“NIIT Technologies Limited Conference Call”Chairman, Rajendra Pawar, CFO KTS Anand and Investor Relations Manager, Mohit. I would like to begin by just commenting on the environment

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“NIIT Technologies Limited Conference Call”

January 14, 2008

Moderators: Rajendra Pawar – Chairman, NIIT Technologies Limited

Arvind Thakur – NIIT Technologies Limited KTS Anand – CFO, NIIT Technologies Limited Mohit – Investor Relations, NIIT Technologies Limited

NIIT Technologies Limited

January 14, 2009

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Moderator: Ladies & Gentlemen Good evening. This is Marina the Chorus Call Conference Operator. Welcome to the NIIT Technologies Ltd. conference call. As a reminder for the duration of the presentation all participants are in the listen-only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. Should anyone need assistance during the conference call they may signal an operator by pressing * and then 0 on their touchtone telephone. At this time I would like to turn the conference over to Mr. Arvind Thakur from NIIT Technologies Ltd. Thank and over to you Mr. Thakur.

Arvind Thakur: Thank you Marina and good evening everybody. Welcome to the NIIT Technologies Third Quarter results call. I have here with me Chairman, Rajendra Pawar, CFO KTS Anand and Investor Relations Manager, Mohit.

I would like to begin by just commenting on the environment which as you are probably all aware is characterized by severe risk aversion due to liquidity issues and a loss of confidence in the market. All major markets are trading at fraction of the levels of what we have seen in January last year. In fact, in some situations investors have accepted even a 0% rate on US government options for short term securities. Fortunately, Central Banks the world over are trying to improve the liquidity and confidence. We have seen the US spending $350 billion from its Troubled Asset Relief Program which they call as TARP of the $700 billion that was allocated and we also know that President elect Barrack Obama is looking at further relief on this front. UK has also announced a relief package of 400 billion pound sterling. Germany is unveiling its own economic stimulation program.

Right here in India, Reserve Bank has been cutting repo rates and reverse repo rates and CLRs, pumping in more than 300,000 Crores into the economy. I believe the economic pressure will persist for sometime. We are seeing in different industries and for example the retail industry they’ve had the most dismal shopping season in nearly 40 years and manufacturing also is beginning to feel the impact. The IIP growth here in India was negative in October although it bounced back somewhat to 2.4% in November, it is the far cry from the 13.8% growth in the same month last year. Our own industry which is the IT industry would be impacted in the short term as end customers struggled to readjust to the economic scenario. The overriding direction we believe would be to cut cost and conserve capital and the essential theme that they would be expecting from their partners would be to provide more for less.

While this maybe a challenge, it in fact will present the industry with a great opportunity as with strong offshore presence Indian IT players have a great value proposition. Essentially our clients are looking at getting more from less and leveraging the off-shoring capability I think is a great strength of the industry as well as for our own organization. We have been viewing the challenges and looking at our ability to emerge stronger by working on three elements of strategy. First and foremost, given that 46% of our revenues come from our top ten clients and a little over 60% comes from top 20 clients, our primary focus has been on consolidation of key accounts and to


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ensure business continuity and secure our future. That has been one element of our focus in the recent past.

The other elements or the second element is to continuously improve cost structures, to cushion against other uncertainties that we are likely to encounter in the challenge environment and the third, which I have often been discussing with all of you is to fundamentally transform the business and make it more non-linear to provide more value-add. I think when I look at this quarter, the most significant thing that we have been able to accomplish is on point one which is the consolidation of key accounts and the quarter is characterized by a record intake of $148 million US through a focus program on getting contract extensions with consolidation of business for terms ranging over multiple years. This has been the company’s immediate priority in the time of economic crisis. This ensures that the core business remains sound and our efforts in the quarter as a result of these initiatives I believe has resulted in securing our future. Revenues grew 6% year on year in the quarter to Rs. 2485 million. During the quarter the rupee depreciated dramatically against the dollar and as you are aware we have taken hedge positions against the dollar at an average rate of Rs. 41.51 to a dollar and as a result of this Rs. 189 million has been the loss or the revenue decline as a result of crystallization of effective hedges in this quarter. The current outstanding hedge position for the company is US $221 million spread over 30 months. Our geography mix is changed a little on account of volatility in the currency. So if I eliminate the impact of hedging losses, 36% of revenues have accrued from the US while EMEA, which is Europe Middle East Africa, which is pre-dominantly Europe, represents 47% of revenues, the rest of the world contributing 17% of revenues.

