postponement of a couple of new large projects from existing customers and a significant number of holidays especially at offices of key technology customers. The company has already ramped up employees and infrastructure for these postponed projects, which are expected to commence in the current quarter. Notably, the volume of offshore business has increased.

Comparing the figures on a year-on-year basis, sales are higher by 24%, and PAT was maintained at Rs 3.73 crore.

The net profit growth was stagnant despite a 24% revenue growth as compared to the corresponding previous quarter, mainly due to ramp up of employees including sales and marketing people as well as the building up of infrastructure to cater to growth requirements.

Consolidated net profit for the year ending 31 March 2003 is expected to grow approximately by 30%. This means that the company is expecting net profit of Rs 4.04 crore for the quarter ended 31 March 2003. This would imply a sequential growth of just 8%.

Five new customers were added during the quarter, taking the total number of active customers to 35 for the quarter.

The company has been working for Hewlett-Packard's internal IT applications and product R&D covering web applications and 3K support services. In line with its strategy of making further inroads into HP, the company is now also working in new areas like systems software and HP customer engagements covering new applications like SAP, 3K migration and HP-UX R&D. In fact, BSIL and HP are currently chalking out a plan to further expand their relationship.

90% of the revenue was generated from offshore projects while the balance 10% was from onsite projects. Manpower utilisation rates increased to 75% from 72% in the corresponding quarter of the previous year.

The company has recently set up e-business services practice as a new line of business. This horizontal practice would focus on verticals such as supply chain management, healthcare and government. The company would be offering mainly consultancy services for the verticals leveraging its domain expertise and expects to break into the big-ticket accounts in the Fortune 100 category through this new initiative. It is already in talks with the US and the Canadian governments and sees a good traction.

On 1 November 2002, the company inaugurated a new 130-seat development center in Mumbai, which is now the base for the Delivery Head Office of some of the core development teams. Also, the company will soon be moving into a larger development centre in Bangalore with 250 seats to cater to the growing requirements of Hewlett-Packard and Micro Warehouse as well as some new key customers.