Reliance Money downgrades NIIT Tech

MUMBAi: Domestic brokerage house Reliance Money has downgraded NIIT Technologies from 'buy' to 'hold' as the company continues to show sluggish performance. It has given a target price of Rs 66.

At 11 am, the stock price of NIIT Tech was trading at Rs 58.6, up 1.4% on good volumes. The company's consolidated revenues declined by 4% quarter on quarter (QoQ) to Rs 248.5 crore. In the preceding last six quarters, NIIT Technologies has shown a miniscule CQGR revenue growth of 1.6%.

Given the turbulent global scenario with every industry getting impacted, NIIT Tech management indicated that the risk of uncertainty was the first thing to be addressed and hence ensured business continuity by entering into long term contracts.

The order intake in this quarter was very robust ($148mn) however some of them are 5 year long term contracts. However the Q3 results show a volume degrowth of 3% which partially indicates the trouble being observed by the company in its major verticals financial services and retail.

As far as pricing is concerned, NIIT Tech recorded a 2% pricing increase in Q3FY09; however management indicated a bleak and challenging outlook for pricing. The company indicated of enormous pricing pressure across all verticals but intends to counter it by entering into longer term contracts (to ensure continuity) and increased offshoring.