Revenues from our different verticals: 43% from BFSI with 27% coming from insurance, 27% also were revenues from travel and transport vertical and retail & distribution contributed to 14% of revenues. If I look at these 3 focus verticals we now have 84% of our overall revenues coming from these segments. There has been a consistent effort in supporting and building our managed services and asset based or platform based services to support our business for creating non-linear revenues and the proportion of revenues from these services was 25% in this quarter. Part of the value proposition to our customers in order to deliver more from less has been to leverage the off-shoring element of the business and in fact in this quarter the offshore revenues have increased to 41% as compared to 39% in the last quarter.

Few comments on the margins, operating profits remained at the same levels over the same period last year at Rs. 446 million. Through a combination of improved off-shoring and better cost optimization, operating margins improved 25 basis points over the last quarter at 18%. If I look at our operating profits and in fact if I eliminate the hedging losses in both quarters which is the last quarter and this quarter, the operating profits would have actually grown 17% quarter on quarter. So there has been an impact of hedging losses both on our revenues and that naturally flows all the way down to the operating profits.


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During the quarter there was a weakening of the Pound and a loss in exchange rate booked as a result of accounts receivables and payables in the other income is to the tune of Rs. 139 million which has been the real contributor to the drop in net profit which for the quarter is Rs. 168 million. We improved our capacity utilization to 84.5%. This is on account of further reduction in headcount, 229 people were reduced during the quarter taking the head count to 4438 at the end of the quarter. Of these 22% of direct people engaged in billable activities were working onsite and 78% are working offshore. Annualized attrition for the quarter stood at 15.8%. During the quarter cash and bank balance improved to Rs. 1499 million. There was improvement in the bills receivables position which reduced to 74 days of outstanding as compared to 80 days in the last quarter. 13.6 Crores was spent during the quarter on the campus and 15.5 Crores in other projects. This includes 7.5 Crores in a new facility which was acquired in Noida to relocate some of our existing STPI units. I think with these opening remarks I would be now happy to open the conference for questions.

Moderator: Thank you very much sir. We will now begin the question and answer session. Anyone who wishes to ask a question may please press * and then 1 on their touchtone phone. If you wish to remove yourself from the question queue you may press * and then 2. Participants are requested to use only handsets while asking a question. Anyone who has a question may press * and 1 at this time. Our first question is from Mr. Raunak Nagda from Value Quest Research, please go ahead.

Raunak Nagda: Good evening sir.

Arvind Thakur: Good evening Raunak.

Raunak Nagda: Sir I would like to know if you have reduced your number of employees and your utilization rates have gone high, do you tend to reduce it more going forward, reduce the number of employees?

Arvind Thakur: We have been actually consistently reducing headcounts over the last three quarters. This has been in response to the challenges in the environment where like with other organizations we too need to improve our cost structures and conserve capital and in the process support our bottom line. So if you look at our utilization levels in the last three quarters, they have been improving consistently as a result of this. This quarter utilization is 84.5%, last quarter it was 81%, and the quarter before that was 77%. We have put a hiring freeze in the organization. That does not mean that we would not be hiring any people but we will be hiring people against the specialist role responsibility and key roles in the organization. Our preference would be to utilize people and move people within the organization to occupy those new roles. So headcount increase is not the focus of the organization. The focus of the organization is to deliver more from less. Also talked about the fact that going forward, we are looking at increasing the proportion of revenues from our nonlinear businesses. Nonlinear business as you know is a business where revenues increase, does not imply proportionate increase in headcount and this we are doing by strengthening our practices around managed services which is essentially infrastructure management services and revenues and services around asset based or platform based services


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which are as you know IPR intellectual property that we have put together in the organization to provide services.

Raunak Nagda: Sir and I would like to know at what rate have your hedged your dollars?

Arvind Thakur: Our dollars are hedged at an average rate of Rs. 41.51 per dollar.

Raunak Nagda: Sir, and the amount is 221 million, am I right?

Arvind Thakur: That’s right.

Raunak Nagda: Okay, thank you sir.

Arvind Thakur: You are welcome.

Moderator: Thank you Mr. Nagda. The next question is from the line of Mr. Ganesh Shetty from IFA, please go ahead.

Ganesh Shetty: Hello sir, good evening.

Arvind Thakur: Hello Ganesh.

Ganesh Shetty: Yeah, good evening sir. I would ask you just one question regarding our foray into SEZ business, can you please throw some light on this?

Arvind Thakur: Our foray into which business?

Ganesh Shetty: SEZ. Which you have already intimated to stock exchange regarding SEZ business.

Arvind Thakur: SEZ, oh okay, okay. Yes, as you are aware we are building a campus in Economic Zone just outside Delhi in Greater Noida. We hope to activate and move into the campus sometime in the next financial year. Currently, the facility is under construction. The construction would probably get over by March or April of this calendar year. As you know, fresh new business only can be put in the economic zone, so new business that we start getting in the next financial year we will see how we can move it into our campus which is in this Special Economic Zone.

