May 09, 2012 03:19 PM IST | Source: CNBC-TV18

NIIT looks to retain margins at 15% in FY13

After reporting a consolidated net profit of Rs 26 crore for the fourth quarter of FY12, up 30% from a year ago period, NIIT is hopeful of maintaining its good performance.

After a 30% increase in consolidated net profit in the fourth quarter of FY12, NIIT is hopeful of maintaining its good performance in the coming fiscal as well.

The company is also looking at the US and European markets along with the Indian markets for better opportunities. In an interview with CNBC-TV18, Vijay Thadani, CEO of NIIT said, "While the market will remain uncertain, we do see a positive opportunity for order intake if you look at the outsourcing market from US and Europe."

NIIT posted consolidated net profit of Rs 26 crore in Q4FY12, against Rs 20 crore in the corresponding quarter last year. The consolidated net revenue also increased considerably at 38.64% to Rs 305 crore from Rs 220 crore in Q4FY11. The EBITDA margins for NIIT rose 15.16% to Rs 35.7 crore in the fourth quarter of 2012, compared to Rs 31 crore in the quarter ended 31 March, 2011.

Below is the edited transcript of his interview with CNBC-TV18. Also watch the accompanying video.

Q: Lay out the trajectory, as you see, for the rest of this year because the body language from IT companies has been quite different when we speak to different managements. What is it that looks like a reasonable revenue growth target for NIIT this year?

A: Before that I need to put it in a perspective. During the last year, our focus was on strengthening our balance sheet and we brought it to a near zero debt situation, just 6.7 crore out of 310 crore. We had a very decent growth in each of the four platforms of growth that we have been focusing on.

The cloud campus got 13,800 new enrolments which in the first year of operation is phenomenal response. We had in our managed training services added nine global contracts with USD 120 million visibilities now. We added 47% order intake improvement in the schools where we are working on NGuru solutions.

In the skill building segment we built a partnership with National Skill Development Corporation (NSDC) for skills development with six new centers. If you look at this as a backdrop, there are two important markets which are important to us - one is India and the other is US and Europe.

Managed training services are a relatively new activity and the propensity to outsource, given the economic uncertainty, is on an increase. We have seen a dramatic increase in our order intake. We do see that trend continuing during the year based on the funnel that we see. While the market will remain uncertain, we do see a positive opportunity for order intake if you look at the outsourcing market from US and Europe.

On the other hand, if I look at India, I think a number of conditions can point to its being positive. There are a larger number of people going to colleges and therefore, more people are looking for jobs. Hence, there is a requirement of skills development from a supply side.

From a demand side, the signal is mixed. There are certain sections which are looking for more people. Now that we have a diversified portfolio of training offerings, we are cautiously optimistic. I tend to feel that it's a mixed reaction for next year. But, we tend to feel that the four platforms that we are working on will all aid us in overcoming that to a certain extent.

Q: Detail what's happened on the margin front as well for NIIT this time around?

A: If you look at our overall results, we have to exclude the divestiture of Element K from both sides. Element K was a relatively lower margin business. But, in operations, its volume was fairly large.

If you take that away, then you would see that on a like to like continuing basis and without considering pass through revenues to create a comparable, the margins are at the same level as last year. It slightly dipped about 20 basis points. But, I think broadly, it is at the same level. Given the new initiatives that we had launched, one would have looked at a larger drop in margins, something which we had projected.

Q: Given what you are seeing in terms of enrollments, on what do you think there might be a likely revenue growth for this year, even a ballpark percentage range?

A: I definitely feel that at the level that we grew last year, which was about 15% on a year on year basis, we should have a similar level despite choppy conditions. What that level might be, whether it is a few 100 basis points lower or a little higher is difficult to predict. But, I would tend to feel in early teens is perhaps the right level of growth to aim for.

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