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Last Updated : Jan 19, 2013 12:14 PM IST | Source: CNBC-TV18

Expect margins to improve going ahead: NIIT

Net profit of NIIT Technologies‘ rose 30 percent quarter-on-quarter. It rose to Rs 56 crore in the third quarter of current financial year 2012-13, but with that year-on-year the net profit declined 12.5 percent.


Net profit of NIIT Technologies’ rose 30 percent quarter-on-quarter. It rose to Rs 56 crore in the third quarter of current financial year 2012-13, but with that year-on-year the net profit declined 12.5 percent. Their corporate learning solutions (CLS) margin was 12.1 in the last reported figure. In an interview to CNBC-TV18, Rajendra S Pawar, Chairman, NIIT Ltd said that there is improvement, the order intake has been very good. They have six new customers under CLS in Q3.


"We have also witnessed 33% fresh career enrollments for banking programme", he added.


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


Q: We just had consolidated net sales, can you give us all the numbers?


A: As you have seen, the revenue stands at Rs 232.7 crore which is almost at a similar level like last year. The EBITDA at Rs 7.7 crore and at the profit after tax (PAT) level it is a bit positive compared to the same time last year when post that Element K transaction. It was Rs -16.9 crore on PAT. So, improvement in PAT, revenue is roughly same.


We need to dissect it into at least two parts. The mainline IT, long-term programmes have been obviously for the last year or so. Six quarters have been influenced because of very slow hiring by the IT sector. This still remains rather tight and it has kind of gone along with the sector hiring.


However, all the new offering that we have, has gone up. Whether it is banking that has gone up 33 percent enrollment this quarter or school learning solution which is up 35 percent or the new structure we talked of corporate learning, which is a global business, is up 14 percent. So, these areas which are the non long-term career businesses have all moved upwards. However, the mainline career business in the light of the challenges in the market remains challenge.


We do see the gross domestic product (GDP) looking up next year. So, we think that sector has also bottomed out.


Also read: NIIT Tech Q3 net profit up 30% QoQ to Rs 56 cr


Q: How much did Individual Learning Solutions (ILS) decline this time around, last time we had 18 percent fall year-on-year (YoY), how much did they fall this time?


A: Almost 22 percent on the long-term career. That is the one which continues to be challenging. If one looks at this quarter itself for the hiring of the top significant eight companies, the net addition was almost half this year compared to last year by the IT sector. So, that sentiment runs into the employment market. The results of the IT sector this quarter seems to be all ahead of numbers on their financial side. We expect that the hiring thing normally follows by the lag of a quarter or two.


Q: Can you give us CLS margins also, 12.1 was the last reported figure, have you managed to improve them?


A: Very marginal. There is an improvement. The order intake has been very good. We have six new customers in CLS, big multinational bank, consulting firm and large corporates. That is the manager training services business as we call it. That part of the corporate learning services is now 70 percent. So, I think this is a long term technology base fortune 100 kind of proposals and projects. They are shaping very well and that is becoming a growth engine for the whole company.


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Q: Last year same quarter, you had a consolidated loss, what has caused this turnaround, you reported 16.9 crore of losses?


A: The cost pertaining to that Element K divestment was a big significant contribution. That of course contributed to a large extent. However, the GDP went from 8.4 to 6.5 to 5.4 percent. That 5.4 percent is a prediction. The prediction for next year is 6.1-6.3 percent. So the mainline learning business is linked to sentiments. We are now looking forward to that bottoming out and moving forward.


Q: You are basically referring to your career building solutions, you expect that would turnaround?


A: The others are all growing as you saw but they are smaller percentage. They are growing well. This part in the coming season we expect definitely.  The entire pullback that people had done on hiring will start easing up. The sentiment turns by the time we come into the season. We expect that the mainline long-term career business will turn as well.


Q: There are reports that you have tried to control cost by quite a bit. So, in that how much can one expect EBITDA margins to improve, will they be stable at current levels or is there a scope for improvement?


A: No, we expect an improvement quarter-on-quarter (QoQ) because we have done significant cost containment rationalization on number of locations and so on. However, as I said, the newer businesses are growing. So, we need to build more capacity or use up more capacity. It is for the mainline career that in the coming season we expect things to turnaround. There are some more minor cost containment factors and questions for the next quarter. Maybe after that we expect that utilisation of all the resources and capacity will start building up.


Q: You have a strategy of tying up with a lot of big companies, you have a tie-up with KPMG, Google, the NIIT Imperia then you have a tie up with ICICI Bank for your finance and banking institute, you also have a tie-up with Genpact, what do all this mean to the profit and loss (P&L)?


A: When we were hardcore IT, we had our own software division which is now listed company. So we had the domain knowledge. When we started going into new areas, we needed domain knowledge.


So, ICICI gave us banking which has said in this quarter Goldman have 33 percent. Genpact gave for BPO and with technology companies. This quarter we have announced something very interesting which is digital marketing. With the digital marketing institute of wireless they are the thought-leaders in that area. So, it is all about domain and content specialization because I think the world is moving.


Q: Eventually that will enrich your corporate solutions? Is that what you are saying?


A: Not necessary. So for example, digital marketing, the short-term programmes are for college students of all types. So, that goes into our entry level or mainline career building solutions business.


However, the moment, we get the technology, since the content development capability is common it becomes an offering that goes to all spaces. Another new offer in this quarter, which is doing well, is the financial management programme for commerce students. It is a new offering coming out of banking going into career and that itself has grown upward of 30 percent.



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First Published on Jan 18, 2013 04:02 pm
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