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Last Updated : Jun 08, 2016 01:14 PM IST | Source: CNBC-TV18

Q1 may be weak due to seasonality; margins to hold: NIIT Tech

The company's margins to remain steady due to significant growth in its international and digital business, says Arvind Thakur, CEO & Joint MD, NIIT Technologies.

NIIT Technologies' management has reiterated a soft revenue growth for the first quarter in FY17 on account of exposure to its Geographical Info System (GIS) business, said Arvind Thakur, CEO & Joint MD of the company. This is just a seasonal weakness that the company faces every year, he added.

Thakur believes the company's margins to remain steady due to significant growth in its international and digital business.

Meanwhile, NIIT Tech's travel vertical, impacted due to client specific issues in previous quarters, is likely to recover under the re-organisation the company has undergone, he told CNBC-TV18.

Below is the verbatim transcript of Arvind Thakur’s interview with CNBC-TV18\\'s Reema Tendulkar and Anuj Singhal.

Reema: Yesterday you reiterated your outlook for a soft revenue growth in Q1 of FY17 we understand. Could you explain what that means because in the past two quarters, Q3 and Q4 of FY16 your dollar revenue growth was negative. Does that mean that your Q1 is going to be worse than what we saw in the last two quarters. How do you define a soft quarter for you?

A: There is a part of our business which is focussed on Geographical Information Systems (GIS) where we do significant amount of work for the government and the peak quarter of revenues for that business is quarter four and it slows down dramatically in quarter one. So, every year seasonally there is a decline in Q1 in our GIS revenues. So, that is the reason why we are projecting Q1 to be soft going forward.

Reema: What percent of your revenues come in from the GIS and how much would the GIS segment be lower in Q1?

A: GIS is about Rs 120 crore annually in terms of our revenues. So, that will give you an idea of what amount we can get every quarter from that business. And like I said Q1 is the smallest quarter for GIS. So, there is significant decline in Q1 every year.

Reema: What about the travel vertical, because that was under pressure prior quarter. How is it going to be in the coming quarters?

A: In the prior quarter we had certain client specific issues which had to do with the reorganising that is happening within the customer base. So, that is behind us now, so we expect travel to recover in the coming year.

Reema: How was FY17 going to shape up for you because FY16 you just had a dollar revenue growth of close to about six percent odd. Will FY17 be better than FY16?

A: No, one of the things that we need to understand is that our dollar revenues are only about 50 percent of our overall revenues because only 46 percent of our business comes from the US. So, when we look at revenues at NIIT Technology what you really need to look at is our constant currency revenues because all major currencies had depreciated against the dollar, the GBP, the Euro, the Australian Dollar, everything had depreciated against the dollar. So, in constant currency we grew 11.3 percent last year and that is more or less in line with the industry and we expect a growth this year also to be in line with the industry.

Anuj: Last time you had hinted that some bit of uncertainty amongst clients because of the approaching Brexit and also US election issues. Any more clarity on that?

A: No, these are external factors which impact the economy as a whole but I don\\'t think our clients specifically are getting impacted as a result of these issues.

Reema: What about on your margins, because that has been the key positive. Your margins have gone up by nearly 500 bps in the last couple of quarters, from 13-14 percent you are now at 18-19 percent. You have indicated that in FY17 there will be modest margin expansion but what would be the target margins that NIIT Technology would like to operate at?

A: We have seen steady improvement in our margin throughout the year last year and that has mainly been on account of the significant growth that we had in our international business. In fact the domestic business declined by 14 percent last year. Our international business expanded by 17.1 percent last year. So, we had brought about reorientation in terms of a business growth globally by focussing more on international revenues. So, that is really what has contributed to the growth and margins. Further expansion in margins is likely because we are also expanding our digital revenues which gave us better margins. So, overall for the year we ended at about 17.6 percent and going forward we hope to improve on that in FY17 as well.

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First Published on Jun 8, 2016 11:56 am
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