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Company Report
NIIT Technologies Ltd.
CMP
Rs.500.95
Target Price
Rs.645.00
BSE Code
532541
Market Cap (Rs Cr.)
3065.81
52 Week High/Low
632.00/335.00
Industry
Information Technology
Face Value
Rs.10.00
Shares O/S
6.12 Cr.
EPS(TTM)
43.11
Book Value
258.40
P/E
11.62
P/B
1.94
Shareholding Pattern
15th February, 2016
BUY

NIIT Technologies is a leading global IT solutions organization,
servicing customers in Americas, Europe, Middle East, Asia and
Australia. It offers services in Application Development and
Maintenance, Infrastructure Management, IP Asset or Platform
Solutions, Business Process Management, and Digital Services to
organisations in the Financial Services, Travel & Transportation,
Manufacturing/Distribution, and Government sectors.

The company has registered decent results for the quarter ending
December 2015. The consolidated revenues grew by 14% to
Rs.678.70 crores vs. Rs.595.30 cr. in the year ago quarter.
Operating profit grew by 43.27% at Rs.123.50 crores as against
Rs.86.20 crores in the corresponding quarter last year. The
adjusted net profit surged sharply at Rs.75.40 crore as against
Rs.48.20 crore; registering growth of 56% on a y-o-y basis.
Margins continued to expand during the quarter and this was
mainly on account of reduced SG&A.

Amongst industry segments, BFSI grew 2.1% contributing to 38%
of total revenues. Travel and Transportation revenues declined
3.7% resulting to a share of 36% and Manufacturing/Distribution
contributed 9%. Revenues from Government contributed 3% of
the revenue mix. Head count stood at 9,517 at the end of the
quarter with utilization of direct resources at 78.7%.Business in
the US contributes to 46% of overall revenues during the quarter.
EMEA to 34% while the revenue share from APAC contributed
10% to total revenues and revenues from India contributed to
10% of the mix. Capex spend during the quarter stood at Rs.29.5
crores.
Valuation
Research Analyst: Vineeta Mahnot
research@hemonline.com
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With the strong order intake, good pipeline, strong traction in the
Digital services business and ramp ups in Q4 may lead to FY17 to be
stronger than FY16. We believe the company is trading at an
attractive valuation at 10.85x and 9.63x of FY16EPS of Rs.46.17 and
FY17EPS of Rs.52.04. We initiate a ‘BUY’ on the stock with a target
price of Rs.645 (appreciation of about 29%) with the medium to long
term investment horizon.
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Business overview
NIIT Technologies is a leading global IT solutions organization, servicing customers in Americas, Europe, Middle East,
Asia and Australia. It offers services in Application Development and Maintenance, Infrastructure Management, IP
Asset or Platform Solutions, Business Process Management, and Digital Services to organisations in the Financial
Services, Travel & Transportation, Manufacturing/Distribution, and Government sectors.
Service Offerings- Application Development and Management:
NIIT Technologies provides Application Development Services
including custom software development, business intelligence and
migration and modernisation to globally dispersed customers. The
company helps clients manage their mission and time-critical
applications by providing cost-effective application management
services over a wide range of technologies.
Infrastructure Management Services: NIIT Technologies’
Infrastructure Management Services simplify IT operational and
investment challenges by delivering IT infrastructure and
applications as completely administered services. The company provides a comprehensive portfolio of end to end
Infrastructure Management Services ordained around the philosophy/vision of continuous delivery that map all
aspects of IT infrastructure advisory, design, implementation and E2E business driven IT SLA agreements catering to
the needs of both industrial and digital world.
Business Process Management (BPM): NIIT Technologies’ BPM
business offers outsourcing solutions that combine domain
expertise, process excellence and cutting-edge technologies. It
enables clients to effectively and efficiently manage back office,
middle office and front office operations.
Systems Integration and Package Implementation: These
solutions mainly revolve around SAP and other ERP platforms.
