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Jul 19, 2013, 05.30 PM IST | Source: CNBC-TV18

NIIT posts Q1 loss on tax, FX woes; eyes Q2 revival

NIIT Technologies first quarter net profit fell by 6 percent quarter-on-quarter. Rajendra S Pawar, Chairman, NIIT expects second quarter revenues to improve.

We don't look at numbers but it will be significantly better than where we are.

Rajendra Pawar

Chairman

NIIT Technologies

NIIT  reported Q1 net loss of Rs 9.5 crore as against a profit of Rs 11.5 crore for the same period last year on the back of tax and forex issues, says chairman Rajendra S Pawar.

The IT education firm lost Rs 3.4 crore on forex volatility and Rs 2.7 crore on a dividend tax accounting issue. (More on numbers)

"Our IT business contracted in Q1 but we saw growth in the non-IT businesses," Pawar told CNBC-TV18. Meanwhile he says GNIIT enrollments up 9 percent after a gap of seven quarters.

He is also expecting good response from Cloud Campus and overall better results in second quarter.

Below is the verbatim transcript of his interview to CNBC-TV18

Q: Could you walk us through the reason for a Rs 9.5 crore loss that you have seen this time around versus a profit on year-on-year (Y-o-Y) basis?

A: First of all to give you the synopsis, revenues are more or less flat as same quarter last year. Operating margins are at 5 percent, almost flat but we have had loss coming out. Two-thirds of it comes out of the dividend, which we have from subsidiary, the tax on that and Fx.

Then of course we have had the whole recruitment scenario, the hiring scenario has been tough for the last more than a year now. So, we are beginning to see that perhaps that is coming towards an end because in this tough scenario we have seen a couple of positive trends, which we have worked upon.

First and most significant being that while the GNIIT, our flagship programme has faced the challenge because of the engineering education being challenged for the last almost seven quarters. For the first time after the seven quarters we see the GNIIT enrollments are up 9 percent and that is very important for us as a thing going forward.

The second is, we launched our Cloud Campus in the last quarter and that is showing very significant response in the market at least in terms of lead indicators like enquiries.  Enrollments have normally a lag of a quarter or two. So, these are two things, which we are seeing in the environment which are positive for us.

We have been talking of our change as a global talent organization so about a fourth of our revenues are coming up from non-IT education, an IT education haven’t been challenged for the last almost more than a year. So, now forth of our revenue and within that banking for example, enrollments are up 41 percent. It is a very healthy growth. So it has been a mix quarter, some challenges, some positive trends and we are now gearing up for the future on a positive note.

Q: Give us one detail, this dividend on account of your subsidiaries that pay out, is it a one quarter phenomenon which is not likely to reckon next quarter?

A: One quarter.

Q: Could you give us a sense what perhaps the profits will look like next quarter or just on a quarterly basis?

A: They will be better for sure. We expect Q2 revenues also to improve, it is an important quarter. We expect that the traction coming out of the Cloud Campus launch which is getting very good response should transfer itself and our corporate business, our global business that is about half, little less than half of our business, has grown 16 percent in this quarter.

Order intake has grown up 6 percent, we have had four significant orders in our managed training service business. So, there are parts of the business which are doing well. There is a part, which is a domestic in IT business which has been tightly linked to the hiring freeze or slowdown. That part has been challenged but within that if GNIIT continues to grow as we have seen last quarter then the growing elements will perhaps go beyond this lagging.

Q: Give the tightness in hiring, which is likely to perhaps continue at least in the near-term, what perhaps will be the revenue growth for the entire fiscal year because we have started off on a very flat footing and with respect to profits being better will it be in a zero to 5 crore mark, something which you saw in the last quarter was at 2.7, just some sense?

A: We don’t look at numbers but it will be significantly better than where we are. That is for sure. Your point is valid about hiring. We don’t expect a big change in the near-term, but what we are seeing is a shift.

For example, you would have noticed that engineering enrollment this year is far more challenged than they were last year. But interestingly, employers are also beginning to look at graduates in commerce and arts with IT specialization. So, this shift is probably what is causing GNIIT to go up.

So, that shift accelerates in this period, which is what we are pushing very hard along with Cloud Campus, which is a serious innovation. That could shift things in favour of the GNIIT programme. So we could see a positive change in that sense.

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