CMP 374.50

Target Price 408.00

ISIN: INE591G01017

JANUARY 21st

2015

NIIT TECHNOLOGIES LTD

Result Update (PARENT BASIS): Q3 FY15

BUYBUYBUYBUY

Index Details

Stock Data

Sector IT Services

BSE Code 532541

Face Value 10.00

52wk. High / Low (Rs.) 486.00/328.00

Volume (2wk. Avg.) 39000

Market Cap (Rs. in mn.) 22732.15

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 13084.80 13284.26 14745.53

EBITDA 3142.20 2736.38 3132.18

Net Profit 2084.00 1901.60 1959.53

EPS 34.33 31.33 32.28

P/E 10.91 11.95 11.60

Shareholding Pattern (%)

1 Year Comparative Graph

NIIT TECHNOLOGIES LTD BSE SENSEX

SYNOPSIS

NIIT Technologies Ltd. is a leading IT solutions

organization, servicing customers in North America,

Europe, Asia and Australia.

Net profit for the quarter was Rs. 443.30 million

against Rs. 396.20 million in the corresponding

quarter of the previous year, an increase of 11.89%.

The company’s net sales stood at Rs. 3321.50

million from Rs. 3283.50 million over the

corresponding quarter last year.

During Q3 FY15, USD 109 million of new orders was

secured.

NIIT Technologies appraised at People CMM Level 5

again.

The Company entered into partnerships with new

Digital technology players and launched Digital

ForesightTM, a predictive analytics solution in the

U.S.

NIIT Technologies completes 15 years of successful

engagement with Toyota.

During Q3 FY15, Consolidated revenue at Rs. 5953

million grew by 1.4% YoY basis and net profit grew

by 20.2%.

NIIT Technologies Ltd has added 5 new clients, 2 in

US and 1 each in EMEA, APAC and India.

Net Sales and PAT of the company are expected to

grow at a CAGR of 10% and 5% each over 2013 to

2016E.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

NIIT Technologies Ltd 374.50 22732.15 34.33 10.91 2.45 90.00

Infinite Computer Solutions India Ltd 145.40 5838.70 18.42 7.89 1.29 40.00

Sonata Software Ltd 127.90 13449.90 8.79 14.55 4.21 375.00

Zensar Technologies Ltd 654.80 30372.70 39.42 16.61 4.70 100.00

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q3 FY15,

Months Dec-14 Dec-13 % Change

Net Sales 3321.50 3283.50 1.16

PAT 443.30 396.20 11.89

EPS 7.27 6.53 11.23

EBITDA 718.10 617.80 16.24

NIIT Technologies Ltd achieved a turnover of Rs. 3321.50 million for the 3rd quarter of financial year 2015 as

against Rs. 3283.50 million in the corresponding quarter of the previous year. The company has reported an

EBITDA of Rs. 718.10 million, increase by 16.24%. Net profit for the quarter is Rs. 443.30 million against Rs.

396.20 million reported in the corresponding quarter of the previous year, grew by 11.89%. The company has

reported an EPS of Rs. 7.27 for the quarter as against an EPS of Rs. 6.53 in the corresponding quarter of the

previous year.

Break up of Expenditure

Particulars

Rs. Million

Q3 FY15 Q3 FY14

Purchase of Stock-in-Trade 203.80 249.70

Employees benefits expense 1822.20 1830.70

Depreciation and amortisation

expense 167.10 108.70

Other expenses 630.10 566.30

Latest Updates

� NIIT Technologies completes 15 years of successful engagement with Toyota a Motor Asia Pacific

Engineering & Manufacturing Co. Ltd.

� Air Tahiti Nui launches 5 new regional websites. Air Tahiti Nui chose NIIT Technologies to develop this new

platform.

� NIIT Technologies appraised at People CMM Level 5. PCMM is a maturity framework that focuses on

continuously improving the management and development of the human assets of an organization. Level 5 is

the highest maturity level in the model.

� The Company entered into partnerships with new Digital technology players and launched Digital

ForesightTM, a predictive analytics solution in the U.S.

� Americas contributed to 44% of revenues, EMEA to 35% of revenues and India to 21% on the back of

execution of large orders secured during the year.

� NIIT Technologies listed in "The Breakthrough 10 Sourcing Standouts" in Americas by the Information

Services Group in its third quarter 2014 Global Outsourcing Index.

� During Q3 FY15, USD 109 million of new orders was secured.

� NIIT Technologies Ltd has added 5 new clients, 2 in US and 1 each in EMEA, APAC and India.

� During Q3 FY15, Consolidated revenue at Rs. 5953 million grew by 1.4% YoY basis and net profit at grew by

20.2%.

COMPANY PROFILE

NIIT Technologies is a leading IT solutions organization, servicing customers in North America, Europe, Asia and

Australia. It offers services in Application Development and Maintenance, Enterprise Solutions including

Managed Services and Business Process Outsourcing to enterprise in the Financial Services, Travel &

Transportation, Manufacturing/Distribution, and Government sectors.

