Look for higher revenues from NIIT in Q3: Rajendra Pawar

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NIIT Technologies announced its second quarter results for FY12. The company's net revenues rose 12.8% to Rs 371 crore versus Rs 328.8 crore. Its PAT surged 11.65% to Rs 46 crore versus Rs 41.2 crore.

In an interview with CNBC-TV18, Rajendra S Pawar, Chairman of NIIT Technology talks about the company's second quarter result. He also outlines the company's growth trajectory further ahead.

Below is an edited transcript. Watch the accompanying video for more.

Q: This time around there was a one time expense but how much do you think you could maintain your margins at in the next couple of quarters?

A: This quarter has been significant for a number of reasons. First and foremost it's a record quarter in terms of order intake at USD 200 million. Our highest two quarters ago was USD 140 million. This has also been a quarter where we had two significant transactions - we acquired a software company in Spain and then we had a joint venture with a company in the US in the media space.

As a consequence of the one time expenses involved in these transactions, the margin has taken a dip. But if you were to do a like to like comparison, last quarter we were 18.5% on margin, this quarter without this transaction we would have been 18.6%. The revenue growth has been good. We have had a 12.9% increase QoQ and the net profit is up 11.2% QoQ so in that sense it has been a very strong quarter for us.

Q: What kind of volume growth do you think you can maintain in the next couple of quarters after doing what you did this time?

A: For the new transactions that we have done, the revenues would start kicking in from next quarter. We expect revenues to go up significantly higher from what it has been in terms of growth in this quarter. These two transactions and this USD 200 million order intake should see our growth rate accelerating in the next few quarters.

Q: Tell us about the Crime and Criminal Tracking Network System (CCTNS) order that you won from the government? When do you think that will start to kick in and what kind of monetary upside do you expect from those?

A: We have completed the BSF order, we have done CRPF. So in the paramilitary area we have had a very strong capability built over a period of time. That's the reason why these CCTNS orders for crime records have come in. We expect revenues to start coming in this coming quarter and one quarter down will be more significant. In the next 18 months we expect to complete these two orders. Of course, there are more in the pipeline.

Q: On Madrid-based Proyecta, when do you think that could start to show up in your books and when do you think the deal will be EPS accretive?

A: The deal is completed. It is a software company which is very specialized in two sectors of interest which is the airlines and the financial sector. The revenues start coming in straight away because it's a full acquisition.

More important than the size of the deal is that we have been looking at the Latin American markets so this becomes a kind of a beachhead because all the professionals which are about 120 are Spanish speaking and fairly seasoned professionals. Our foray into Latin America is perhaps the biggest reason why we see value in Proyecta. That's very important for us going forward.

Q: What are you hoping to see in terms of order accretion? How much do you think you can grow your revenues on a quarterly basis?

A: We don't give specific numbers but we have USD 230 million plus executable in the next 12 months of the order intake we had now. We have seen 12.9% QoQ, so we expect a significant increase going forward in the next few quarters of this large order intake. We are seeing an acceleration I would say for the next few quarters. It's a strong set of quarters in front of us.

Q: Did you see any kind of forex gain this quarter?

A: Forex gain is marginal because our basis is we take the price at the beginning of the month, so it's been 0.4%. So most of the growth out of 12.9% of which I would say 12.5% is volume growth.

Q: Do you think you could maintain your margins at this 18.5% level for the entire fiscal?

A: Margins will have a drop because this one time cost which has come in this quarter will obviously affect the margin for the year but we expect that we will improve. In the next year we will recover part of what we have lost out because of the one time transaction. The government orders in India don't come at the same margin as we saw last year.

But there is significant growth in volume, we expect EPS to improve for the year but on the operating margin, we will see a certain dip in this year compared to last year and then we will start seeing a recovery of that from next year onwards.