It's a statement associated more with the go-go nineties than the go-slow 2000s. So, when Vishnu Dusad, the 46-year-old CEO of Nucleus Software says, "Our growth rates will be higher than the industry's", investors who participated in last year's tech tragedy on the bourses could be forgiven for not believing him. Only, Dusad speaks the truth. Nucleus closed its books for 2001-02 with revenues of around Rs 65 crore, 86 per cent higher than 2000-01's Rs 35 crore.

The big five it companies-TCS (it actually doesn't belong in this section yet; it's not listed), Wipro, Infosys, HCL Technologies, and Satyam Computer-accounted for 35 per cent of India's total software exports of Rs 36,000 crore in 2001-02, but if it is a growth-play you seek, mid-cap software companies (with a market capitalisation between Rs 150 crore and Rs 1,500 crore), and a sprinkling of small-cap ones, are it.

It may be hard to find companies such as Nucleus, but it is in the realm of the achievable.

This select club of mid-caps and small-caps has bucked the slowdown by catering to a niche, acquiring specialised domain expertise, forging alliances or building relationships with one client. "Customer access is their biggest strength," explains Sunil Mehta, Vice President (Research), Nasscom. "They offer niche services that aren't in the radar of the Big Five." With due consideration to the informed opinion of fund managers and analysts, here is our own pick of six such companies.

The Right Shape

Trading volumes seem to suggest this company is hotter than hot-on April 15, 18 lakh Geometric Software shares traded hands on NSE; some 7 lakh on BSE-but there is more to Geometric Software, a company promoted by Manu Parpia, the former head of Godrej's it business, than liquidity.

First off, the company's strange monicker comes from its ability to crunch complex algorithms in solid geometry, a skill much in demand among the makers of CAD/M/E (Computer Aided Design, Manufacturing, and Engineering) software. Estimates put the size of the market Geometric addresses at $6.7 billion (Rs 32,160 crore) in 2001. And in late 2001, Geometric struck two deals that should benefit it in the long term.

The first, a strategic alliance with Wipro, will see Geometric providing solutions to Wipro's customers in the manufacturing space. The second is a 70:30 joint venture with Dassault Systems, the largest players in the emerging Product Lifecycle Management domain, the spiritual successor to ERP (Enterprise Resource Planning). Geometric has had its share of tumbles: in 2001, its US operations didn't do very well, perhaps a fallout of the departure of some key execs. "The company's size (it has just 350 employees) and ability to scale up are concerns," says M.G. Shyam, a senior analyst with HDFC Securities, "but we are attracted by its high technology orientation." So are we, which is why the company finds a mention here.

It's the geography

Do not be deluded by references to Business Process Outsourcing-Indian it's mantra of the month-while looking at the business model of Hyderabad-based Infotech Enterprises.

Close to 50 per cent of the company's revenues of Rs 70.27 crore in the first nine months of 2001-02, came from GIS (Geographical Information System, and it is a $8.5-billion or Rs 40,800- crore market) conversion.

GIS is the back-breaking business of combining map-making, demographic distributions, and other relevant business variables to come up with, what else, map-like thingamajigs that companies can use to increase efficiencies in everything from logistics to distribution to customer management.

Then, there's Infotech's engineering services business that bagged a plum assignment from Pratt & Whitney-as a result of which its revenues went up from Rs 7.18 crore in the first six months of 2001-02 to Rs 7.28 crore in the third quarter of the year.

"Its biggest accomplishment has been the Pratt & Whitney deal," says Saurabh Singhi, a software analyst with Alchemy Stock Brokers. "And it looks well-positioned to bag other such engagements."

There's competition aplenty in both domains, but if Infotech Enterprises can grow at over 50 per cent-estimates suggest it grew by 60 per cent in 2001-02-and keep the revenue contributions of its three businesses, GIS, engineering services, and software services (50 per cent, 25 per cent, and 25 per cent respectively) constant, it should help. That's as de-risked a business model as can be.

On Wings of Desire

Why Kale Consultants remained focussed on the domestic market for the first 10 years since it began operations in 1986, while other software companies were reaping greenbacks, will remain a mystery. But its global gambit, however late, seems to have paid off.

Last year, its airline services division-it accounts for 60 per cent of revenues, and competes in a market valued at $10 billion (Rs 48,000 crore)-grew 166 per cent. Today, Kale claims it has what it takes to be a wing-to-wing solutions provider to airlines, and has a client list of 35. "We have an edge in this domain because our products are contemporary," says Vipul Jain, managing Director, Kale Consultants.

It isn't just products that make Kale hot, the company has entered the BPO segment too, with back-office services for airlines (it already boasts multi-year contracts from Qatar Airways and Air Luxor).

"The pure-play product strategy generally brings about instability in revenue streams," says Pratish Krishnan, an IT analyst with Cholamandalam Securities. "The entry into the BPO segment will stabilise Kale's revenues." That it should, and despite 9-11 the airlines business won't go belly up anytime soon.

BPO to the rescue

A company whose topline grew by a mere 14.6 per cent shouldn't by rights be on this page. If Mphasis BFL does, blame it on the company's BPO arm Msource. From Rs 5.2 crore in 2000-01, Msource's revenues rose some 350 per cent to Rs 23.39 crore in 2001-02. Mphasis BFL's client list-Citigroup, JP Morgan Chase, ING, BNP Paribas, AIG, Charles Schwab, P&G, J&J, and SIA-suggests that the company could be well-placed to benefit from any upturn in it-spending. However, it is Msource that gives the company an edge, reducing the risk in its core business through a play in it-enabled services. Predictably, of the 600 people hired by Mphasis in 2001-02, over 500 were for Msource.

By March 2003, Msource, which employs 700 people now, hopes to employ 1,500-2,000 people and generate revenues of Rs 70 crore. Competition is intense in the call centre business, but Msource has already managed to break even. Any increase in business, and a consequent increase in utilisation levels, could translate into super-normal profits for the company.

A classic product play

Product hothouse, I-flex has hogged much of the limelight in the banking space, but its genetic isomer Nucleus-I-flex started life as CITL, a Citibank company, and business from the bank accounts for (and has accounted for, in the past) the bulk of Nucleus' business-isn't exactly a pushover.

With 350 installations worldwide, and a client list that includes Citibank, Amex, GMAC (General Motors' financial services subsidiary), and Shinsei Bank, Nucleus is one of the few Indian companies with a significant presence in products (25 per cent of revenues).

"It has developed domain expertise while working on projects and converted this into products," says a Mumbai-based investment analyst. ''Our strong domain knowledge and understanding of the banking vertical has helped us create credible products,'' says Dusad. Net-net: the banking and financial services vertical in the software industry may be becoming crowded, but Nucleus does seem to have found a place for itself.

Fly-by-wire

What Nucleus did in banking, Subex Systems wants to do in the telecommunications domain. The company built expertise working on onsite projects for the likes of AT&T and Lucent. Now, it is converting that expertise into products. "Our new strategy is built around products for telecom applications," says Subhash Menon, MD, Subex. "And within that space we are focussing on an area critical to operators, revenue maximisation."

The shift in focus helped: in 2001-02, telecom equipment makers bore the brunt of the slowdown in the global economy, but operators remained largely immune. "The product strategy will bring some stability to Subex's revenue stream," explains Sohini Andani, an analyst with LKP Securities. With India's telecom sector set to boom, and clients like Bharti, Birla-AT&T-Tata, and BPL Mobile (not to mention Sprint and several others without India), Subex may just be at the brink of something big.

There may be more great mid-caps out there, some in software, and others, in other domains. The trick is to find them. Start hunting.