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Last Updated : May 06, 2016 03:55 PM IST | Source: CNBC-TV18

Margins improved due to change in business mix: NIIT Tech

NIIT Technologies posted a healthy set of fourth quarter numbers with fourth quarter revenues rising 12 percent to Rs 684.7 crore and it swung to a profit of Rs 79 crore from a loss last year.

NIIT Technologies posted a healthy set of fourth quarter numbers with fourth quarter revenues rising 12 percent to Rs 684.7 crore and it swung to a profit of Rs 79 crore from a loss last year.

In an interview with CNBC-TV18, the company's Joint MD and CEO Arvind Thakur said its business mix had undergone a change and this had shown up in its improving margins.

"We have moved more of our business to international geographies and expanded our business in the digital services space," he said.

Below is the verbatim transcript of Arvind Thakur's interview with Nigel D'Souza & Surabhi Upadhyay on CNBC-TV18

Nigel: Let us start off with the biggest positive of your numbers – margins at around 18.4 percent those are looking quite good. What brought about that are they sustainable going ahead?

A: Yes, indeed you would have seen that our margins have been improving steadily through the year in every quarter and this is basically on account of the mix that we have changed in our business moving more of our business to international geographies particularly to the US and expanding our business in the digital services space. So, these are been contributing to the margin expansion in the company and that also extends into the fourth quarter of this year.

Surabhi: What about topline growth? Dollar revenue has shown a bit of a contraction by when do you think that you will start seeing traction at the headline number itself and what is the deal pipeline been like this quarter and what is the outlook on the pipeline?

A: We have had very good intake of new business, USD 120 million of fresh intake is what we have seen in this quarter. It was USD 123 million in the last quarter. If you look at quarter one and quarter two they have been typically between USD 80-90 million in both these quarters. So, quite obviously we are seeing a good momentum in new business and particularly large deals. This quarter also we have secured large business from an insurance client in Europe which is a total outsourcing deal.

We secured a new logo in the US which is also a multimillion dollar engagement with another insurance client. So, we think very good traction particularly in the BFSI space in our business. We hope to see all these the new large deals as well as the enhanced intake that we have been seeing in the last two quarters expand our revenues in the quarters to come.

Nigel: You were just telling us that it was at around USD 80-90 million approximately. Now it is around USD 120 can you better that and also could you tell us what is your executable order book as of now?

A: Our executable order book over the next 12 months is USD 301 million and looking at the deal pipeline of course it all depends upon closures, we hope to maintain and sustain these kinds of level in the quarters going forward.

Surabhi: On margins just to go back 18.4 percent is that a sustainable level where NIIT Tech is at and how were the pricing levers working for you at this point?

A: In the first quarter of every year when we do the wage hikes margins tend to get impacted by 200-220 basis points. However, then they gradually start picking up again towards the end of the year the exit margins become much better. I would say if you look at overall for the year our margins have been 17.6 percent we hope to better that in the next financial year.

Surabhi: When you say better that by how much or some sense, not a specific number but on a yearly level you are looking at improving margins? What sort of improvements should we expect and you mentioned the wage hikes which are impending and that impact will flow through in the subsequent quarter so should the street be prepared for the usual 200-220 basis points hit because of the wage hike?

A: Yes, that is what I just mentioned. There would definitely be that kind of impact as a result of the wage hike. When I say improved margins are going forward again looking at our history and the way margins have been expanding over the last two quarters I think you can expect 20-30 basis points improvement over the existing annual operating margin that we have seen.

Nigel: Need to probe more on the revenue contraction. Going ahead what kind of revenues can be seen? Can we see a growth coming in what kind of growth can be abreast ourselves for?

A: Our intake is very healthy and revenues are derivative of intake, so pipeline is also healthy so you can hope to see growth going forward. Since, we have seen now steadily for two quarters at least very good intake in the business that is going to get translate into revenues going forward.

Surabhi: In terms of the break up while BFSI has really pulled back very smartly for you this quarter can you give us an outlook about the other segments whether it is travel, whether it is manufacturing whether there has been a minor contraction this time around as well. What about the other segments?

A: We have grown on the strength of BFSI; travel has been somewhat subdued for us during the quarter. So, we hope to see that recover very significantly in the next financial year and add to the growth trajectory of the organisation.

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First Published on May 6, 2016 03:16 pm
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