Polaris Software was one of the biggest losers in the market on Tuesday.

Shares of the software firm specialised in banking solutions were down by 6% at Rs 116 on the BSE in afternoon trades. Earlier in the session, they hit a low of Rs 113.80. 1.4 million shares changed hands on the counter.

The Polaris Software Lab scrip has been hit by a sustained selling spree, which was accentuated by a fall in tech stocks in the last few sessions amid weakness in the global markets on concerns of a possible US-Iraq war. From a recent high of Rs 162.40 on 15 January 2003, the PSL scrip has slumped by 28.5% in a few sessions to the current Rs 116.

PSL's Q3 results are expected to be weak amid pricing pressures from its biggest customer, Citibank. The latter is believed to have cut billing rates by about 15% for all its vendors including PSL and Orbitech in September 2002. This will effect PSL's margins.

PSL, which started by writing code for Citigroup's Indian operations and counts it as one of its largest customers, expects to derive more than 80% of its revenue after the merger of Orbitech from the banking and financial services sector.

Besides, following the merger of Orbitech with PSL, the latter's margins could come under further pressure because of the salary differential between PSL and Orbitech. The salaries of PSL's employees now need to be matched with that of Orbitech (the latter's being higher). Yet, it is reckoned that, with the merger of Orbitech, PSL will be in the big league in the banking and financial solutions segment (at number 3 or 4 slot).

Meanwhile, there were reports a few weeks ago that Citigroup, which has become one of the key shareholders of PSL following the merger of Orbitech, plans to cut down its holding in the merged entity from the present 47.36%.

As per reports, PSL is mulling expansion plans, which includes the setting up of a development centre in Hyderabad in the next three months. The proposal will be placed before the company's board soon for approval. The funding for the proposed Hyderabad centre will be met internally.

PSL has three development centres as of now in India at Chennai, Gurgaon and Noida. On the international front, PSL is also planning to enter Luxemborg, the Netherlands and Belgium. It is also keen to enter China by setting up a development centre to cater to the Japanese market.