Orbitech Ltd, an arm of US-based Citigroup, has pared its holding in Polaris Software Lab Ltdby consistently selling its shares in the open market. Beginning with a bulk deal of 13.3 lakh shares at Rs150.97 on 24 September, Orbitech has offloaded around 39 lakh shares in the Chennai-based software company at around the same price in four trading sessions.

With this, the Citigroup holding in Polaris comes down to around 40% from 44% of the total voting shares.

Polaris share price, ironically, has been holding out at around Rs150-151 amidst frenzied trading activity. On 5 October, 54.3 lakh shares changed hands on the bourses, when Citigroup offloaded in its fourth round of selling of 6.05 lakh shares.

The biggest uncertainty for Polaris is in terms of business that accrues from Citigroup, which at present accounts for 40% of its revenues. The sale of shares comes at a time when the Polaris management is signalling a re-alignment in cost structures and business operations, brighter prospects and improved performance despite tough market conditions.

For the quarter ended June, the company posted a 3% growth in revenues at Rs326 crore. Operating profit grew by 42% over the previous corresponding quarter to Rs55.2 crore. During fiscal 2009, the company’s turnover grew to Rs1,201 crore from Rs941.13 crore in the year before. The net profit had doubled from Rs52.6 crore to Rs111.2 crore in the same period.

Initiatives to employ and utilise the company’s work force in accordance with the job requirements have improved utilisation to 80% from around 70% in FY2008. A zero-debt company, Polaris has cash and cash equivalents in its books of Rs400 crore which in future will be used for strategic acquisitions.

Polaris’ decision to remain a niche player in the banking and financial services space since inception could well be its strong point. Going forward, investments made in the last two years will result in expansion on two counts—geographic and product verticals. The company is increasing market penetration in emerging economies. Yet, given this new development from Citigroup, Orbitech’s management may have to decide whether there’s a need to de-risk their business model by diversifying and gaining new customers.