Ganesh Shetty: Is there any plan to rent excess capacity to outside player or any other IT players? This is what my question is.

Arvind Thakur: At the moment, we are looking at utilizing this facility for our business.

Ganesh Shetty: And sir my second question is regarding corporate governance, after this Satyam episode there have been lot of problems and lot of anxious questions arising from everyone in this field regarding corporate governance. As we all know that our corporate governance is one of the best in the industry still whether there was any inquiry from our customers or from other investors, big investors regarding


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corporate governance or to reassure them regarding our corporate practices. Can you please throw some light on this?

Arvind Thakur: I think yes, if you look at the Satyam issue we treat it as an isolated incident in the industry, but it certainly does raise many issues and it is a cause of concern for the industry. We are proactively going to be having conversations with our customers on this issue. We had a similar situation a little while ago when there were terrorist attacks you know in Mumbai. At that time also we had proactively engaged with our customers to reassure them about the health and the prudence of doing business with companies such as ourselves. So we would be proactively engaging in this exercise with our customers.

Ganesh Shetty: Sir, are we willing to disclose more on this aspect like FDs in bank accounts which Infosys has recently declared so more disclosures from a company part of view so that investors as well as customers will be assured of our business that they are going to use to go forward?

Arvind Thakur: I am very happy to make those disclosures.

Ganesh Shetty: Thank you very much, sir. That’s all from me. Thank you.


Moderator: Thank you Mr. Shetty. The next question is from the line of Mr. Subramanian from UNIFI Wealth Management. Please go ahead.

Sarath Reddy: Good evening Arvind. This is Sarath Reddy, how are you?

Arvind Thakur: I am very well Sarath. Thank you.

Sarath Reddy: I have a question on the forex provision of 13 Crores. Could you please help us understand how the accounting of this is handled in relation and could you relate that to how the same would have been handled in the last quarter and how it will be handled in the next quarter if the dollar remains at the current level?

Arvind Thakur: Okay, so there are two elements of exchange fluctuation. One is the US Dollar which is what has been hedged and it’s been hedged at Rs. 41.51 to a dollar. The company’s hedged accounting policy is based on the recognition and measurement principles as enumerated by AS-30 for highly probable forecasted transactions and this has resulted in the operating revenue being reduced by 18.9 Crores during the quarter because rupee is further weakened against the dollar. So that is how the hedges are accounted for. The other element of volatility has to do with the pound. As you are aware the pound sterling has weakened quite significantly and as you know in accounting you take the rate at the end of the month to recalibrate your accounts receivables and payables and whatever gain or loss of foreign exchange takes place as a result of that, you know that needs to be shown as a gain or loss in the other income. So because revenues were at a different rate for GDP and the quarter closed at a different rate, the net loss when you recalibrate your accounts receivable and payables is to the tune of 13.9 Crores which has been provided for in


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other income. Okay, now last quarter the treatment was exactly the same. The hedging losses were Rs. 85 millions and there was a profit of 56 million in other income because of exchange forex gain. Did I answer your question?

Sarath Reddy: I wish I could say yes. I think I am slow on this. I do not understand. I might have to call and take a few minutes. I do not want to take everybody’s time.

Arvind Thakur: No, no we will be happy to explain it to you. So let’s try to clarify and maybe I will just hand this over to my CFO who can probably give you more details. Go ahead with your questions because this might be on the minds of others on the call as well?

Sarath Reddy: Okay let me try and phrase it also a little differently. So as I understand we have a total amount of x which we have sold and taking forward through futures contract at an average price of Rs. 41.5 per dollar. And during the quarter we had a certain amount of revenue or about 250 odd Crores approximately of revenues in different currencies. When we billed the customers we took to our top line at a certain rate based on the date of billing but come the end of the quarter for invoices raised during the quarter as well as invoices raised like suppose in the earlier quarter which still remained unpaid at the end of the quarter we had to mark to markets to be outstanding receivables and that created a provision of about 13 Crores. Did I understand correctly?