NII Technology has preferred IT partner to over 230 clients across 18 countries in these select verticals. With a

talent pool of about 8000 professionals, NIIT Technologies follows global standards of software development

processes.

The Company has been featured in the Global Services 100 in 2013 list, where a set of companies that define

leadership in the global services business.

Certification

NIIT Technologies adheres to major global benchmarks and standards, having secured the ISO 9001:2000

certifications and the ISO: 27001 Information Security Management accreditation and follows global standards of

development. It has been assessed at Level 5 of SEI CMMi version 1.2. The companies Business Process

Outsourcing arm conforms to the highest quality standards such as COPC and Six Sigma. Data center operations

are assessed at the international ISO 20000 IT management standards.

Product and services

NIIT Technologies has successfully partnered with companies such as ING Group, British Airways, SEI

Investments, Singapore Airlines, Toshiba, Office Depot, Ministry of Defense – Singapore, helping them reach their

business goals in a cost effective way without compromising on quality.

In this competitive world the company initiated following services to customers

• Application development Management

• Managed Services

• Testing Services

• Cloud Computing

• BPO

• Geographic Information System (GIS) Solutions $ Services

• Mobile solutions

NIIT’s Worldwide Locations

NIIT Technologies provide value to their clients based on the combined strength of companies global delivery

centers, spread across 18 countries. The companies have expertise and a proven track record of delivering

quality to over 230 clients worldwide and have

The global networks of the company in different countries around the world are as follows

• NORTH AMERICA

• AUSTRALIA

� Sydney

� Melbourne

EUROPE

• BELGIUM

• GERMANY

• IRELAND

• NETHERLANDS

• SWITZERLAN

• UNITED KINGDOM

• SPAIN

MIDDLE EAST

• DUBAI

ASIA

• HONG KONG

• INDIA

� Delhi

� Bangalore

� Haryana

� Kolkata

� Mumbai.

• SINGAPORE

• THAILAND

• PHILIPPINES

• JAPAN

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31st, 2013 -2016E

FY13A FY14A FY15E FY16E

I EQUITY AND LIABILITIES

A) Shareholder's Funds

a) Share Capital 602.40 607.00 607.00 607.00

b) Reserves and Surplus 7076.50 8676.30 10577.90 12537.44

Sub-Total- Total Net worth 7678.90 9283.30 11184.90 13144.44

B) Non Current Liabilities

a) long term borrowing 55.50 48.90 50.37 51.37

b) Long Term Provisions 250.60 280.30 291.51 300.26

Total Non Current liabilities 306.10 329.20 341.88 351.63

C) Current Liabilities

a) Short term borrowings 0.00 215.00 225.75 233.88

b) Trade payables 838.40 991.10 1090.21 1166.52

c) Other Current liabilities 1334.80 1394.20 1441.60 1470.43

Sub-Total- Current Liabilities 2173.20 2600.30 2757.56 2870.84

TOTAL EQUITY AND LIABILITIES (A + B + C) 10158.20 12212.80 14284.34 16366.90

II APPLICATION OF FUNDS

D) Non-Current Assets

Fixed Assets

i. Tangible assets 2604.10 2587.73 2732.64 2855.61

ii. Intangible assets 135.30 121.34 132.26 142.84

iii. Capital Work in Progress 277.50 1159.53 1576.96 2081.59

a) Sub-Total-Total Fixed Assets 3016.90 3868.60 4441.86 5080.04

b) Deferred tax assets 70.40 103.20 121.78 137.61

c) Other non-current assets 132.20 50.80 56.90 61.45

d) Non-current investments 1234.20 1234.20 1332.94 1426.24

e) Long Term loans and advances 186.00 433.50 541.88 639.41

Sub-Total-Non-Current Assets 4639.70 5690.30 6495.35 7344.75

E) Current Assets

a) Current Investments 750.00 400.60 452.68 507.00

b) Inventories 37.30 47.90 55.56 62.23

c) Trade receivables 3176.40 4316.50 5267.93 6150.03

d) Cash and Bank Balances 659.90 486.40 525.31 577.84

e) Short-terms loans & advances 463.60 818.80 1015.31 1238.68

f) Other Current Assets 431.30 452.30 472.20 486.37

Sub-Total-Total Current Assets 5518.50 6522.50 7789.00 9022.15

TOTAL ASSETS (D+E) 10158.20 12212.80 14284.34 16366.90

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 11083.00 13084.80 13284.26 14745.53

