Analysis: Improving financials at NIIT Tech

The improved outlook for IT companies is obvious across the sector and NIIT Tech displayed as much in the second quarter results declared on Tuesday. Revenues recovered this quarter to grow by 4% q-o-q to Rs 226.3 crore after falling 8% and 4% sequentially in the previous two quarters. However, it was still down 12.5% yoy. The company recorded a revenue loss of Rs 15.4 crore on account of hedging losses in the second quarter of FY10.

The cost tightening implemented in the interim have helped boost operating margins from around 18% over the last few quarters to 20% this quarter. Capacity utilisation was up 3 percentage points sequentially to 82% and higher margin offshoring revenues were up to 4% y-o-y and 2% q-o-q to 43% of revenue mix.

Net profit margins have also stabilised back to around 12% after dipping to 8% last quarter when the company was hit hard by mark-to-market hedging losses in the first quarter.

The company has seen a fresh order intake of $51 mn in the quarter which was spread almost equally globally across geographies. This takes its executable order book over the next year up $7 mn to $105 mn. The company added three new customers in the quarter – two in the travel segment and one in retail. Travel and insurance are core revenue areas and continue to grow strongly (BFSI revenues up 7% q-o-q and travel up 6% q-o-q) while retail revenues were down 11% q-o-q.

The stock was up 3% in trading today to Rs 130 and is currently trading at 6.4 times FY10 earnings.