In a formal statement, Chennai-based Polaris said: We would like to categorically affirm that there is no truth in the allegations that IBM has approached Polaris for a possible takeover bid.

Bangalore-based MphasiS, which also denied that IBM had approached it, provides both software development as well as back-office processing services from its MsourcE subsidiary, has been planning to make an American Depository Receipt over-the-counter listing on Nasdaq over the next 12 months, which would value the company in the region of $75m to $125m.

MphasiS, which was formed out of the merger between the then loss-making Mphasis and BFL in February 2002, is reported to be 60% to 70% owned by private equity and venture capital firms, and includes a $10m investment by Chrysalis. The company is particularly strong in the financial services sector and counts firms such as ABN Amro, BNP Paribas, HSBC, Prudential, Emirates Bank, Capital One, FedEx, Delta Airlines, HP, Samsung, Proctor & Gamble among its customers.

Polaris meanwhile, was formed out of a merger between Mumbai-based Orbitech and Chennai-based Polaris in May 2002. Orbitech was majority owned by US investment giant Citigroup, and the sale followed the merger of three Citigroup offshore businesses Citigroup Overseas Software Ltd, Global Support Undertaking and Citibank India Technologies. Citigroup Venture Capital is now the largest shareholder in Polaris, which targets the banking, financial services and insurance sectors.

Both Polaris and MphasiS are second-tier offshore developers, and rank as the 14th and 16th largest Indian players respectively. During the full year ended March 31, 2003, MphasiS grew its net profit 63% to INR 669m ($14.6m), revenue 37% to INR 4.29bn ($107m), while Polaris grew profit after tax 17% to INR 687m ($14.9m) in its year to March 31, on revenue up 51% at INR 4.28bn ($93.1m).

IBM currently employs some 4,000 people in India, where it provides a range of software development and services for its global client base, and this has grown from 2,500 in 2002. About 500 of these developers are working on local projects.

Source: Computerwire