In an interview with CNBC-TV18, Rajendra S Pawar, Chairman of NIIT discusses the restructuring that the company underwent last year and its future plans.
NIIT is focusing on turnover in its skill and career business this year, Rajendra S Pawar, Chairman of NIIT told CNBC-TV18.
For FY15, the company reported profit margin of 3 percent on quarterly basis and 5 percent on yearly basis at the earnings before interests, taxes, depreciation and amortization (EBITDA) level.
“We have done major restructuring to make sure that we are ready to deal with more asset light businesses, more technology-based delivery models and more growth-oriented centers,” Pawar said.
As a part of restructuring, Pawar said, it reduced center capacity by 30 percent and learning center space by 15 percent. Contribution to school and government business was also brought down considerably.
The company also saw a 51 percent growth in corporate learning business.
For FY16, focus is to maintain stable growth in corporate learning and positive growth in skill and career business.
Below is the edited transcript of Rajendra S Pawar's interview with Nigel D'Souza and Sumaira Abidi on CNBC-TV18.
Nigel: There were a couple of one-offs. Excluding those one-offs, could you give us what are your margins for this particular quarter and what is the outlook going ahead?
A: Margins are 3 percent at EBITDA level for the quarter and for the year, 5 percent. But the significant news of the quarter is regarding the major transformation, which if you recall we had started talking about it in September. The whole court process, exercise is now complete and we are pretty much starting the year as a much more lean and fit for growth company.
The idea has been that we have looked at all our businesses, we looked at the geographies at our location and the picture now is that a corporate business, which is across 51 percent and more than half our business is going well. That is on a good track record and continues to grow well and has good margins.
Our real transformation was happening for the India-China business, the skills and career business, which is now little less than half our business. Here, what we have done is we have taken stock of those geographies, developing countries, which have not been yielding results, some parts of Africa, some parts of China and then looking at some of the products, which are challenged to have outlived their lives. We have done a major restructuring and reorganization to make sure that we are getting ready to deal with more asset light businesses, more technology based delivery models and more growth oriented centers.
We had talked about reducing our emphasis on the schools and government business, which is now coming down quite steadily and in fact, in the restructuring that we have done, we put that into a subsidiary, so that if it has to grow on its own attract technology and capital and it is easier to do.
We are sharply focused now on the corporate learning business to accelerate it; it is doing well and for the career business to now take the benefit of the transformation, which had been to make it much more fit for growth.
So we have consolidated and reduced our centre capacity, for example by 30 percent, we have produced the physical space that was delivery of our own learning centre by almost 15 percent.
In a sense the team and more important news is that our CEO designate who came on board when we were starting the transformation process last year about six months ago, Rahul Patvardhan. From Wednesday, he takes over as the new CEO and is all set to go and get growth back in the corporate business. The overall the company’s performance starts getting back to the kind of growth level we have had in the past.
Sumaira: With this new asset-like model that you have what are the kind of margins that you would target say in FY16 itself and also if there is sort of internal target that you have for FY17?
A: This year and even the year that just got over, the corporate learning business has done well. We will continue on the same pace of growth, same kind of margins and that has roughly become now 51 percent of our total business. So, that part is stable and we are saying we need to accelerate there.
The challenge part of the business given the economy and given everything else was the skills and career business which has contributed to a loss. I think there the direction is to get growth back and get it into positive. I think that is the directional change which the new CEO is charged with doing.
So, we have to get back to growth because that is very linked to the state of the economy, jobs and IT jobs for example. So, in the skills and career business, our goal is to get it back to growth after a couple of years as you know of deceleration in that segment and that has contributed to a part of the loss. The other goal, therefore, is to make it profitable in this year. So, these are really the strategic directions that our new leadership is challenged with.
Nigel: With regards to going ahead as well you were telling us that you are going through that entire transformation phase, etc. Give us some guidance for FY16?
A: As I mentioned, half the business is corporate. It has gone well in terms of growth. We expect the same growth rate to continue with similar profitability. In the skills and career building business, which has been de-growing for the last few years, we expect that to get into growth and we expect that to have positive margins.
So, overall it should give because of these two changes. One is that the corporate learning business continues at a growth level and second, is that the skills business comes back to growth. We should expect an overall improvement both, on the topline growth levels as well as on profitability.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.