Stock Review: NIIT Technologies

Even as the information technology (IT) industry looks set to clock a better performance this year on improving demand, attrition and higher wage bills may well spoil this party. The brunt of this will be felt more by mid-cap companies in the sector, unless a company has differentiated strategy and value proposition as NIIT Technologies (NTL) does. NTL, a mid-sized IT company, is following a two-pronged approach to deal with some of these threats.

For one, it has built a domain expertise in niche industry verticals like insurance, travel, manufacturing and retail, which will result in strong business visibility in the coming quarters. It was named the No. 1 service provider in the travel industry for two years (2008 and 2009) in a row by Datamonitor Black Book of Outsourcing. Its cargo handling solution too has seen some success across Southeast Asia. The company also enjoys a good geographical mix revenues from North America, Europe and Asia Pacific.

Secondly, the company has built differentiated services in focus verticals. NTL offers application development management, cloud computing packaged implementation and BPO services. At present, the company derives 27 per cent revenues from managed services and IP-asset based services, rather than the commoditisable time and material kind of pricing model. Over the next five years, Gartner expects companies to cumulatively spend $112 billion on software, platform and infrastructure as aservice. By 2012, a fifth of the businesses will not own any IT assets.