NIIT Q2 net expected to grow by 11-25%

NEW DELHI: NIIT Ltd. is expected to report on Thursday a sharp slowdown in earnings growth for the January-March quarter. NIIT, which will announce its second-quarter results before market hours on April 19, warned of the slowdown in March. "NIIT's net profit for the quarter is likely to rise 10.96 per cent (over the year-ago quarter) to Rs 408 million ($8.7 million). Net sales could grow 24.82 per cent at Rs 2.62 billion," said analyst Chetan Shah with DBS Securities.

In the previous October-December quarter, net profit increased 61 per cent from a year earlier, on a 26.5 per cent rise in sales. NIIT is India's largest computer education firm. By the end last December, it had more than 2,073 centres located in India and abroad, and it adds around 500 such centres each year. Shah said NIIT added around 166 education centres during the January-March quarter.

A Reuters poll of 12 brokerages found net profit for the January-March quarter rose 25.39 per cent from a year earlier to Rs 461.07 million. Sales were estimated to have increased 21.09 per cent to Rs 2.542 billion.

Net profit on a running quarter basis is expected to rise on an average by 54.57 per cent and net sales by 63.17 per cent. NIIT became the first large Indian software company to issue a profit warning when it said in March it expected its second-quarter revenue to be $7 million less than previously forecast. It attributed the fall to the merger of two clients and a delay in new orders by others.

Priya Rohira, a software analyst with Pranav Securities, said NIIT's net profit is unlikely to jump in the next two quarters because of the earnings warning issued by NIIT on its software solutions business. NIIT develops software for clients such as British Airways , Microsoft and Unilever Singapore.

In the October-December quarter, revenue from this division surged 54 per cent from a year earlier, while revenue from its education division shot up 35 per cent. "I expect only a 15-20 per cent growth in NIIT's software business on a yearly basis. Also, the revenue generated on a per client basis is small for NIIT compared to its peers," an analyst at one foreign brokerage told Reuters.

The analyst, who did not want to be named, said his expectations of NIIT's net profit and net sales were flat as the company was phasing out on a lot of system integration work which generated a large chunk of revenue.

Stock price movement

NIIT closed 6.19 per cent higher at Rs 492.75 on Tuesday, while the 30-share benchmark index was up 1.87 per cent. All analysts were unanimous in saying NIIT looked attractive at current levels as it had come off sharply since the company announced the profit warning on March 7.

NIIT's shares are down 58.74 per cent since then and down 69 per cent from the start of 2001. "Even at a 20 per cent annual growth rate, NIIT's share price looks good because of its low price-earnings multiple of 7.6," one analyst said. ($1 = 46.88 Indian rupees).

(C) Reuters Limited 2001.