NIIT Tech Q1 adj profit dips to Rs 58.5 cr, revenue up 4.9%

Revenue during the same period grew by 4.9 percent sequentially to Rs 641.1 crore.

“The quarter witnessed robust 8.9 percent sequential growth in international geographies which helped maintain operating margins at 16.3 percent despite wage hikes” said Arvind Thakur, CEO and Joint MD, NIIT Technologies.

Operating profit increased to Rs 104.2 crore in the quarter ended June 2015 from Rs 99.7 crore in March quarter and margin remained unchanged at 16.3 percent.

Order intake during the quarter was USD 97 million resulting in USD 300 million of order book executable over the next 12 months. order intake during March quarter was USD 89 million.

“With the integration of Incessant, the company acquired 15 new significant clients”, said Sudhir Chaturvedi, COO, NIIT Technologies.

Business in the US grew 7.7 percent sequentially contributing to 45 percent of overall revenues during the quarter. EMEA grew by 4.7 percent contributing to 35 percent of the mix, and the revenue share from APAC and India stood at 20 percent.

Among industry segments, BFSI grew 15.2 percent sequentially due to growth in new insurance accounts and integration of Incessant, said the company in its filing. BFSI now contributed to 36 percent of total revenues, travel and transportation to 37 percent, manufacturing/distribution to 6 percent and government to 5 percent of the revenue mix.

Attrition rate declined significantly to 14.3 percent in June quarter from 15.75 percent in March quarter.

At 13:07 hours IST, the scrip of NIIT Technologies was quoting at Rs 441.15, up Rs 23.85, or 5.72 percent on the BSE.

Below is the edited transcript of Arvind Thakur’s interview with Surabhi Upadhyay and Reema Tendulkar on CNBC-TV18.

Surabhi: You are looking at a revenue growth of almost 4.9 percent rounded off to about 5 percent in the quarter. How would you describe the demand environment?

A: I think demand environment is very good. We have seen very strong growth in our international geographies. In fact our international geographies have grown 8.9 percent during the quarter. So, that is a healthy growth coming in from business.

Overseas, we have seen strong growth in the US in particular. 7.7 percent sequential growth took place in the US. Also, in the European region the growth was to the tune of about 4.7 percent quarter-on-quarter (QoQ). So, all-in-all I think good in terms of the demand environment.

Surabhi: How much of this growth on the topline is a function of just mere volume growth or you actually commanding better pricing as well, if you could just take us through how those levers are shaping up at the operational level?

A: We have not really experienced any pricing pressure as such. This growth is coming on back of some new accounts which we have acquired in the last half of the last financial year particularly in the insurance phase; they have scaled up extremely well. We have also seen our international travel accounts which have scaled up well so by and large this growth is based on volumes.

Surabhi: While your overseas geographies are doing very well, the domestic business has seen some pressure this time around. Is that a worry for you?

A: In fact that is a stated direction for the company. We want to reduce our dependence on the government business which we have been doing in the past. So this quarter we have seen number of our large programs going live and therefore you see reduced revenues from the domestic business.

Also, there is a specialised area of business that we engage in which is around geographical information system, GIS, which is again seasonally small in the first quarter because most of the government spending around this technology happens in the fourth quarter of the last year.

Reema: What was the contribution of Incessant Technology to your topline this quarter?

A: If I remove Incessant, then our growth in the quarter would have been 1.3 percent sequentially.

Reema: Considering that Incessant has performed very smartly what would be the growth we can expect from Incessant Technology in FY16?

A: Incessant has been growing extremely well in fact if I look at Incessant’s growth, sequentially it has been in double digits. We expect that to continue throughout the year.

Reema: The other heartening feature about your performance this quarter has been on margins. You have managed to maintain it despite the negative pressure because of wage hikes. First, what was the quantum of pressure because of wage hikes and visa cost on your margins and how will you be able to offset it? What were the productivity gains?

A: The wage increases would have depressed margins by about 200 basis points. However, this has been offset by increased revenues from our international geographies which have better margins than our domestic business. Also, Incessant is accretive in its margins and they have also contributed to the margin improvement.

Reema: What are the margins of international geographies as well as Incessant?

A: I don’t specifically have the margins of these entities.