NIIT: Finding a Realistic Level



NIIT is a
leading player in
the software services and
software education business. The company reported revenues of Rs 217.03 crore in
the second quarter ended March 2001, which were up 3% over the corresponding
previous quarter. Its global revenues were flat at Rs 351.82 crore in the second
quarter compared to Rs 353.74 crore in the same period last year.

In the software services segment, NIIT focuses on
professional services, legacy, customized software development, engineering
services and software integration (SI) and product distribution (PD). In this
quarter, NIIT’s
global revenues stood at
Rs 192.30 crore, up 13% over the first quarter. NIIT plans to reduce its focus
on SI and PD business, which is largely a high volume-low margin business.
Revenues from SI and PD were down to 36% of the software revenues in the second
quarter as against 56% last year. NIIT added 28 new customers, which include ING
and Channel 4 TV, UK. NIIT’s other clients include British Airways, Deutsche
Bank, ING, Microsoft and Toshiba.

In the IT education segment, NIIT offers courses through its
key brands namely Swift, Cats and Futurz. Among these, Futurz is the leading
course contributing 69% of the total revenues in the second quarter. The courses
offered through Futurz includes iGNIIT, a 4-year comprehensive program. NIIT
added 155 centers during the second quarter taking its total number of centers
to 2,228, which include 108 international centers. NIIT’s global education
revenues in the second quarter stood at Rs 159.50 crore, up 20% over the first
quarter and 26% over second quarter last year.

Financials

(All figures in Rs crore)

 199920002001*2002*
Revenues581.32749.94772.44911.48
Other
Income
1.4319.0220.0022
Operating
Profit
195.45273.88234.44293.48
OPM
(%)
33.3833.9827.7629.78
Net
Profit
142.81224.13184.69243.73
Equity38.6538.6538.6538.65
EPS (Rs)36.9457.9947.7863.06

#Projected

Year ended September 30

NIIT is currently traded at
Rs 446 discounting its projected September 2001 earnings by nine times and
September 2002 earnings only seven times. The US slowdown has had a major impact
on the company’s business. NIIT expects its services business to grow at about
20% in the current fiscal. Moreover, the company expects the education segment
to perform poorly, which is a fall-out of the retrenchments and recruitment
freeze by IT companies. The company expects more than 30% fall in the operating
profit in the current year due to the slowdown. NIIT’s share price has
declined substantially over the past three months and a further fall from
current levels seems unlikely. However, we do not expect major surge from the
current level in the immediate term. Market performer.

Sushanto Mitra is the founder of Technology Capital Partners

The views reflected here are of the author and not of
this publication. No liability is accepted for losses based on the information
presented here

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