NIIT bags order from UK regulator Ofcom, stock sizzles

Leading global IT solutions organisation NIIT Technologies (NIIT) informed stock exchanges on Tuesday that it has been selected as a strategic partner by the UK's communications regulator Ofcom. The value of the contract is GBP 23 million (around Rs 226 crores) over a six year period which includes an initial term of 4 years along with extensions.

NIIT is engaged in application development and maintenance; managed services; cloud computing; and business process outsourcing to organizations in the financial services; insurance; travel; transportation and logistics; manufacturing and distribution; and some government sectors.

NIIT will help Ofcom manage its infrastructure and application systems and offer a customer focused service to improve the user experience of ICT services. Ofcom is the independent regulator and competition authority for the UK communications industries, with responsibilities across television, radio, telecommunications, wireless communications and postal services.

As a strategic partner to Ofcom, NIIT will implement a dedicated service delivery model; and new service management processes and tools. Key services will include the service desk, data centre services, application management and project management. Commenting on the new contract, Satya Samal, EVP and Europe Head, NIIT Technologies stated that, “We are delighted to have been chosen by Ofcom as its strategic outsourcing partner. We are confident that we will be able to deliver value to Ofcom through our strong understanding and proven capabilities in the application and infrastructure management services domain."

On the financial front, NIIT's total revenue from operations increased by 2.93 per cent to Rs 2373 crores in FY15 from Rs 2305 crores in FY14. The EBITDA stood at Rs 336 crores, a decrease of 5.17 per cent from Rs 354 crores in FY14. The EBITDA margin stood at 14.16 per cent as compared to 15.37 per cent in FY14. The decrease in EBITDA is related to the increase in company's employee expenses in FY15. The employee expenses stood at Rs 1341 crores in FY15 which is 56.54 per cent of total revenue of the company. It has increased by 3.74 per cent in comparison to last year.

The net profit stood at Rs 114.07 crores, a decrease of 50.52 per cent from the previous year. The decrease in net profit is due to substantial increase in exceptional item expenses. From zero in FY14 it surged to Rs 80 crores in FY15. After the announcement the stock of the company is trading at Rs 563.80, an increase of 3.78 per cent from previous close.