NIIT Tech Sees Strengthening In Order Book

NIIT Technologies announced its Q1FY14 numbers on July 16, 2013. Although the numbers were largely disappointing, the outlook of the company still looks bright.

In Q1FY14, the revenues of NIIT Tech grew by a mere 0.87% sequentially to touch Rs 541.9 crore. The company saw maximum traction in the domestic markets. While it showed signs of recovery in the US, it continued to exhibit weakness in Europe.

On the margins front, the company’s performance was disappointing. For the quarter, its operating profit declined by 11.54% to Rs 78.2 crore, which was primarily on account of the fact that the company announced its annual wage hike. It raised the salaries of its offshore employees by 8% and that of onsite employees by 3%.

NIIT Tech’s net profit declined at a slower rate than its operating profit. This was mainly due to an increase in Other Income, which came in at Rs 20.6 crore on account of revaluation of its foreign currency assets and liabilities. This resulted in a net profit decline of 6.01% to Rs 53.2 crore in Q1.

The profitability has clearly taken a hit. However, its order book stood at USD 290 million for the elapsed quarter, showing a considerable gain compared to the figure of USD 220 million in Q4FY13. The robustness in its order book provides enough reason for a positive outlook on the company.

In recent times, the company has won several big-ticket orders. These include a contract worth Rs 185 crore with the Andhra Pradesh finance department. It also struck a Rs 344 crore deal with the Airports Authority of India for the implementation of airport operations control centres. Revenues from the latter are expected to flow in from the end of the year, adding to the strength of the company.

Although the quarter has seen a decline in profitability, it is important to note that wage hikes make this somewhat of a routine for the first quarter. The company does makes up for the lost margins over the rest of the year. Having looked at the order book and the recent deal wins for NIIT Tech, the outlook definitely seems positive.