KTS Anand: Sarath, this is KTS Anand. When we transact any transaction like bill and invoices we raise at you know we have a process through which we have a monthly rate. During the month all the transactions are you know booked in books of accounts on those transaction rates which is at the beginning of the month. Which we follow throughout the month and every month it changes. And for example, this quarter the average rate was 49.65 and the revenue is booked with that and whatever losses which comes on effective hedges on account of which we have done it at the average rate of 41.51 whatever loss comes which is reduced as per the hedging accounting which is based on AS-30 from the revenue which is 189 million of rupees which we have done for this quarter. That is a portion which is called as effective hedges. There is a small portion of around 5% to 6% which is the ineffective hedges which is primarily non-assigned contract and options for which we do mark to market in the other income because that is the non-effective hedges. Apart from that every quarter end we recast the accounts payable and accounts receivable realized and unrealized both which during this quarter as you have noticed that there is a decline in the pound value and which has resulted at loss of around 139 million, while in the same when we did the recasting in the last quarter, there was a gain of around 56 million. So these are two parts, one is the effective hedge and the other is ineffective hedge and the third leg is the recasting of AR and AP, which goes to the other income. I think Sarath that’s a pretty comprehensive explanation.

Sarath Reddy: Yeah thank you.

KTS Anand: We can take it offline if you need some further clarification in this.


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Arvind Thakur: Okay we will do that and can you relate this to the next quarter? Can you give in what you know of current currency levels and your outstanding forward positions?

KTS Anand: If we assume, the currency remains at what level it is today there would not be any currency fluctuation in the bottom of… in the other income. As far as hedge portion is concerned there will be a similar kind of a loss in the next quarter as well.

Sarath Reddy: That is in the P&L you would provide another 13 Crores?

KTS Anand: No, not 13 Crores. There would not be any gain and loss because if we assume they currently remain at the same level.

Arvind Thakur: At the same level. Currency at the same level, just to clarify if currency at the same level the hedging loss will be of an equivalent amount provided the revenues are the same and there will be no gain or loss in the other income.

Sarath Reddy: Okay understood, so the revenue will decline by a similar value but P&L impact will flow through that adjustment and not through a separate other income entry?

KTS Anand: That’s right.

Sarath Reddy: I noticed that the net worth of the company is declined by about 20 Crores for the quarter between September ’08 and December ’08 from the presentation on the website. Is that a separate balance-sheet adjustment on account of all the outstanding forwards?

KTS Anand: That’s right. There is a cumulative loss on the account of effective forecasted transaction which we take it up in the balance sheet that is really on account of that.

Sarath Reddy: Now each quarter when you take something to P&L by adjusting the revenues the reversal happens from balance-sheet to P&L, is that right?

KTS Anand: Absolutely.

Sarath Reddy: Okay thank you very much. I think I understand. Otherwise congratulations, I think it was operationally a great quarter.

Arvind Thakur: Thank you Sarath.

Moderator: Thank you Mr. Subramaniam. The question is from the line of Mr. Dipen Shah from Kotak Securities. Please go ahead sir.

Dipen Shah: Hi Arvind, how are you?

Arvind Thakur: Hello Dipen, Happy New Year.

Dipen Shah: Happy New Year to you. Thank you. I had a few questions. First of all, once again coming back to your revenues, if we remove the impact of


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the hedging losses which is 18.9 Crores and 8.5 Crores from the previous quarter we are almost flat on the revenue said in rupee terms.

Arvind Thakur: That’s right.

Dipen Shah: Now, would we be able to translate it or maybe break it up into the volume growth and how much was the change in realizations and how much was the impact of the currency in that?

Arvind Thakur: Yes, in fact, you’ll notice again, because I am little approximate over here, you will notice that the currency gain which is because the US Dollar has increased and the GDP has declined. So the net currency gain would be to the tune of 4%, again little approximate maybe 4.1-2-3% but to that level. And the incremental hedging loss is also at the same level. So if you really look at volume growth, the number that you see over here it might be a reflection of the volume growth.

Dipen Shah: Yeah but that number is pretty much flat so would we say that there was a flattish kind of volume or decline?

Arvind Thakur: Volume growth would have declined.

Dipen Shah: Okay, so hedging loss is 4% and the currency can be 4 so there is a corresponding 4% volume loss.

Arvind Thakur: That’s right and just to explain to you why are we seeing that happening? In the beginning of our commentary I told you that the value proposition with which we have gone to our clients is to do more from less and essentially we moved work from onsite to offshore. What that does is it reduces your top line but improves our bottom line. So that is what we are seeing happening in this quarter.

Dipen Shah: Okay, because once again that would translate into a lower realization growth but a slightly higher volume growth so maybe a 4% reduction in volume growth could at least be a 2% volume reduction and maybe a slightly better realization performance, would that be correct?

Arvind Thakur: I would say 1% to 2%.

Dipen Shah: Okay, so that’s one part. Second part I just wanted to know was how much of the revenues actually came from in terms of US Dollars or Pound or Euro during the quarter?

Arvind Thakur: That would be in proportion of our geography mix.

