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NIIT – Aiming to be a global player

May 23, 2000

Emergence of the Internet is causing a fundamental shift in products, markets and technologies. NIIT has anticipated this shift much ahead of time. It is transitioning itself from product company to an e-commerce company. This is likely to benefit the company in several ways. NIIT has shown excellent financial performance for the six-month ended March 2000. The company’s profit after tax grew by 94% to Rs 562.9 m and consolidated total income witnessed an increase of 34% to Rs 5.6 bn over the corresponding previous period. During the same period its operating profit margin increased to 20.8% (from 18.6%) as a result of transformation to software solution business from learning solution. The company’s software solution business consisting of 60% of its total income witnessed an astounding growth of 50% during the first half of FY2000.

NIIT, in a move to become a global player, has increased its exposure to international markets. The company derives 29% of its total income from US. In the first half of the current year, its US business witnessed a jump of 51% to Rs 1.64 bn over the corresponding previous period. As on March 2000, the company had orders of US $68 m with 30 new global clients. America enjoys the share of 60% in the global technology market. The company has plans to increase the income from US business from the present 29% to 60% in the next three years as its main growth area.

NIIT’s move into e-commerce has been very rapid and market with the launch of a number of products. The company’s future business focus will be on technology solutions including e-business, e-learning and e-transformation. Recently the company has tied up with Relativity Technology to fulfil the global demand of e-transformation. It has also developed e-commerce products and components, which includes:

NIITePayServer:
It enables an enterprise to set up an electronic bill presentment and payment system

NIITeMart:
It is a ready to use product that helps create a shopping mall on the web.

NIITePortal :
It helps to create an entry point on the web for surfers.

NIITeService:
It provides a convenient national connect for electronic transformation.

Valuations:
The company has plans to become global player in the area of e-commerce, for the purpose it will develop e-commerce solutions, e-knowledge solutions and e-learning solutions. Today NIIT is the most visible e-commerce solution provider company from India. At the current market price, there is very little downward risk in the business of NIIT.

Comparative Valuations

Particulars NIIT Infosys Satyam
Market Price (Rs) 1,750 5,850 2,676
P/E (x) 47 146 96
Market Cap/Sales (x) 12 38 18

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