X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2019 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
NIIT: Software services shine… - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

NIIT: Software services shine…

Oct 27, 2003

NIIT, India’s largest IT education and training company, has reported a 4.5% and 348% rise in its topline and profits, respectively, for 4QFY04. For FY04 (NIIT is a September ending company), while the rise in revenues has been almost similar to 4QFY04, profits have risen by 98%. The substantial gains in profitability were a result of improvement in operating margins as well as tax benefits (deferred tax assets).

The standalone picture...
(Rs m) 4QFY03 4QFY04 Change FY03 FY04 Change
Sales 985 1,029 4.5% 3,499 3,645 4.2%
Other Income 26 43 66.1% 173 170 -1.6%
Expenditure 897 898 0.1% 3,095 3,147 1.7%
Operating Profit (EBDIT) 87 131 49.3% 404 498 23.4%
Operating Profit Margin (%) 8.9% 12.7%   11.5% 13.7%  
Interest 15 19 30.1% 69 61 -11.4%
Depreciation 138 115 -16.7% 460 532 15.6%
Profit before Tax (39) 40   47 75 58.4%
Extraordinary items 14 -   - -  
Tax (38) (19)   (44) (106)  
Profit after Tax/(Loss) 13 59 347.3% 91 181 98.7%
Net profit margin (%) 1.3% 5.7%   2.6% 5.0%  
No. of Shares 38.7 38.7   38.7 38.7  
Diluted Earnings per share* (Rs) 1.4 6.1   2.3 4.7  
P/E Ratio (x)   26.3     34.1  
*annualised            

While that was the standalone picture, the consolidated performance brings out the improved performance of NIIT in a better light. As seen from the table below, better performance in the major segments of education and IT services have helped NIIT to post a 16% rise in its consolidated topline for FY04. However, the product distribution and systems integration (PD & SI) division of the company continues to fare dismally and, in FY04, witnessed a decline of 42% YoY. The operating margin of the consolidated entity however seems to have dipped on account of fall in margins of the education business.

The consolidated picture...
Rs m FY03 FY04 Change
Education 2,232 2,363 5.9%
IT services 3,971 4,998 25.9%
PD & SI 337 195 -42.1%
Total Revenues 6,540 7,556 15.5%
Operating profit 753 804 6.8%
OPM (%) 11.5% 10.6%  
Profit/(Loss) after Tax (193) 39  
Net profit margin (%) -3.0% 0.5%  

Education business

While this segment saw an improved performance on the topline front for FY04, NIIT’s continued investments in expanding its global reach (especially into China) resulted in operating margins for this segment to decline by about 300 basis points. The company ‘s international centres have increased from 241 at the end of FY03 to 277 at present, and the result can be seen in the 77% YoY growth of its international education business revenues. However, the rationalisation of training centers within the country has resulted into the total number of centers declining from 2,447 in FY03 to 2,151 in FY04.

On the students’ enrolement front, NIIT has been able to reduce the pressure that was witnessed in 2QFY04 and 3QFY04. However, due to increasing competition, average realizations have dipped further in 4QFY04. In FY04, the education segment has also witnessed an increase in contribution from short-term courses (like Futurz and Swift). NIIT, however, faces tremendous competition from local institutes that are able to offer similar short-term courses at comparatively lesser prices. Thus, the imperative for NIIT is to offer specialized courses (like CATS and DNIIT) that cater to the higher end of technology spectrum.

Software business

This segment, which now contributes to around 66% (61% in FY03) of NIIT’s consolidated revenues, has played an important role in the overall growth of the company in FY04. Reduced pressure on billing rates and increased order intakes has helped NIIT to post good performance for this segment. Also, the company has been able to maintain margins for this segment at the FY03 levels of 19%. The company can also take comfort from the fact that its pending order book at the end of FY04 stands at US$ 126 m (about 76% of FY04 revenues). Just in 4QFY04, this segment witnessed a fresh order intake of US$ 42 m that included US$ 20 m from the insurance vertical alone.

