Expect FY14 to witness better Y-o-Y revenue growth: NIIT

Vijay Thadani, CEO, NIIT expects to retain margins at current levels through aggressive cost management and expects to see better Year-on-Year revenue growth for FY14.

Amongst their four businesses that is school business, corporate learning solutions, banking and financial services and management development programs, their corporate learning solution did the best with a growth of 32 percent Y-o-Y, says Thadani. They are downsizing the government part of their school business but private school business is growing. The non-government business is now 59 percent versus 51 percent earlier.
On the banking and financial services side their non IT services grew at 43 percent on a Y-o-Y basis for the same quarter. Consolidated revenues of the company fell 6 percent to Rs 262.4 crore in September quarter from Rs 279.1 crore in a year ago period. However, second quarter's (July-September) consolidated net profit grew 3.45 percent year-on-year to Rs 12 crore. Below is the verbatim transcript of his interview on CNBC-TV18 Q: What is disappointing the street is that yet another quarter has gone by where your revenues have de-grown. In this quarter it has fallen by 6 percent on a year on year basis – could you tell us how long this revenue de-growth will continue and what is your expectation for FY14 on the top-line?
A: First of all to put the numbers in perspective, the de-growth is not 6 percent because there was some pass through revenue in the last year same quarter which had been shared. So, on a like to like basis the revenues are nearly at the same level but minus one percent to be technically correct.
Second, the margins too are at the same level with a very small reduction. So at the same revenue, with a high exchange rate and inflation built in, I think aggressive cost management has helped us retain the margin.
The net profit is at a little higher level than last year. What has contributed to this is the fact that the organisation is going through a transition. We have deemphasized government school business very substantially. One of the reasons one does see the revenues the way it is, is because we completed a contract of 2005 schools in southern state which would have obviously contributed to higher revenues if we had continued with that business. This was a planned closure of the contract. It was a 5-year contract, completed successfully but it will release a lot of capital in our balance sheet as it is visible from our depreciation which has reduced by 20 percent on a year on year basis.
So release of capital and coming out of these high capital intensive, low margin projects from the government is a planned step and that is one transition which we are managing.
The second transition is environment. In Nasscom projections, the number of IT hiring is reduced but on the other hand given our strong portfolio of businesses, we have been able cushion a part of that impact by a much higher growth in banking and financial services where our non-IT revenues actually have grown 43 percent on a year on year basis for the same quarter. Q: For FY14 then what could we expect with respect to your revenue growth given that the transition is going to pan out even for the rest of the two quarters which will keep your top-line subdued or for the full year is the company likely to see some growth?
A: I think for the year the company should see some growth over last year. These are difficult and volatile times for the environment, so very difficult to predict.
We know at this point of time definitely there should be some growth.  However, the growth in education and training driven business would be a small growth. Q: It will be in the zero to five percent mark, closer to that?
A: Yes; something like that. It is Very difficult to say but I am sure with your best wishes we could do that and better. Q: Could you tell us in your various segments how have you done the school learning, individual learning, your corporate learning solutions - could you tell us which were these segments which did well in terms of growth percentages and which ones were under pressure?
A: Corporate learning solution did the best. We grew 32 percent year on year. We improved our margin from 12 percent to 13 percent. We got some benefit of a favourable exchange rate as far as the top-line is concerned but even in volume terms our growth was 14 percent, which is very good. We have 17 marquee clients. We have a very strong revenue visibility and that business has done exceedingly well.
Schools business as I mentioned, is going through a transition because the government part of the business is downsizing. The private schools are growing, so our non government part of the business is now 59 percent versus 51 percent last year. It would be mixed results, if one totals up the two but the non government part. We are replacing thousands of schools in one order to one school at a time in multiple orders, is a transition which is being managed.
In our individual segment we have banking and financial services training which is doing very well as well as management development programs. Q: Last year your pre-minority if one takes a look at the profitability, the company had reported a loss of Rs 25 crore – what will it be for this year? For FY14 also will it be a loss if I exclude the money that you get from your Minority subsidiary?
A: I think what one has to get in the correct term is the total profit that we get out of NIIT because the investment is an important part of the NIIT’s performance and therefore when we are measuring return on capital etc then we have to measure the total.
At a net profit basis we have moved from Rs 116 to 120 million this year. We do believe that by the end of the year we should see an improvement over last year.