Niit Technologies Net Income dropped on 50.5% in 2015 and EBITDA Margin decreased slightly on 1.2 pp from 15.4% to 14.2%

05-05-2015 • About Niit Technologies ($NIITTECH) • By InTwits

Niit Technologies reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

EBITDA Margin is declining: 14.2% in FY2015 vs. 15.4% in FY2014 vs. 19.3% in FY2011
Niit Technologies has medium CAPEX intensity: 5 year average CAPEX/Revenue was 5.7%. At the same time it's a lot of higher than industry average of 3.6%.
CAPEX is quite volatile: 1,876 in FY2015, 1,399 in FY2014, 930 in FY2013, 931 in FY2012, 502 in FY2011
The company has highly profitable business model: ROIC is at 18.1%

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Niit Technologies ($NIITTECH) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	12,323	15,765	20,214	23,050	23,725	2.9%
SG&A				79	79	-0.5%
EBITDA	2,378	2,701	3,327	3,542	3,359	-5.2%
Net Income	1,822	1,972	2,132	2,305	1,141	-50.5%
Balance Sheet
Cash	1,129	2,211	2,317	2,199	2,678	21.8%
Short Term Debt	71	423	0	0	0
Long Term Debt	36	63	60	53	49	-7.8%
Cash flow
Capex	502	931	930	1,399	1,876	34.1%
Ratios
Revenue growth	-57.6%	27.9%	28.2%	14.0%	2.9%
EBITDA growth	24.5%	13.6%	23.2%	6.5%	-5.2%
EBITDA Margin	19.3%	17.1%	16.5%	15.4%	14.2%	-1.2%
Net Income Margin	14.8%	12.5%	10.5%	10.0%	4.8%	-5.2%
SG&A, % of revenue				0.3%	0.3%	-0.0%
CAPEX, % of revenue	4.1%	5.9%	4.6%	6.1%	7.9%	1.8%
ROIC	30.4%	27.5%	26.9%	23.9%	18.1%	-5.8%
ROE	27.4%	23.6%	21.1%	19.1%	8.5%	-10.6%
Net Debt/EBITDA	-0.4x	-0.6x	-0.7x	-0.6x	-0.8x	-0.2x

Revenue and profitability

The company's Revenue increased on 2.9% in FY2015. Revenue decline was accompanies by EBITDA margin decline. EBITDA Margin decreased on 4.2 pp from 6.7% to 2.5% in FY2015.

SG&A as a % of Revenue showed almost no change in FY2015.

Net Income marign decreased on 5.2 pp from 10.0% to 4.8% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 7.9% in FY2015. The company's CAPEX/Revenue increased on 2.0 pp from 5.9% in FY2012 to 7.9% in FY2015. It's average level of CAPEX/Revenue for the last three years was 6.2%.The company invested a large share of EBITDA (55.9%) to CAPEX.

Return on investment

The company operates at good ROIC (18.12%) while ROE is low (8.51%). ROIC decreased on 5.8 pp from 23.9% to 18.1% in FY2015. ROE dropped on 10.6 pp from 19.1% to 8.5% in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.8x and Debt / EBITDA is 0.0x. Net Debt / EBITDA dropped on 0.2x from -0.6x to -0.8x in FY2015. Debt decreased on 7.8% in FY2015 while cash surged on 21.8% in FY2015.

Appendix 1: Peers in IT Consulting & Software

Below we provide Niit Technologies benchmarking against other companies in IT Consulting & Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tech Mahindra ($TECHM)	-85.8%	6.8%	25.2%	174.0%
Tata Consultancy Services ($TCS)		31.0%	28.8%	29.9%	15.7%
Mindtree ($MINDTREE)		26.6%	23.2%	28.8%	17.0%
Infinite Computer Solutions (India) ($INFINITE)	-57.9%	19.5%	31.7%	24.6%
Infosys ($INFY)		22.7%	19.6%	24.2%	6.4%
Median (21 companies)	-33.0%	22.7%	20.4%	14.3%	11.0%
Niit Technologies ($NIITTECH)		27.9%	28.2%	14.0%	2.9%

