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Aptech plays catch-up with NIIT - Views on News from Equitymaster
 
 
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  • Jul 3, 2000

    Aptech plays catch-up with NIIT

    Aptech and NIIT are names synonymous with computer education and training (E & T) in India. The Indian E & T market is growing at a rapid pace. The attractiveness of them market has led to existing companies facing stiff competition from new unorganised players.

    Aptech is already operating the world's largest network of training centres i.e. 1,417 centres in more than 25 countries and holds a vision to take its computer education business to worldwide leadership status by the year 2002. The company plans to become a Rs 10 bn company by that time. After making a dent in the training and education business the company has redefined itís business profile and is now gradually moving towards software solutions business. The contribution from software business has increased in the current year to 15% from 10% in the previous year. On the other hand NIIT has an established software business, which during the first half of the current year contributed around 60% to its total revenue.

    Comparative financial performance
    Particulars NIIT Aptech
    E & T as a % of revenues 55.0% 85.0%
    Growth 30.0% 24.2%
    Software as a % of revenues 45.0% 15.0%
    Growth 50.0% 108.8%

    As can be seen from the table, Aptech has comparatively lower margins than NIIT mainly due to higher contribution from E & T business. Aptechís margins will improve as the company targets niche areas in the software development, which will also lead to higher growth in its bottomline.

    Key ratios
    Particulars NIIT Aptech
    Operating profit margins 33.4% 22.2%
    Net profit margins 24.6% 13.9%
    ROCE 49.4% 29.9%

    Aptech has not received as favourable a market valuation as NIIT mainly due to slow growth rates in its E & T business, lower margins from software business (since one of the focus area is ERP where the margins are low) and lower return on incremental capital employed. However Aptechís unique strategies of online training, international business and focus on e-commerce business will improve its growth rate in future. It would be very important as to what returns the company achieves on these businesses which in turn will decide re-rating in the stock.

    Comparative valuations
    Particulars NIIT Aptech
    Market Price 2,210.4 846.0
    P/E 59.8 41.4

     

     

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