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Aptech: Hard hit - Views on News from Equitymaster
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  • Mar 13, 2002

    Aptech: Hard hit

    Erstwhile Aptech Limited that had two revenues streams, training & education and software services, has been de-merged into two separate entities from April 1, 2001. The approval from the High Court came in December 2001. Therefore, financials for the newly formed entities are available only for 4QFY02 and FY02. According to the terms of the demerger, the training and education business has been hived off into a separate entity known as Aptech Training Limited (ATL).

    Aptech Limited (Aptech) is now a software services firm. To boost the size of operations Hexaware Technologies Limited (HTL) has been merged into the company. Aptech Ltd. declared results for the year ended December 2001 (FY02) recently. The topline include 3 months of revenues from training & education and nine months of revenues of HTL. Thus, the numbers are not comparable with the previous years numbers.

    For FY02, Aptech posted net profits of Rs 16 m on a topline of Rs 1,107 m. Of the total revenues, Rs 600 m came from training and education (for January 2001 to March 2001). Therefore, revenues from software services was Rs 507 m. This includes nine moths of revenues of HTL. Aptech is finding going to be very tough in the current business environment. The company reported a loss of Rs 85 m for 4QFY02, on a revenue base of Rs 97 m.

    (Rs m) 4QFY02 FY02
    Sales 97 1,107
    Other Income 4 65
    Expenditure 175 1,007
    Operating Profit (EBDIT) (78) 101
    Operating Profit Margin (%) -80.9% 9.1%
    Interest - -
    Depreciation 18 149
    Profit before Tax (92) 16
    Tax (7) -
    Profit after Tax/(Loss) (85) 16
    Net profit margin (%) -87.5% 1.5%
    Diluted number of shares 22.3 22.3
    Diluted Earnings per share*   0.7

    Meanwhile the newly formed training & education company, ATL, clocked revenue of Rs 626 m for 4QFY02. This is a drop of 32% YoY. The net profits were Rs 2 m, subsequent to a restructuring charge of Rs 32 m. Aptech has 2,436 centres and a presence in 52 countries. The company plans to consolidate its operations in countries like China, Bangladesh, Vietnam, Nigeria & Columbia. China has been a preferred destination for all software education companies in the recent past. NIIT now has about 50 operational centres in the region, while Aptech has about 75 centres and 10,000 students.

    Quarter ended December 2001 Total nos of centres Revenue per centre (Rs)
    NIIT 2,467 297,157
    Aptech 2,436 308,908
    SSI 726 414,686

    ATL is banking on revenues from overseas business for growth. The company earned Rs 211 m in revenues for 4QFY02 from its international business. This according to the company is a 281% growth, YoY. It hopes to increase the revenues from international business by 35% over the next two years.

    Obviously both the revenues streams for the company are showing signs of strain. But what is worrisome is the performance of Aptech in the fourth quarter. Hexaware in FY01 claimed to have revenues of Rs 1,500 m. This translates to quarterly revenues around Rs 375 m. According the company’s presentation on the restructuring exercise the ‘new company’ was to have revenues of US$ 60 m (Rs 2,850 m) in FY00. How much of a hit has the company taken given that the 4QFY02 revenue for Aptech was a mere Rs 96 m?

    Both the new entities, Aptech Limited as well as Aptech Training Limited are currently not being traded on the stock exchanges, owing to the demerger.



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