See higher enrolments going forward: NIIT

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NIIT's Q3 consolidated net profit is up 74% at Rs 9.5 crore. Consolidated net revenues are up 2% at Rs 284 crore.

Rajendra Pawar, Chairman, NIIT , says companies are beginning to hire which is resulting in higher enrolments.

Here is a verbatim transcript of the exclusive interview with Rajendra Pawar on CNBC-TV18. Also see the accompanying video.

Q: Could you detail out the key highlights of your quarter this time?

A: It has been a strong profit quarter with good profit growth whether it is profit after tax (PAT) or EBITDA. EBITDA is up 36%, net profit after tax is up 74%. The second highlight is strong order intake. I think we have seen a 22% increase in enrolments, though year-over-year revenue is up just 2%. I think the focus has been on profit improvement which we have achieved. The good sign is that we see jobs coming back and I think that is in the air. So, that is beginning to translate into higher enrolments, which is a good lead indicator for us.

Q: Could you also give us more clarity on the volumes and margin for this Corporate Learning Solutions (CLS) business?

A: There is an India component which has seen reasonable growth. But the larger part of CLS corporate business has been US, which is Element K. The US business has - like in the earlier two quarters - been flat or negative, but the profit improvement in that business has been high. The CLS business' main driver is Element K which is our subsidiary in the US, the company we bought. There we changed the strategy last year. We have been talking about it for the last couple of quarters which is much more IP based. There we have seen good traction. So, because of bigger more aggressive move into IP-based services, we have seen an improvement. I think that is also one of the reasons why profits and profitability is improving.

Q: There has also been an adverse impact of forex to the tune of Rs 6 crore, are you factoring this in?

A: The volume action is more than 2%. About 4% would be volume increase and a little over 2% is taken off by exchange.

Q: What are the focus areas you are looking at?

A: The good news is that jobs are coming back in almost all sectors not only the IT sector but also finance which is our venture as IFBI or Imperia. These are all driven by job and its prospects, so we see strong growth in front of us for individual business if 225 enrolments are the lead indicator.

On the corporate side, we see GOI spends as priority and are scaling that up. The US business is still uncertain. It is very difficult to say how strong the revival will be or when will it be. Therefore, our focus is on managing a better product mix and much more IT-based sales. We had good traction with element K in the US. We see a little competitive in using our own IT, so US will remain a question mark for the next two quarters. We have to focus on a bit of competitive selling which is what we are doing.

Q: What about your QIP plans, give us clearer picture on timeline and fund usage?

A: The timeline has been pushed a little bit given the uncertainties around us, so that is not the agenda and is not on the cards at this point in time.

Q: What about guidance, will you be maintaining it for coming years?

A: We don't give specific guidance in numbers. The lead indicator of increasing enrolment is a positive sign for us and it is also in a sense understandable because jobs in the financial sector are coming back. That is one thing which drives demand, more than that it starts driving sentiment. So, we see a positive sentiment in enquiry terms in the individual learning business. We are now beginning to prepare for growth in this coming year 2010.

Q: You are expecting IT Budgets also to be substantially scaled up this year?

A: In our case, the individual learning business is not as much driven by US revenue growth but Indian companies starting up. We expect that demand will come to us. The IT sector has started hiring up after a fairly long gap or started hiring aggressively. Therefore, the international IT budgets have an indirect impact. We hear that it is going to be roughly flat but outsourcing will increase from US because of cost consideration which is why the software sector is beginning to get ready for. They have done well this quarter and we are beginning to get ready for more growth. Therefore, they are beginning to hire. For NIIT, it is derived demand and we see an enquiry increase of 22% as a fairly strong indicator that the hiring coming back is creating a positive sentiment. People are beginning to invest in themselves to get ready for equipping themselves, so it is a good lead indicator for us.

Q: Any key market which you are focusing on right now for any new emerging opportunities?

A: I would say that right now India is one of the most promising markets. We are looking at the schools business. The government is talking a lot on spending on education. We are looking to go deeper and wider across the board, moving towards more IP-based. We have improved our IP component of sales by another 2% this quarter, so we are becoming more non-linear. We will have much more reliance on technology-based products, internet-based delivery models. It is that kind of shift which we see. I guess the drive in terms of volumes will be India centric in the next couple of quarters. If the US starts showing growth in the second half of the year as people are expecting, then even the international activity should see a strong fillip.