NIIT Q1 net down 88%, revenue falls 30%

Shailendra Bhatnagar

NEW DELHI: NIIT Ltd., reported late Tuesday its net profit plunged 88.4 per

cent last quarter from a year earlier, on a much greater-than-expected drop in

revenue.

NIIT, dubbed the McDonald's of computer education in India, said its

October-December net profit slumped to Rs 34.6 million from Rs 298.3 million a

year earlier.

Net sales declined 30.2 per cent -- to Rs 1.09 billion. The profit result was

in line with the median forecast of a Reuters poll of eight analysts. The

revenue figure, though, was far from the mark.

The poll pegged net profit at a median of Rs19 million, down 94 per cent from

a year ago. Four out of the eight analysts predicted a net loss. But a majority

expected revenue to increase, with the median forecast envisaging a rise of 11.4

per cent.

"The results are not that bad considering (some) people had expected it

to report a loss," said Chetan Shah, analyst at Quantum Securities. NIIT,

which has a October-September financial year, usually posts weaker results in

its first quarter. Enrolments for its short-term courses usually peak during

July-September.

Consolidated numbers



But performance on a consolidated basis was much worse. NIIT, along with its

subsidiaries, posted a net loss of 135 million rupees for the first quarter

compared with a profit of 343 million rupees in the year earlier period.

Total revenue plunged 42 per cent to Rs 1.75 billion.

Vijay Thadani, NIIT's chief executive officer, blamed the loss on higher

sales and marketing expenses, rising depreciation charges and on moving a higher

percentage of software development "offshore" to India, where rates

are lower than for work carried out "onshore" at clients' sites

abroad.

Demand for courses



During 2001, the demand for NIIT's computer training courses declined due to a
downturn in the software industry, which had been the most dynamic sector of the

Indian economy, creating tens of thousands of well-paid jobs yearly.

While the firm maintained its forecast of an overall contraction in the

domestic education market, it said enrolments in the first quarter were higher

at 160,000 from 116,000 in the fourth quarter.

"Our education business is showing early signs of recovery which is

based on a higher sequential rise in enrolments," Thadani said. NIIT also

stuck to its annual guidance, given in September, of posting a consolidated

operating profit of 1.15 billion rupees for year ending September 2002.

Billing rates



NIIT -- which also provides software services to firms such as British Airways,
its biggest client -- said the aftermath of the September 11 events lead to a

crisis in the aviation industry which also affected its topline.

"We've had pressure on onsite billing rates," Arvind Thakur,

director at NIIT, told reporters. "They've declined to $76 per hour in the

past quarter from $78 in the July-September quarter."

The fall was even steeper when compared with $80 which NIIT got for its

software services in the year ago period. "Going forward, we continue to

see a dip of $1.0 per quarter in billing rates," Thakur told Reuters.

"The erosion in revenue was also because of a fall in the business

within the aviation sector. The movement of (software) work offshore also caused

the revenue to contract," Thakur said. NIIT said it won 18 new clients in

the first quarter and its manpower stood at 3,442, down by 332 employees in the

fourth quarter.

Ahead of the results, NIIT's shares ended down 3.5 per cent at Rs 219.45 on

the Bombay Stock Exchange, whose key index closed flat. NIIT was recently

removed as a component of the benchmark 30-share index.

(C) Reuters Limited.