At the current price of Rs 159, the stock is trading at a P/E multiple of 34.1 its FY04 standalone earnings. Considering the fact that there still remains the uncertainty regarding the improvement in global IT education spending and also that the average P/E (18x-19x) for the Indian software sector is at much lower levels, NIIT’s stock price seems highly overstretched. However, the company, which has been one of the hardest hit in the slowdown, is trying to restructure its business. As a part of this strategy, NIIT is planning to de-merge its software solutions business into a separate company and reorganize the education business. What implications does this restructuring have on NIIT’s growth prospects are yet to be seen. Investors should, thus, practice caution.


Equitymaster requests your view! Post a comment on "NIIT: Software services shine…". Click here!

  

More Views on News

NIIT LTD 2017-18 Annual Report Analysis (Annual Result Update)

Mar 15, 2019 | Updated on Mar 15, 2019

Here's an analysis of the annual report of NIIT LTD for 2017-18. It includes a full income statement, balance sheet and cash flow analysis of NIIT LTD. Also includes updates on the valuation of NIIT LTD.

NIIT LTD Announces Quarterly Results (3QFY19); Net Profit Down 11.3% (Quarterly Result Update)

Jan 24, 2019 | Updated on Jan 24, 2019

For the quarter ended December 2018, NIIT LTD has posted a net profit of Rs 36 m (down 11.3% YoY). Sales on the other hand came in at Rs 2 bn (up 151.7% YoY). Read on for a complete analysis of NIIT LTD's quarterly results.

NIIT LTD Announces Quarterly Results (2QFY19); Net Profit Up 137.3% (Quarterly Result Update)

Nov 9, 2018 | Updated on Nov 9, 2018

For the quarter ended September 2018, NIIT LTD has posted a net profit of Rs 261 m (up 137.3% YoY). Sales on the other hand came in at Rs 2 bn (up 153.2% YoY). Read on for a complete analysis of NIIT LTD's quarterly results.

Newgen Software Technologies Ltd. (IPO)

Jan 15, 2018

Should you subscribe to the IPO of Newgen Software Ltd?

Ankit Shah's First Five Insider Recommendations (The 5 Minute Wrapup)

Aug 5, 2017

How to get exclusive insider recommendations from Ankit Shah.

More Views on News

Most Popular

This is Why the Stock of Jubilant FoodWorks Went Up 1,160%(The 5 Minute Wrapup)

Apr 12, 2019

This critical business strategy has enabled companies to scale their operations faster.

Pocketing Massive Gains with HDFC And HDFC Bank(Profit Hunter)

Apr 12, 2019

Here's how one could have generated gains of Rs 59,250 in 10 days by trading HDFC and HDFC Bank with a capital of Rs 4 lakh.

My Master Series on How to Trade Election 2019(Profit Hunter)

Apr 16, 2019

For 30 years he has watched how elections impact the markets, and practiced how to profit from it. Now he is here...telling you everything. Read on...

Election Series: Follow the World's Biggest Traders To See Where the Money Flows(The 5 Minute Wrapup)

Apr 17, 2019

20% of all the traders bring in 80% of the money. Watch these 20% and you get a working idea of which way the wind is blowing.

A Letter to You from India's No. 1 Trader(The 5 Minute Wrapup)

Apr 15, 2019

It's our great pleasure to introduce Vijay Bhambwani to our readers - we consider Vijay to be India's best trader. Read on to find out why...

More

Get the Indian Stock Market's
Most Profitable Ideas

How To Beat Sensex Guide 2019
Get our special report, How to Beat Sensex Nearly 3X Now!
We will never sell or rent your email id.
Please read our Terms

NIIT LTD SHARE PRICE


Apr 25, 2019 (Close)

TRACK NIIT LTD

  • Track your investment in NIIT LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

NIIT LTD 8-QTR ANALYSIS

COMPARE NIIT LTD WITH

MARKET STATS