NIIT Technologies held a conference call to discuss the quarter results ended December 2008 and future prospects. Arvind Thakur, CEO, addressed the call.
Highlights of the call
- For the third quarter ended December 2008, NTL reported 4% de-growth in operating revenues at Rs 248.50 crore with operating margins up 30bps at 18%. Other Income turned loss of Rs 10.10 crore against Rs 8.10 crore in the sequential quarter and depreciation charge was up 3% at Rs 10.70 crore and tax charge was up 6% at Rs 6.90 crore and the resultant PAT after minority interest crashed 54% at Rs 16.80 crore.
- For the quarter, the volume dip was 4%.
- Hedging loss of Rs 18.90 crore impacted the revenues and translation losses recorded in other income was Rs 13.9 crore. In the sequential quarter, hedging loss was Rs 8.5 crore impacting revenues and forex gain in other income of Rs 5.6 crore.
- Utilizations for the quarter was up at 84.5% against 81% in the sequential quarter and 77% in June 2008 quarter. The utilization has peaked with about 100bps improvement.
- Room Solutions reported revenues of Rs 30.1 crore against Rs 32.6 crore over the sequential quarter with OPM was down of 18% against 22% in the sequential quarter. The dip in revenues is mainly due to GBP depreciation against US dollar.
- The Hedging position is US$ 221 million at Rs 41.51/US$ for 30 months against US$ 242 million at Rs 41.27/US$ for 27 months at the end of sequential quarter.
- MTM losses standing in the balance sheet at end December 2008 was Rs 155 crore up from Rs 118.7 crore in the sequential quarter.
- Capex spent on campus was Rs 13.6 crore, Rs 7.5 crore towards Noida facility and balance Rs 8 crore on other projects. The Company would shift to SEZ facility in FY2010. The construction would end by March – April 2009. For Q4FY09, capex is Rs 40 crore of which Rs 30 crore towards campus. Another Rs 20-30 crore would be incurred on the campus in FY10.
- During the quarter the Company granted a loan of Rs 10 crore (total loan outstanding as on December 31, 2008 Rs 20 crore) at 12% p.a. to NIITian Welfare Trust, which has been formed for the purpose of providing welfare benefits to the employees of the Company and that of NIIT Ltd and their subsidiaries. The trust has primarily invested the amount borrowed in equity shares of the Company and that of NIIT Ltd. Based on the closing price of shares as at January 13, 2009, there is a deficit of Rs 9.43 crore in the Trust. Considering the present economic scenario and capital market volatility, the Company has not taken the provision for the same.
- Top 5 clients contribution dipped to 33% (34% in the sequential quarter), top 10 clients contributed 13% (12% in the sequential quarter), top 10 clients contributed 16% (14% in the sequential quarter)
- Non-linear business contributed 25% same in the sequential quarter.
- Onsite efforts for the quarter were down 100bps at 22%. Offshore contribution to revenues improved 200bps at 41%.
- For the quarter, Insurance contributed 27% same as in the sequential quarter, BFS 16% against 15% in sequential quarter, Travel & Transportation 27% (28% in sequential quarter) and manufacturing & Retail contributed 14% (13% in sequential quarter).
- The million dollar customers have remained stagnant at 42 in Q3FY09. NTL added 2 new clients during the quarter one each in Transportation and Insurance.
- The order intake during the quarter at US$ 148 million with order book executable in the next 12 months stands at US$ 99 million. Order intake from Rooms was US$ 6 million.
- The DSOs at the end of the quarter were down at 74 days against 80 days in the sequential quarter.
- NTL reduced 229 employees in Solutions: 43 in BPO and 188 in IT services during the quarter, taking the total number of employees engaged at the end of the quarter to 4438.
- The tax rate for FY09 would be 15%. The effective tax rate was at 28.9% due to shift of investment from mutual funds to fixed deposits.
- Cash & Cash equivalents were to the tune of Rs 149.9 crore and the company has availed of a term loan of Rs 49.8 crore.
- For the quarter, EMEA contributed 47% (50% in sequential quarter), Americas 36% (31% in sequential quarter), APAC 9% (9% in sequential quarter) and India 8% (10% in sequential quarter).
- The management expects enormous pricing pressures going forward. But for the company has got some pricing increases on renewals on the back of value propositions and higher offshoring. New business would see pricing pressure.