Dipen Shah: So 36% will be US Dollars and 47% would be…

Arvind Thakur: GBP and Euros.

Dipen Shah: Okay that is fine. The other thing which I had in fact in terms of the order intake, we had a record order intakes so that’s pretty good news. Is this order intake from existing clients so that we can see that


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these are long term assignments or was there any one-off big order which we have to probably discount once again next quarter?

Arvind Thakur: No, in fact I think that, let me just throw a little more light on the intake and in fact let me just go back one more quarter so that you know we get a complete picture. If you look at our intake this quarter is 148 million and if I add last quarter as well it’s about 223 millions which in fact is approximately the same intake which we had in the whole of the last year. Right, so I think there has been a very focused move in getting our top clients to give us business because one of the threats was that they may consolidate and the business may go to some other people. I think what we have been able to very successfully do is to get them to consolidate with us. And also earlier contracts which were you know a year or six months we have been able to get extension of three years and five years. So I think the great thing about this quarter has been our ability to consolidate the accounts and completely address the immediate threats to business continuity. And let me give you a little more flavor. If I analyze you know this 223 million; of this 77% would be from our top ten clients, okay because that is where their focus has been so besides top ten there has been other intake as well but I am saying the real focus has been on the top ten clients and if I analyze this a little more 64 odd percent has been secured at the same rate for the balance period of the year and escalating in subsequent years, alright. About 14% or 15% has a decline in the current year so we said you know you have a problem we will give you a discount now but it should escalate from year 2 onwards. About 9% to 10% they have an immediate rate increase and cutting in for 5 years. Only about 4% or maybe 5% of the intake has a discount. So I think the second good thing is this quality of the intake in terms of protecting you know pricing going forward.

Dipen Shah: Okay that’s helpful and I was just basically asking because of the fact that during the current quarter we have seen that the contribution from the top clients has actually come down on a sequential basis and so that actually means that there has been an absolute reduction in revenues so maybe it has got to do with the cross currency fluctuation if that is the case?

Arvind Thakur: There are two reasons, actually one main reason. If we really look at our top ten clients they are actually same, the portion of revenue is exactly the same. But if you look at our top five clients you will find that the proportion has reduced. The reason for that is what I just explained to you. The secure future business of moving work offshore, earlier the ratio used to be 40-60 and now we are delivering at 20-80. So what that does is it reduces a top line but improves your bottom line.

Dipen Shah: Okay fine got that. And the other part was on the hedging once again. During the quarter we have seen US Dollar has appreciated and the Pound has depreciated against the Rupee. We have had a big 18.9 Crore loss that would have been on the dollar hedging. So as far as the $220 million is concerned is there no or very minimal kind of hedging against GBP and the Euro because we should have gained on that in case we had a large hedging in that?


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Arvind Thakur: Yes, in fact maybe I can give you the figure as well. Yeah actually very insignificant. Only 1.6 million GBP and 6 million Euros are hedged through derivative options.

Dipen Shah: Okay, so any reason for having such a low hedging when we have 50% of revenues coming from these currencies?

Arvind Thakur: You know you don’t have vanilla products to hedge against Euro and the GBP. You have to do it through derivative options and there are risks associated with that.

Dipen Shah: Fine, fine. So it’s better not to have them. Fine, got it and the last one is, the operating profit margin excluding forex loss was a significant 24%.

Arvind Thakur: It would be very healthy.

Dipen Shah: Yeah that was a significant improvement and I think a large part of it has to come through the currency impact but any other thing and how should we expect the margins to move assuming there are no further currency fluctuations?

Arvind Thakur: So I think if you look at you know improvement in margins, if I look at both last two quarters without hedging there is about a 3.5% improvement in margins. About 1.8 would be because of currency gain and the balance about 0.5 is because of the offshore onshore mix improvement and the rest you will notice our headcounts have reduced all our travel, rental all expenses are reduced which are operating efficiencies.

Dipen Shah: Okay and just a couple of book-keeping questions, first of all can we have the actual average billing rate onsite and offshore?

Arvind Thakur: You know Dipen we do not disclose that for competitive reasons.

Dipen Shah: Okay that is fine. The other part is what was the actual license fee during the quarter and the last quarter if we can have that figure?

Arvind Thakur: That we will have to take offline.

Dipen Shah: Okay and the third part is the Net Block has actually reduced on a quarter on quarter basis, so was that basically some of the assets becoming redundant and taking out of the balance-sheet?

Arvind Thakur: No, it has more to do with the hedging. Sorry…

KTS Anand: Dipen, it’s primary, there are some assets which are retired plus the assets which are in foreign currency like which are more owned and all that. Those are being recasted.