NIIT Technologies’ subsidiary, NIIT GIS Ltd. also provides endto-end GIS-based solutions to customers. NIIT GIS provides
software products, training, technical support, data conversion
and application development to varied industry sectors. They also include complete geo-spatial image processing and
consulting solutions.
Digital Services: The Company has clearly articulated its offerings in this area which has four elements: Digital
Experience, Cloud, Analytics and Digital integration.
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Strong order inflow
There has been good order intake by the company over the recent quarters as a result of realignment of the company’s
sales and marketing effort. NIIT Tech has added 4 significant new customers during the December quarter, including
new large engagement with Ofcom. The value of the contract is GBP 23 million over a six year period which includes
an initial term of 4 years and extensions. This Ofcom deal contributes to margin improvement for the business. In all
the company added four new logos this quarter- two in EMEA and two in APAC. Three new clients are from the
Travel and Transportation space and one from the others. There has been order intake to the tune of $123 million
during the quarter taking the order book to $301 million executable over the next twelve months. The order intake has
been geographically spread with $50 million from USA, $55 million from EMEA and the remaining $18 million from
rest of the markets. In this quarter the company completed some key flagship digital experience projects in multiple
clients in the travel vertical. The Company secured 5 new Digital engagements in areas like Predictive Demand
modelling, Omni-channel commerce, Next Best Action and Migration to Amazon Web Services. The Company is
investing in developing strong capabilities across Digital Experience, Analytics and Digital Integration.
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Good growth potential next year
Company expects revenue growth to recover from the first quarter of financial year 2017 in line with industry average
after witnessing Q3 as a soft quarter. Even Q4 may remain soft on account of some programs in the Travel space which
has gone live. However for FY16, the management expects to grow at the lower end of the industry average. On the
margin front, the company expects to improve from the fourth quarter of FY16 driven by better business mix and
strong order intake. The Digital business and GIS business proportion is expected to improve. The good traction in the
Digital services will help the company in its growth trajectory for FY17. The company plans to focus on main verticals
like BFSI, Travel and Media which constitutes the bulk of the order pipeline and will drive the mainstream of growth
going forward. The company is seeing good traction especially in the Insurance vertical and in the US in Banking. The
company sees good order pipeline going ahead. Though there may be some softness in the order book on account of
changing nature of business as contribution of digital business is increasing to 15% which generally has short
executable period of 2-3 months. Further, under digital business, the company expanded the capability of its advanced
analytics platform, Digital Foresight to deliver business outcomes aimed at increasing sales, reducing customer churn
and combating fraud.
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Consolidated Profit & Loss Account
Rs. Crore
Particulars
Net sales
FY13
FY14
FY15
FY16E
FY17E
2021.36
2304.99
2372.50
2704.65
3050.84
14.03%
2.93%
14.00%
12.80%
Growth
