Aptech's impressive profit growth in third quarter is driven by more than 800% jump in other income. Higher contribution from software services to total revenues has led to improvement in margins to 22.6%.
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Aptech’s software business accounts for 28.6% of global revenues as compared to 18.6% in 3QFY00. In the software division web and e-commerce revenues grew by 426% in the quarter and now contribute 45% to total software revenues. This has led to higher operating margins for the company. The company earns operating margins of 33.8% from software business compared to 24.9% from training business. The company plans to achieve revenues of $100 m by 2002 from software division (accounting for 50% of its business). Its focus on e-commerce and knowledge management is expected to drive its future revenue growth in software division.
During the year Aptech has started several new portals which include BConnectB.com, TringTring and onlinevarsity.com. The company has added a record 27 new clients during the quarter which include blue chip firms like Reed in Europe and CISCO in the US. Its 48% of revenues come from repeat business. With good performances on all fronts and a well set management team in place in India and abroad, Aptech could achieve its target of becoming Rs 10 bn company by year 2002.
At the current market price of Rs 350 Aptech is trading at a P/E multiple of 10 times its 3QFY01 annualised earnings. The company's lower valuations compared to its peers (NIIT and SSI) are due to several reasons. Firstly the training business contribute more than 70% of its business, secondly employee attrition rate is higher (17%) and the company's margins are comparatively lower in software business. Aptech's future valuations depend on its ability to move up the software value chain and maintain the growth rate in training business by introducing new courses.
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