Dipen Shah: And how much was the balance sheet part of the effect hedging which is there in the balance sheet, the loss that is sitting in the balance sheet?


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KTS Anand: Net of deferred tax assets it’s around 155 Crores.

Dipen Shah: And this is spread over the next 30 months.

KTS Anand: That’s right.

Dipen Shah: Okay, okay. Thank you very much and all the best.

KTS Anand: Alright. Thank you.

Moderator: Thank you Mr. Shah. The next question is from the line of Mr. Abhishek Jain from CSIL. Please go ahead.

Abhishek Jain: Hello.

Arvind Thakur: Hello Abhishek.

Abhishek Jain: Yeah sir, congratulations on decent sets of number. I just want to know what is the revenue for Room Solution and what are the margins for Room Solution?

Arvind Thakur: Okay, room solution revenue is 301 million Rupees.

Abhishek Jain: Okay and that is due to drop of 8% or 10% sir?

Arvind Thakur: That is because of the Pound depreciation and the margin is 18%.

Abhishek Jain: That again, that is like last quarter it was 22% sir.

Arvind Thakur: That’s right because again there is a decline in the margin on the top line because of Pound depreciation so that’s gone all the way down.

Abhishek Jain: So second hello, sir you have booked a loss of 139 million due to GBP, is it’s majority due to Room Solution only sir?

Arvind Thakur: No all the Pound revenues, Pound AR and AP, account receivables and account payables so besides Room we do a lot of business you know in other parts of NIIT as well in the UK.

Abhishek Jain: And what is your tax rate sir?

Arvind Thakur: Tax?

Abhishek Jain: Tax rate, 13%-14%?

Arvind Thakur: Do we have the number?

KTS Anand: You know this quarter the tax rate is slightly higher because of the one transaction we moved our investment from mutual funds to the fixed deposits looking to the present economic environment. So that has costed us more but the profits are being affected by the hedging loss. If we remove the hedging loss then we are well in the range of 15%.


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Abhishek Jain: Okay sir thank you.

Moderator: Thank you Mr. Jain. The next question is from the line of Mr. Nihar Shah from Enam Holdings. Please go ahead.

Nihar Shah: Hello sir, congratulations on a good set of numbers. Just one quick question, you had two new clients coming in this quarter from EMEA. Could you give us some clarity on which vertical these clients were from?

Arvind Thakur: Yeah one is in travel. It’s a small airlines and the other is in insurance, that’s in Europe.

Nihar Shah: Okay and can you throw some light on what does the sort of new client pipeline look for you over the next few quarters in terms of big deals that you are currently working on?

Arvind Thakur: I think it’s quite health particularly in the travel and transport space we are seeing very good traction. We are also seeing our existing clients scaling. There was only one client where we extended our contract where I just explained we moved work from onsite to offshore where there is a temporary decline but we hope to pull that up over the next year as you know we will do a lot of business with them.

Nihar Shah: Okay and the third question I had was what kind of pressure are you seeing on pricing, you know we hear from some of the larger players in the industry that pricing is definitely under pressure. What kind of pricing pressure are you seeing right now?

Arvind Thakur: Enormous pressure in pricing, like I said all companies in any industry is looking at improving cost structure and conserving capital and so our clients are no different but I just shared with Dipen the quality of our new contracts where you have seen that we have been able to you know get escalations in almost every contract and also gave the proportion of you know where the escalation is coming and so on. So for us it’s been an ok situation, pretty comfortable situation.

Nihar Shah: Yeah that is exactly what I was coming for you know you have seen some sort of pricing increases from your new contract this quarter that you won you know what is difference that has you know allowed you, enabled you to get this pricing increase if you can just throw some light on that?

Arvind Thakur: I would like to but it is a trade secret. So I will tell you what we have done. It is very simple. We told our customers listen let us not discuss price let us discuss value. Right?

Nihar Shah: Right.

Arvind Thakur: And basically we want to position our strength which is giving more for less by positioning off shoring and we told them listen let’s offshore more: what that does to you is improves your cost structure what that does to us is improve our margins and hey by the way since we are providing you this great value also consolidate the rest of your business with us.


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Nihar Shah: Okay.

Arvind Thakur: So it is a very simple formula.

Nihar Shah: That is all from my side thank you.

Arvind Thakur: Yeah you are welcome.

Moderator: Thank you Mr. Shah. The next question is from the line of Mr. Ruchit Mehta from HSBC Asset Management. Please go ahead.

Ruchit Mehta: Hi good evening. Just a small clarification I mean typically once the quarter is just completed do you not reset your fixed contracts to the quarter end rate because by this position you will continue to lose money.

