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Rolta May Return to Profit Growth on India Defense Contracts

Dec. 2 (Bloomberg) -- Rolta India Ltd., a maker of software for companies such as Chevron Phillips Chemical Co., expects to return to a profit growth this year on increased demand for its products from India’s military.

Net income may rise 15 percent in the year ending March 31, said Hiranya Ashar, chief financial officer at the Mumbai-based Rolta. The company’s profit fell 13 percent last year, according to data compiled by Bloomberg.

India’s defense spending on technology may triple to “$3 billion in the next seven to 10 years,” Ashar said in a phone interview today. “India’s defense budget may increase by up to 10 percent each year and most of the money will be spend on upgrading technology.”

The south Asian nation will spend 1.47 trillion rupees ($32 billion) on defense this year, triple its 2000 outlay. India’s defense procurement budget is forecast to reach $42 billion by 2015, according to a report by Deloitte LLP.

Rolta makes software for India’s battlefield management system, tactical communication system and the digital soldier program, according to the company’s annual report.

“The growth in geospatial and geographic information, including defense, and Rolta’s decision to stop sourcing software from third party vendors will help,” boost its profit, Vikas Jain, analyst at Shah Investor’s Home Ltd. in Mumbai, said by phone. “Revenue from software licensing and maintenance will also start getting reflected.”

Rolta shares, which have declined 16 percent this year, gained 1.2 percent in Mumbai to 164.5 rupees at 10:14 a.m.

The geospatial and geographic information software, that is used to make digital maps and defense systems, accounts for more than 50 percent of the revenue.

India contributes 59 percent of Rolta’s total revenue and North America follows with 29 percent, he said. Rolta had orders worth 18 billion rupees until Sept. 30, and is looking to buy software technology for about $15 million from a company in defense sector, Ashar said, without elaboration.

To contact the reporter on this story: Jay Shankar in Bangalore at jshankar1@bloomberg.net

To contact the editor responsible for this story: Stephen Foxwell in Mumbai at sfoxwell@bloomberg.net

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