NIIT is to venture into the training of the entrepreneurs who have the ideas to start a dot.com company. The company would also provide the infrastructure and technology to help the project get started and then provide access to venture capitalists.
NIIT derives 50% of its business from training and the balance from software development. The company has around 114 centres of its own and around 890 centres of franchisees within the country.
The operating margins in the company’s training business were under pressure last year due a slowdown in the training business and the preference of the market for shorter training courses (unlike the company’s offerings of predominantly longer courses such as the GNIIT). In the latest quarter however, the slide in the training margins seem to have arrested.
The new course that NIIT plans to offer seems designed to cater to the market need for basic training in setting up an internet business as well the need for a shorter duration course. Obviously, if the company feels that the business plan that the entrepreneur has designed makes sense it could take a stake in the new company itself apart from the normal fees for the training it would provide.
Besides, with over 1000 centres already in place the scope of expansion for the company’s centres seems to be limited. Hence the need to venture into higher value added courses, which could give a much higher return to the company.
Most analysts have rated NIIT as buy primarily due to its impressive growth of revenues from software development. The training business provides the company with a cushion of stable revenues and decent margins.
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