NIIT Tech net profit drops 7.5% year on year

Weighed down by an one time dividend tax pay out and impact of wage hikes, mid tier software services firm NIIT Technologies Ltd announced a 7.5% drop in its net profit at Rs.53.2 crore for the March quarter of the financial year 2013-14 compared to the same quarter last year. The company's revenues were up 15.4% year-on-year and 0.9% sequentially to Rs.541.9 crore.

Despite a flat volume growth during the quarter, the company’s management is upbeat about the current demand scenario with a strong recovery in its largest market of the US in sight. “The first quarter of the financial year is historically a soft one for us,” said NIIT’s chief executive Arvind Thakur. He added that however, the company is seeing an uptick in the US market, with a strong recovery in the domestic demand even as the demand in Europe continues to be challenging.

While the US market contributes around 39% to the company’s revenues, around 35% comes from Europe and the Middle East region with India contributing almost 13% to the company’s topline.

Rajendra S Pawar, chairman of NIIT Technologies said that the company has an order book of $145 million in the current quarter which is the highest it has seen in the last four quarters.

For the March quarter, the company’s operating margin was at 14.4% negatively impacted by 202 basis points due to the wage hikes doled out in the April. The company also paid Rs.5.4 crore of dividend tax for repatriation of dividend from overseas subsidiaries during the quarter which contributed to the net profit decline. “This one-time opportunity was available during the quarter to offset taxes from dividend distribution tax payable for FY2013,” the company said in a statement.

On Friday, Infosys Ltd reported better than expected financials for March quarter and a robust volume growth of 4.1%, which has upped the expectations for the entire sector. In the quarter ended June 30, the company reported 3.7% growth in net profit, at Rs 2,374 crore, compared with the corresponding quarter last year, though it saw a sequential decline of 0.8%. Revenue at Rs 11,267 crore was an increase of 17.2% on a year-on-year basis. Infosys added 66 clients during the quarter, one of the best performances in recent years.

While Infosys’ larger rival Tata Consultancy Services (TCS) will announce its results on July 19, its smaller rivals Wipro and HCL will present their numbers towards end of July.