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Last Updated : Oct 20, 2015 09:31 AM IST | Source: CNBC-TV18

Expect deal wins to pick up in Q3: NIIT Tech

NIIT Technologies has surpasseds analysts' expectations on Friday with second quarter consolidated net profit rising 16.6 percent sequentially to Rs 68.2 crore on strong operational growth.

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Sudhir Chaturvedi, COO, NIIT Technologies in an interview to CNBC-TV18 spoke about what led to the exceptional growth in the second quarter and the outlook going forward.

NIIT Technologies has surpasseds analysts' expectations on Friday with second quarter consolidated net profit rising 16.6 percent sequentially to Rs 68.2 crore on strong operational growth. Consolidated revenue increased by 5.7 percent to Rs 678 crore in the quarter ended September 2015.

Below is the verbatim transcript of Sudhir Chaturvedi's interview with Nigel D'Souza & Sumaira Abidi on CNBC-TV18.

Nigel: Could you run us through your numbers, margins, topline as well as profitability?

A: We had a strong Q2. Revenues were up 15 percent year-on-year (Y-o-Y) and 5.7 percent up sequentially to get to Rs 6,779 million. Our profits expanded by 135 bps to 17.6 percent from the operating margin perspective and our profit after tax (PAT) grew by 70 percent Y-o-Y.

So we have shown significant improvement in all our revenue and margin parameters and most interesting part of our growth is that our international geographies grew at 8 percent. So essentially our strategy of focusing on international geographies is leading to improved revenue growth as well as improved margins.

Sumaira: For a while now we have seen that NIIT Technologies has been facing a lot of issues with some of their top customers, we saw a bit of a turnaround in Q1. Would you go on to say that issues have now been sorted out completely and even on the domestic business front, how are things looking for you now?

A: What we are seeing is broadbased growth across all our customer segments. So in fact, one of the things that we have focused on and we have spoken about in this over the last year is a strategy to focus on acquiring new logos and mining them aggressively. What we are seeing is that our accounts which are from our top 11 to 30 -- the 11to30 accounts for this quarter have gone faster than the top10. So even though the top10 itself grew, we have found that it was outpaced by the growth between the top 11 and 30 and that is pleasing because our growth performance is based across the wider set of accounts and that gives us more predictability going forward.

Nigel: We have been seeing in the past that revenue growth is likely to be driven more by the international growth rather than domestics. So give us those numbers, what was the international growth in this particular quarter and also what is the sustainability of the margins?

A: As I mentioned, our overall international geography growth was 8 percent and in US we grew 6.6 percent. In fact if you see our vertical segments, our Banking, Financial services and Insurance (BFSI) segments grew the fastest at just over 8.3 percent in terms of sequential quarterly growth.

So in terms of looking ahead from our revenue performance, Q3 is traditionally a short quarter in terms of there are more holidays etc, we will see some slowdown in terms of the revenue growth. However, from a margin perspective, the nature of the shift that we are seeing to our international revenues, we will see our margin continue to grow up in the direction that has been in the last three quarters, which is upward direction.

Sumaira: Can you tell us what is your dollar revenue in constant currency growth and why have order inflows been lower sequentially?

A: Our dollar revenue is around USD 104 million and as I said, it is 5.7 percent increase over the previous quarter. In terms of order intake, our order intake was USD 80 million this quarter, which is down from USD 97 million in the previous quarter but what we are seeing is that there are two elements to this. One is that we had three deals, which have flown into the next quarter, so we expect them to close in Q3 instead of Q2.

We are also seeing more revenue growth in our digital business, which is now 15 percent of our business. So the order intake is in line with the revenue growth. So essentially these are smaller projects but there are more of them. We also had one deal loss which we had this quarter. In Q3 we expect the deals that went over to Q3 to materialise and we expect this to pick up in this quarter.

Nigel: Could you give us your attrition numbers for this past quarter, that is one point and the second point you said that digital contributes close to around 15 percent but it is growing well, so what is the growth number on the digital side business?

A: In terms of people numbers, we added 364 people this quarter. So we are up to 9,592 people and our attrition is 13.7 percent, which compares favourably with what the industry average and our own numbers last quarter.

In terms of digital, it is the fastest growing part of our business. So it is growing at a double digit plus growth rate, which is why the share has jumped from 14 percent of revenue to 15 percent of revenue at the same time.

What we are seeing is good traction in the market. We have two sets of offerings, one is on the digital experience side where we saw two of our travel clients go live with their next generation multi-channel experience and on the digital integration side, with our acquired entity which is Incessant Technologies Ltd, where there is significant work where clients are integrating their digital frontends with their legacy backends and we are seeing a significant demand for that service too.

So the two services, one on digital experience and the other on digital integration is leading to a growth in digital services.

Sumaira: If three deals have now been pushed to Q3 then could you give us a sense of what growth in Q3 could look like?

A: All these three deals that moved -- in fact our large deal pipeline currently has six deals that are about USD 20 million and that includes these deals that I have just spoken about.

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First Published on Oct 16, 2015 03:16 pm
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