Arvind Thakur: Just come again. I did not understand.

Ruchit Mehta: Normally lot of IT companies at the end of the quarter they reset their hedges like you said that you said the end of the quarter the rupee was of 49 and your average is about 45. You know outstanding hedging contracts will get reset at 49. Now in every quarter you will need to reset it. Now if you do not reset it in every quarter assuming the rupee remains above your contracted rate you will lose money.

KTS Anand: Ruchit we are committed with the forward contract for over a period of 30 months as Arvind has explained in this part. We are committed with those fixed rates. Our average rate is 41.51 and we are committed for almost to 27-30 months you know in next 30 months.

Ruchit Mehta: So there is no way to reset the rates I mean if you can…..

Arvind Thakur: You can close the contracts and take the cash loss.

Ruchit Mehta: Okay.

Arvind Thakur: Right. Which probably not advisable.

Ruchit Mehta: Okay and in this quarter the FX loss of 13.9 Crores how much of this is the translation losses because you mentioned bulk of it was just the translation of your assets and liabilities outside of India.

KTS Anand: 115 million is the translation loss. This whole is the unplanned.

Ruchit Mehta: Okay and just to get a better sense of the growth environment you mentioned that the volume dipped about 4% in the quarter but how do you see growth growing forward I mean your order book is quite strong you have added very strongly but in terms of the you know the business cycle as such where do you see growth coming back when do you see it kick in more specifically on ROOM solution because now that you have launched a version of ROOM itself when do you see revenue kicking from there?


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Arvind Thakur: I think we will have to wait for that kind of optimism only in the next financial year.

Ruchit Mehta: Okay.

Arvind Thakur: I think the important thing is that the intake is good. So now they have to be executed.

Ruchit Mehta: And could you also clarify out of these $148 million of orders how much would have come directly or indirectly because of ROOM.

Arvind Thakur: Do we have ROOM’s Order intake? So we will try to get back to you on that.

Ruchit Mehta: Okay no problem thanks.

Moderator: Thank you Mr. Mehta. The next question is from the line of Ms. Atika Shah from Enam Securities. Please go ahead.

Arvind Thakur: We are going to answer that earlier question about $6 million is the intake from ROOM. Sorry please go ahead.

Kshitij Shah: Yeah this is Kshitij Shah from Enam. Congrats on the good operational quarter. Just wanted to know are we likely to re-visit our hedging policy going ahead and secondly at what level do you think the utilization would peak out?

Arvind Thakur: I think we are now reaching optimal levels as far as utilization is concerned probably just a few percentage points more is what we can expect but nothing more than that and as far as hedging is concerned we have already taken a call on the dollar. Unfortunately, nobody is able to predict which way the currency is going to move. So there are different views. Perhaps we are taking a little optimistic view where we believe that with oil price is coming down from where they are and as you know India has huge commitment on import of oil and the fact that perhaps India is the only economy which is growing where everybody else is in recession the rupee should strengthen and we should recover these hedging losses over a period of time.

Kshitij Shah: And what happens if you just close down all the hedges, the open positions that you have currently. Have you estimated the kind of cash losses you would suffer?

Arvind Thakur: In a particular quarter then there will be some real cash loss and you know that could go into how many Crores, we have not really computed that but it is going to be quite significant.

Kshitij Shah: Okay thanks sir.

Moderator: The next question is from the line of Ankur Arora from ING Investment. Please go ahead.

Ankur Arora: Hello sir couple of quick questions from my side. One thing I am getting back to hedging side. We have around 221 million of hedges


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outstanding and we have roughly around Rs. 155 Crores of loss sitting on the balance sheet. Am I correct on that?

Arvind Thakur: That is right.

Ankur Arora: Hi see now the thing is one can you just give me a breakup of what is the revenue breakup and also currency exposure especially we get that number that number okay 36% of revenue is coming is out of US, 47% from EMEA. Can you just bifurcate the revenue in terms of currency what revenue comes from these currencies roughly?

Arvind Thakur: I think at this point you have to just work with those numbers.

Ankur Arora: See the reason why I am asking the question because if your exposure to US is limited to only 36% and you have taken such a huge hedge on the dollar side with only 1.5 million hedging on the pound and 6 million on Euro I mean I am not too sure essentially it’s more of a trading bid than I mean it is really a hedging part because our revenue on the dollar side is not that high as the kind of hedges which we have taken on the dollar side. So I just want to clarify on that but essentially a view on them why essentially this kind of number ….

Arvind Thakur: Again, let KTS answer that question.

KTS Anand: Actually if you go back and when these hedges were taken the rupee was hovering around 36 and 37 and we took long-term contracts spread over these 30 months.