Top companies by Gross margin, %


Top	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)				47.4%	42.4%
Infosys ($INFY)	45.3%	41.3%	98.1%	35.9%	38.3%
Mindtree ($MINDTREE)	32.8%	31.5%	36.2%		34.8%
Wipro ($WIPRO)	31.5%	29.2%	30.4%	32.0%	31.6%
Median (4 companies)	34.7%	32.7%	36.2%	35.9%	36.6%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Oracle Financial Services Software ($OFSS)	37.4%	35.3%	35.2%	37.4%
Tata Consultancy Services ($TCS)	29.9%	29.5%	28.6%	30.7%	26.1%
Infosys ($INFY)	32.5%	31.6%	27.9%	26.3%	27.1%
Wipro ($WIPRO)	21.1%	19.1%	20.9%	22.4%	22.3%
Tech Mahindra ($TECHM)	19.5%	16.7%	20.7%	22.2%
Median (18 companies)	18.0%	15.1%	17.8%	18.5%	18.8%
Niit Technologies ($NIITTECH)	19.3%	17.1%	16.5%	15.4%	14.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Ramco Systems ($RAMCOSYS)	16.4%		22.1%	15.3%	12.4%
Infosys ($INFY)	4.7%	4.9%	5.2%	5.5%	4.2%
Mindtree ($MINDTREE)	5.6%	2.5%	4.5%	5.0%	5.6%
Tech Mahindra ($TECHM)	3.0%	5.4%	2.6%	5.0%
Geometric ($GEOMETRIC)	3.8%	3.5%	4.2%	4.0%	4.3%
Median (17 companies)	4.1%	3.7%	3.2%	2.6%	3.1%
Niit Technologies ($NIITTECH)	4.1%	5.9%	4.6%	6.1%	7.9%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tata Consultancy Services ($TCS)	47.1%	48.6%	48.4%	50.2%	40.5%
Tech Mahindra ($TECHM)	19.2%	15.4%	20.1%	43.0%
Geometric ($GEOMETRIC)	19.6%	29.9%	46.4%	41.1%	20.6%
Mindtree ($MINDTREE)	14.9%	24.9%	34.6%	36.2%	32.0%
Cmc ($CMC)	31.5%	26.2%	33.2%	35.3%	26.0%
Median (30 companies)	16.0%	19.1%	20.4%	22.9%	20.8%
Niit Technologies ($NIITTECH)	30.4%	27.5%	26.9%	23.9%	18.1%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
3I Infotech ($3IINFOTECH)	3.5x	8.5x	20.3x	27.7x
Ramco Systems ($RAMCOSYS)	4.0x	8.8x		27.6x	4.2x
Starcom Information Technology ($STARCOM)				17.4x
Onward Technologies ($ONWARDTEC)	2.7x	2.4x	2.2x	4.1x
Kpit Technologies ($KPIT)	-0.7x	0.3x	0.5x	0.7x	0.4x
Median (23 companies)	-0.1x	-0.0x	-0.2x	-0.2x	-0.7x
Niit Technologies ($NIITTECH)	-0.4x	-0.6x	-0.7x	-0.6x	-0.8x

Niit Technologies stock price chart

Niit Technologies financials

mln.	FY2010	FY2011	FY2012

Revenue	29,080	12,323	15,765
EBITDA	1,911	2,378	2,701
Net income	1,264	1,822	1,972
CAPEX	490.4	502.2	931.1
Debt	217.2	106.9	486.5
Cash	920.8	1,129	2,211

About Niit Technologies

NIIT Technologies Limited provides IT solutions in the Americas, Europe, the Middle East, Asia, and Australia. Its services include application development management services, such as application management and development, application renewal and testing; and data analytics services in the data warehousing and business intelligence, such as consulting and assessment, BI/DW solution implementation, data integration, and information delivery services. The company also provides infrastructure management services, including remote infrastructure management services, such as technology management, service desk, and data center services; managed security services for online applications and transactions; and application management services. In addition, it offers testing services, such as test automation, testing COE implementation, and domain specific testing services; and business process outsourcing services. Further, the company provides cloud computing services comprising software-as-a-service, an on-demand delivery model for software; platform-as-a-service, which provides development, deployment, testing, and integration of applications to the cloud; and infrastructure-as-a-service that offers bandwidth, storage, and computing power on an on-demand basis over the Internet. Additionally, the company offers geographic information systems solutions, including software products, training, technical support, data conversion, and application development services; mobile solutions, including mobile platform and frameworks, mobile testing, user interface design, mobile Web, and enterprise mobility solutions; and IP led solutions. It serves travel and transportation, banking and financial services, insurance, manufacturing, media, and government sectors. NIIT Technologies Limited was incorporated in 1992 and is based in Noida, India.