Other Income 329.00 741.60 233.46 256.81

Total Income 11412.00 13826.40 13517.72 15002.33

Expenditure -8739.00 -10684.20 -10781.34 -11870.15

Operating Profit 2673.00 3142.20 2736.38 3132.18

Interest -10.10 -16.70 -36.78 -41.20

Gross profit 2662.90 3125.50 2699.60 3090.99

Depreciation -398.40 -420.20 -663.73 -730.10

Exceptional Items 0.00 0.00 250.00 0.00

Profit Before Tax 2264.50 2705.30 2285.87 2360.88

Tax -585.90 -621.30 -384.26 -401.35

Net Profit 1678.60 2084.00 1901.60 1959.53

Equity capital 602.40 607.00 607.00 607.00

Reserves & Surplus 7076.50 8676.30 10577.90 12537.44

Face value 10.00 10.00 10.00 10.00

EPS 27.87 34.33 31.33 32.28

Quarterly Profit & Loss Statement for the period of 30th Jun, 2014 to 31st Mar, 2015E

Value(Rs.in.mn) 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15E

Description 3m 3m 3m 3m

Net sales 3316.40 3192.00 3321.50 3454.36

Other income 126.10 12.50 52.70 42.16

Total Income 3442.50 3204.50 3374.20 3496.52

Expenditure -2738.40 -2581.90 -2656.10 -2804.94

Operating profit 704.10 622.60 718.10 691.58

Interest -8.80 -8.80 -8.80 -10.38

Gross profit 695.30 613.80 709.30 681.20

Depreciation -148.90 -182.30 -167.10 -165.43

Exceptional Items 0.00 250.00 0.00 0.00

Profit Before Tax 546.40 681.50 542.20 515.77

Tax -98.20 -100.00 -98.90 -87.16

Net Profit 448.20 581.50 443.30 428.60

Equity capital 607.50 608.20 610.00 610.00

Face value 10.00 10.00 10.00 10.00

EPS 7.38 9.56 7.27 7.03

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 27.87 34.33 31.33 32.28

EBITDA Margin (%) 24.12 24.01 20.60 21.24

PBT Margin (%) 20.43 20.68 17.21 16.01

PAT Margin (%) 15.15 15.93 14.31 13.29

P/E Ratio (x) 13.44 10.91 11.95 11.60

ROE (%) 21.86 22.45 17.00 14.91

ROCE (%) 39.71 37.31 29.67 28.76

Debt Equity Ratio 0.01 0.03 0.02 0.02

EV/EBITDA (x) 7.93 7.04 8.05 7.00

Book Value (Rs.) 127.47 152.94 184.27 216.55

P/BV 2.94 2.45 2.03 1.73

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.374.50 the stock P/E ratio is at 11.95 x FY15E and 11.60 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.31.33 and

Rs.32.28 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 10% and 5% each over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 8.05 x for FY15E and 7.00 x for FY16E.

� Price to Book Value of the stock is expected to be at 2.03 x and 1.73 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.408.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

The information technology (IT) and information technology enabled services (ITeS) industry has been one of

the key driving forces fuelling India's economic growth. The industry has not only transformed India's image on

the global platform, but also fuelled economic growth by energising the higher education sector (especially in

engineering and computer science). It has employed almost 10 million Indians and hence, has contributed a lot to

social transformation in the country.

Furthermore, Indian firms, across all other sectors, largely depend on the IT & ITeS service providers to make

their business processes efficient and streamlined. The Indian manufacturing sector has the highest IT spending

followed by automotive, chemicals and consumer products industries.

The Indian IT-business process outsourcing (BPO) sector, including the domestic and exports segments continue

to grow from strength to strength, witnessing high levels of activity both onshore as well as offshore. The

companies continue to move up the value-chain to offer higher end research and analytics services to their

clients.

India is the world's largest sourcing destination, accounting for approximately 52 per cent of the US$ 124-130

billion market. The country's cost competitiveness in providing IT services, which is approximately 3-4 times

cheaper than the US continues to be its unique selling proposition (USP) in the global sourcing market.

The IT-business process management (BPM) sector in India grew at a compound annual growth rate (CAGR) of

25 per cent over 2000-2013, which is 3-4 times higher than the global IT-BPM spend, and is estimated to expand

at a CAGR of 9.5 per cent to US$ 300 billion by 2020.

Export of IT services has been the major contributor, accounting for 57.9 per cent of total IT exports (excluding

hardware). BPM accounted for 23.5 per cent of total IT exports during FY13. Total exports from the IT-BPM

sector (excluding hardware) were estimated to have been US$ 76 billion during FY13, with exports growing at a

CAGR of 13.1 per cent during FY08-13E.

The Government of India has extended tax holidays to the IT sector for software technology parks of India (STPI)

and special economic zones (SEZs). Further, the country is providing procedural ease and single window

clearance for setting up facilities.

Traditional verticals, i.e., BFSI, telecommunication and manufacturing, continue to remain the largest in terms of

IT adoption and are expected to grow at an average of 15 per cent. Implementation of cloud environment and

mobility is the way forward for such verticals.

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purchase or sale of any financial instrument or as an official confirmation of any transaction. The information

contained herein is from publicly available data or other sources believed to be reliable but we do not represent that

it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be

in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for

the recipients’ investment decision based on this document.

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