Oracle Financial Services Stock Analysis

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Overview:

Please note: Although we are writing this for OFSS but OFSS being an Indian Subsidiary of Oracle corporation, more emphasis will be placed on the parent company.

Oracle Financial Services Software Limited (OFSS) is a completely debt free subsidiary of Oracle Corporation an American multinational computer technology corporation headquartered in Redwood Shores, California. 

The company offers financial institutions most comprehensive and contemporary banking applications and a technology footprint that addresses their complex IT and business requirements.

The company offers a comprehensive suite of offerings encompassing retail, corporate and investment banking, funds, cash management, trade, treasury, payments, lending, asset management, compliance, enterprise risk and business analytics, anti-financial crime among others. It is an IT solution provider to the banking industry.

Prime sourcing services business offers comprehensive suite of consulting and application services addressing retail, corporate and investment banking, funds, cash management, trade, treasury, payments, lending private wealth management, asset management, compliance, enterprise risk and business analytics.  

Ofss is an established product player in Financial Services domain with global presence  Operations of the company are divided into three business groups/divisions i.e. Product business, prime sourcing (consulting services business comprising IT application and technology services) and business process outsourcing services. 

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Parent History

 

Oracle was co-founded by Larry Ellison with Bob Miner and Ed Oates in 1977. Originally the company was named as Software Development Laboratories (SDL). Ellison taking an inspiration from the paper written by Edgar F Codd on Relational Database Management System RDBMS , Ellison wanted to make Oracle’s product compatible with System R, but failed to do so as IBM kept the error codes for their DBMS a secret.

SDL changed its name to Relational Software, Inc (RSI) in 1979 and finally to Oracle Systems Corporation in 1983. Today with more than 136,000 employees oracle has presence across more than 155 countries serving more than 1400 customers.

Acquisitions made by Oracle Corporation over past several years

Oracle Cloud Services

Oracle Cloud is a cloud computing service offered by Oracle Corporation providing servers, storage, network, applications and services through a global network of Oracle Corporation managed data centers.

The company allows these services to be provisioned on demand over the Internet. Oracle Cloud provides Infrastructure as a Service (IaaS), Platform as a Service (PaaS), Software as a Service (SaaS), and Data as a Service (DaaS).

These services are used to build, deploy, integrate, and extend applications in the cloud. This platform supports numerous open standards (SQL, HTML5, REST, etc.), open-source applications (Kubernetes, Hadoop, Kafka, etc.), and a variety of programming languages, databases, tools, and frameworks including Oracle-specific, Open Source, and third-party software and systems.

Going Head to Head with Amazon Web Services

Company’s Product Portfolio Includes

Oracle Financial Services Analytical Applications (OFSAA) is a suite of industry leading applications catering to the critical areas of Risk, Finance, Treasury, Front office, Regulatory Reporting and Compliance, including the areas of Financial Crime.

These products are built on a unified data architecture leveraging new age technologies like Artificial Intelligence (AI)/ Machine Learning (ML) and Graph, to deliver high performance. 

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Oracle Financial Services Financial Crime and Compliance Management(FCCM) suite comprises of a modern, comprehensive, and extensible suite of applications that enable financial institutions with advanced capabilities to effectively combat financial crime and comply with regulations while enhancing operational efficiency.

Oracle FCCM’s key offerings span across the entire financial crime and compliance management value chain including streamlined Know Your Customer checks and Sanctions screening, Anti Money Laundering (AML) Transaction Monitoring and Detection, efficient Enterprise Case Management, timely Compliance Regulatory Reporting and Management dashboards.  

Oracle Financial Services Enterprise Risk Management applications are industry-leading products that enable financial institutions to address a wide range of issues including: Support continuous compliance for complex Basel III post-crisis reforms covering Revised Standardized Approach for Credit Risk, Market Risk, FRTB, Counterparty Credit Risk, Large Exposures and Leverage Ratio guidelines due to be adopted by various jurisdictions from 2023onwards.

Bonus Video: OFSS Leasing and Lending Operations Explained in 4 Minutes

Other Products

  • Oracle Financial Services Hedge management and IFRS valuation
  • Oracle Financial Services Analytical Applications for Customer Insight suite
  • OracleBankingDigitalExperience
  • OracleBankingAPI
  • OracleBankingVirtualAccountManagement
  • OracleBankingCorporateLendingisanend-to-enddigitallyenabledlendingsolution
  • OracleBankingCorporateLendingProcessManagement
  • OracleBankingCreditFacilitiesProcessManagementis acomprehensive credit management solution 
  • OracleBankingEnterpriseLimitsandCollateralManagement
  • OracleBankingTradeFinanceProcessManagement
  • OracleBankingSupplyChainFinance
  • OracleFinancialServicesLendingandLeasing
  • OracleBankingPlatform
  • OracleBankingEnterpriseProductManufacturing

Clients

Strong Performance amid Covid-19

OFSS announced about 51 new deals in FY20 (12 of them in Q4) as against 57 deals in FY19. Despite challenging times due to the impact of pandemic across the globe, the company has announced signing of 15 deals in Q1FY21.

OFSS added 15 new deals that included 20 different product modules with strong demand across product offerings – 5 Universal Banking, 5 Digital Experience.The license signings for the quarter stood at USD 29.5 million spanning its entire portfolio and across diverse banks in 32 countries followed with follows the signing of license deals worth USD 23 million in Q4FY20 and USD 12.2 million in Q3FY20, USD 12 million in Q2FY20 and USD 29 million in Q1FY20.

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Financials

Company reported Excellent for Q1FY21 amidst Covid challenges.

Quater ended June 2020

  • The company reported a revenue of Rs 1337.26 crore, a growth of 6%QoQ and 5%yoy.
  • Operating profit margin at 51.6%
  •  Operating profit stood at Rs 690.07 crore, a growth of 22%QoQ and 12%YoY.
  • PAT at Rs 479.79 crore was higher by 78%QoQ and 27%YoY

Year Ended March 2020

  • Revenue was down by 2% to Rs 4861.28 crore
  • OPM expand by 260 bps to 45.8%
  • Operating profit was up by 4% to rs 2228.69 crore.
  •  PAT was up by 9% to Rs 1504.85 crore
  • Company has cash and Equivalents of about 4500 Crores as of March 2020.

Conclusion

OFSS with parent holding more than 70% holdings , multinational company with strong Parents, Operating profit margins of more than 40% consistently and huge cash and equivalents of more than 4500 Cr is worth exploring .

With the more technological advancements in the fields of Cloud Computing , Database Management , Artificial Intelligence , Machine Learning where Oracle has significant presence the company is set to benefit big. This the stock worth having in a portfolio for long term.

Note-: Users are requested to do their own research before taking any decision. All the darkhorsestock ideas are presented with a view of at least 2-3 years or longer. Therefore please don’t send unnecessary queries relating to the stock for short term outlook.

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