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Thursday, September 10, 2009

NIIT Technologies Ltd:A good buy or a byebye?Future prospects

Scripsccan:NIIT Technologies Ltd

Story:Sluggish demand and foreign exchange hedging loss marred the performance of NIIT Technologies in the March ?09 quarter. It reported a forex loss of Rs 22 crore during the quarter. This resulted in an 8.7% fall in revenue at Rs 227 crore and 14% drop in operating profit to Rs 40.4 crore reckoned year-on-year. Had there been no forex loss, revenue could have been flat, while operating profit could have shot up by 34%.The company''s net profit fell 15% to Rs 26.3 crore. Net margin shrank by 106 basis points to 11.9%. It was much lower at 6.8% in the previous quarter due to substantial hedging loss.NIIT Tech''s banking and financial services segment, which contributes 45% of revenue, suffered a 7% decline on a year-on-year basis due to the crisis in the global financial markets. Revenue from its transport division, which is 28% of sales, remained resilient, while retail distribution income dropped 3% to constitute 13% of revenue.The company added five new clients in the March quarter in the verticals of travel, insurance, and retail worth $46 million. With this, the order book size has reached $97 million or half of the FY09 sales. This is executable in the next 12 months.With falling revenue and profits, NIIT Tech has streamlined its workforce. Its headcount has reduced by 880 to 5,118 at the end of March ?09 compared to the year-ago level. The stock has gained over 300 in the last 6months following the broad-based rally in the stock market. Going ahead, the company is likely to see turbulence and a turnaround it its business may still be a few quarters away.Buy it only at 100 odd,exercise caution at present levels.

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