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Aptech: The abyss gets deeper

Nov 9, 2001

The software education majors continued to post very weak numbers in September quarter due to decline in demand. The companies have been also hit by competition from the unorganised sector. Aptech like SSI and NIIT posted a significant dip in topline and bottomline for its 3QFY02. The company’s topline declined 54% YoY and the net profit figure fell by significant 96%. Aptech earned 95% of its revenues from software education and the remaining part of the revenues came from its software services business. In the corresponding quarter last year the company’s business mix was 88% education and 12% software services. While the education business declined by 50% YoY, the software business declined by 83%. On a sequential basis, the company’s revenues from software have declined by 45%.

(Rs m) 3QFY01 3QFY02 Change
Sales 1,524 698 -54.2%
Other Income 42 33 -20.6%
Expenditure 1,180 670 -43.2%
Operating Profit (EBDIT) 344 28 -91.9%
Operating Profit Margin (%) 22.6% 4.0%  
Interest - -  
Depreciation 85 56 -34.5%
Profit before tax 301 5 -98.3%
Tax 48 0 -98.0%
Profit after Tax/(Loss) 254 5 -95.7%
Net profit margin (%) 16.6% 0.7%  
No. of Shares (eoy) 30.3 30.3  
Diluted Earnings per share* 33.5 0.7  
*(annualised)   75.3  

Aptech’s operating margins declined sharply from nearly 23% in 3QFY01 to a marginal 4% in 3QFY02. However, the company has managed to control its overheads and variable costs like software development and education. These costs heads have declined by almost as much as the dip in revenues. The employee costs for the company have grown by 19% YoY. The company has been looking at separations to align its capacity with demand.

At the current market price of Rs 50, the stock is trading at a P/E multiple of 75 times its 2QFY02 annualised earnings. The high P/E is due to significantly low earnings per share. Aptech’s stock has gained in recent times on hopes of the company’s education division being bought out by another company. If a change of management takes place, the stock might see some upside on back of an open offer, which is to be made based on the last six months average price.


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