Expenditure
1692.06
1953.85
2039.62
2231.33
2507.79
EBITDA
329.30
351.14
332.88
473.31
543.05
6.63%
-5.20%
42.19%
14.73%
Growth
EBITDA margin
16.29%
15.23%
14.03%
17.50%
17.80%
Other income
Depreciation &
Amortisation
22.75
30.25
17.31
21.64
24.41
56.69
61.90
91.64
102.98
115.28
EBIT
295.37
319.48
258.55
391.97
452.18
EBIT margin
14.61%
13.86%
10.90%
14.49%
14.82%
1.91
1.10
2.68
3.61
4.07
PBT
293.45
318.38
255.87
388.36
448.11
Tax
75.04
80.23
53.99
89.32
112.03
PAT
218.41
238.15
201.88
299.04
336.08
Share of Associates
0.00
0.00
0.00
0.00
0.00
Minority Interest
5.19
7.62
7.86
17.20
18.40
213.22
230.53
194.02
281.84
317.68
8.12
(15.84)
45.26
12.72
Interest
Adjusted PAT
Growth
Net Profit margins
10.55
10.00
8.18
10.42
10.41
Exceptional item
0.00
0.00
79.96
0.00
0.00
Reported PAT
213.22
230.53
114.07
281.84
317.68
Equity Capital
1033.88
1263.17
1296.30
1,517.14
1,770.77
Res. & Surplus
1013.08
1015.08
1308.63
1,392.62
1,492.13
Equity Shares
6.02
6.07
6.10
6.10
6.10
Adjusted EPS
35.39
37.98
31.79
46.17
52.04
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Balance Sheet
Rs. Crore
Particulars
FY13
FY14
FY15
FY16E
FY17E
Equity Share Capital
60.24
60.70
61.04
61.04
61.04
Reserves & Surplus
1033.88
1263.17
1296.30
1,517.14
1,770.77
Shareholders’ funds
1094.12
1323.87
1357.35
1578.18
1831.81
Borrowings
9.29
5.26
4.85
9.02
10.17
Minority Interest
17.30
18.90
18.87
19.43
20.41
Sources of funds
1120.71
1348.04
1381.07
1606.63
1862.39
Gross block
701.99
750.84
933.62
1040.25
1164.44
Accumulated Depreciation
263.68
297.49
375.73
478.71
593.99
Net block
438.31
453.36
557.89
561.54
570.45
Capital WIP
27.75
128.61
120.31
168.69
204.01
Investments
82.00
55.06
55.36
72.82
98.98
Deferred tax asset
12.24
22.32
38.64
38.64
38.64
Inventories
4.11
5.23
8.51
14.67
17.84
Sundry debtors
453.85
564.35
605.99
704.04
874.12
Cash and bank balance
232.93
221.23
269.25
337.35
392.46
Other current assets
178.76
154.16
105.93
117.34
124.87
Loans and advances
108.88
197.15
214.85
293.35
374.62
Total current assets
Current liabilities and
provisions
978.52
1142.12
1204.53
1466.75
1783.93
418.11
453.42
595.65
701.79
833.61
Net current assets
560.41
688.69
608.89
764.96
950.32
1,120.71
1,348.04
1,381.07
1,606.64
1,862.39
Particulars
FY13
FY14
FY15
FY16E
FY17E
Return on Equity
19.49
17.41
14.29
17.86
17.34
Return on Capital employed
26.77
24.04
18.98
24.70
24.55
Debt/Equity
0.01
0.00
0.00
0.01
0.01
Asset turnover
1.31
1.28
1.20
1.17
1.13
Current Ratio
2.34
2.52
2.02
2.09
2.14
Book value per share
181.63
218.10
222.37
258.55
300.10
Interest coverage
154.36
290.30
96.41
108.58
111.10
Uses of funds
Ratios
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Consolidated Quarterly Financial Highlights
Rs. Crore
Particulars
Q3FY16
Q3FY15
Q2FY16
YoY%
QoQ%
Revenues
678.70
595.30
677.90
14.01
0.12
Expenditures
555.20
509.10
558.50
9.06
(0.59)
Operating Profit
123.50
86.20
119.40
43.27
3.43
Adjusted Net Profit
75.40
48.20
68.30
56.43
10.40
1.3
---
---
---
---
Reported PAT
74.10
48.20
68.30
53.73
8.49
OPM%
18.20
14.48
17.61
372bps
59bps
NPM %
11.11
8.10
10.08
301bps
103bps
Adjusted EPS*
12.36
7.9
11.20
56.46
10.36
Exceptional item
*Adjusted for current number of equity shares
Past Price movement of the stock
NIIT TECHNOLOGIES (545.0000, 559.7000, 461.0000, 492.2500, -59.7500)
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Disclosure of Interest Statement
Company Name
1. Analyst Ownership of the Stock
No
2. Hem & its Group Company Ownership of the Stock
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3. Hem & its Group Companies’ Director Ownership of the Stock
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