NIIT Tech reported a good set of second quarter earnings where its net profit increased 105 percent to Rs 58.9 crore year-on-year (YoY) and revenues grew 3.5 percent to Rs 693 crore on a sequential basis.
In an interview with CNBC-TV18, Arvind Thakur, CEO of the company said that this has been one of the best quarters in terms of order inflows which has stood at over USD 100 million per quarter this year.
Below is the transcript of Arvind Thakur’s interview to Sumaira Abidi on CNBC-TV18.
Q: You have guided for a soft Q3, so last year we saw dollar revenue in the same quarter at a negative 1.25 percent. Could this Q3 be weaker still or is this just a seasonality impact that you are talking about?
A: Looks to me your analyst was probably on the investor call that I had just some time back. What we have said is that our H2 is going to be better than H1 and as you just pointed out, Q3 is normally soft for the industry and that is what I had commented in the call.
Q: Let me talk about your order inflow then. There is about USD 143 million of new orders this quarter. So, if we remove this USD 62 odd million that has come from the Morris Communications deal, it is a little less exciting, if that is the terminology I may use. I understand there are sectoral headwinds, but what would you guide for in the second half of the year then?
A: On the contrary, this has been one of the best quarters in which we have had very strong intake. We had a renewal of Morris, which is a five-year renewal that has been concluded. We have also secured a large engagement in the insurance space in the UK, which is a new logo that we have added.
In addition, we also have two other new logos that we have added in this quarter. So, all in all, this has been a good quarter for intake. Not just this quarter, but if you look at this whole financial year, unlike the past where our intake every quarter would have been 80-90 or even USD 100 million, this year, we have been having an intake of more than USD 100 million in every quarter and so that builds up to a healthy order book, which will support us in sustaining our growth going forward.
Q: You mentioned adding a new client in the insurance business. The rest of Banking, Financial services and Insurance (BFSI) has not done so well. What is your outlook on that front?
A: If you look at BFSI as a whole, where we see a good traction is in the insurance space and as you are aware, most of our business in BFSI is in the insurance space. So, that is where we have been seeing strong traction.
In the BFSI space, there are some structural issues in that segment where we are seeing large banks coming under significant regulatory pressure and a slowdown in traditional business. But for us, we are very focused in a space where banks are investing significantly, which is on integrating their digital platforms with their legacy platforms and that is the business that we are doing through the new unit that we have acquired, which is incessant and that in fact has grown 14 percent quarter-on-quarter (Q-o-Q).
Q: How are you looking at this depreciation in the pound? You have a high exposure to that currency. What could margins look like going forward? When will you be able to return to those FY16 highs of well over 17 percent? You had guided for that some time in the second half. Is that on the horizon at all now?
A: We have seen our margins expand 139 basis points in this quarter and that has been despite the pound depreciating even further. In fact, if you look at our sequential growth, that has been 3.3 percent, we have grown sequentially. We have been fairly robust. In constant currency terms, it is 3.5 percent, so currency has impacted us to the extent of 0.2 percent and I would say that is because of the sound hedging that we have done against both the US dollar as well as GBP.
Q: One final word on your India business. We saw a decline over there. There was a government contract, we understand, that was put on hold. Is there any word on when that can be expected back on track? How is the business looking now for the second half?
A: We have been consciously moving away from executing and acquiring India government business and that is what is getting reflected in our domestic market business. So, government revenues from India government business of the nature where we are doing systems integration is now about 1 percent of our overall revenues.