Ankur Arora: Sir I understand your point but the hedges have taken when the dollar was around 39 and 40 and your expectation was you know about 37 and 38 and for that you took the call. The point I am trying to make is that all the hedges essentially has been taken in the US dollar and here the period of 30 month as you are saying it is almost like a big-big trading call and more than a hedging call so to say because we are not having that kind of exposure on dollar so to say to really come...

Arvind Thakur: See the only vanilla hedge available is in dollars.

Ankur Arora: But then we can always take some hedging between the dollar and the Euro as well not in particularly Euro-rupee hedge.

Arvind Thakur: That is the second lag.

Ankur Arora: Yeah exactly true.

Arvind Thakur: So that’s exactly what has been done.

KTS Anand: Yeah that should be done but there is no vanilla product available as far as Euro and pounds are concerned. There are only options available which are leveraged options and the Board really never wanted to get into those exotic option so that is the reason we took


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only the dollar portion of the whole you know foreign-exchange leverage.

Ankur Arora: That we are implying is that there is no plain option available between Euro and dollar as well to compensate for this?

KTS Anand: That is right.

Ankur Arora: Okay thanks for that sir another is a question is on the balance sheet side and you mentioned that in the call correct me if I am wrong that the net block has fallen because of the re-statement of the foreign currency right? That is where around Rs. 14 Crores reduction in the net block which has happened. See there are a couple of important points on this. Even if you talk about GDP to dollar-rupee conversion the currency has appreciated about 6-7% over the quarter. Dollar appreciated this number just does not tally up especially in one way or another. Keeping in mind you have invested about Rs. 35 Crores in the CAPEX 20.6 Crores CAPEX on the building and 15.5 Crores on other assets in the opening remarks the comment was made. Can you just reconcile the numbers since I am not able to reconcile the balance numbers in the balance sheet?

KTS Anand: I will just tell you there are no additions as far as foreign exchange assets are concerned. If you remember about 2 years back, we acquired the company ROOM Solution and we have those assets which were at a lower rate that is more or less the assets are either in terms of the plant and machinery or land and building and land and building is only in India so they are not being affected by the currency impact. The currency impact in the gross block is to the tune of around 18 Crores as far as those foreign assets are concerned.

Ankur Arora: Rs. 18 Crores currency impact which has come in the last quarter itself

KTS Anand: In the gross block.

Ankur Arora: In the gross block from this thing itself.

KTS Anand: Yeah you see as gross block is 4,872 gone down to 4,786. There is a some addition of 110 million small sale of 12 million that is presently impacting around 183 million. So that is the reconciliation of gross block. And as far as depreciation is concerned if you get on to the net block it is hardly you know 140 difference, that is primarily on account of the depreciation and the currency impact on to the depreciation. If you need we can take up reconciliation.

Ankur Arora: Probably I will probably bother you again on this.

KTS Anand: Anytime.

Ankur Arora: Thanks a lot sir for this.

Moderator: Thank you Mr. Arora. The next question is from the line of Mr. Srinivas Seshadri from ABN Amro. Please go ahead.


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Srinivas Seshadri: Yeah hi congrats on a good set of numbers. I have a few questions. One is I just wanted to check on utilization you mentioned that there is a little bit more head room from here. Would you be able to I mean quantify what you can aim for in the near term may be in a couple of quarters from here I mean how much you can improve this by?

Arvind Thakur: I would just say probably a percentage.

Srinivas Seshadri: Okay and actually I just wanted to check I think your definition of utilization is more of a revenue capacity utilization and not really effort utilization. So would it be possible to share any numbers as to and what the effort utilization actually is running at this point of time?

Arvind Thakur: We do not compute that but you know if that’s of interest may be we should start doing this.

Srinivas Seshadri: Okay or would it be at least possible to share I mean what is the onsite and offshore utilization in revenue capacity terms at this point of time?

Arvind Thakur: Okay we will bear that in mind but my guess is onsite would be very-very high.

Srinivas Seshadri: Would it be like upwards of may be 95% or so.

Arvind Thakur: I would say yeah. I will put it at those levels onsite.

Srinivas Seshadri: And has there been any I mean change in terms of what assumptions we are using to compute utilization in the recent past which might actually distort the numbers a bit or is it like we have been following a constant definition for quite something?

Arvind Thakur: Yeah it is consistent.

Srinivas Seshadri: Okay I see okay. Secondly I just wanted to clarify on ROOM. You have mentioned that the consolidated margins including the off shore on a standalone basis what would be the margin for ROOM?

Arvind Thakur: Okay one second the standalone is 13%.

Srinivas Seshadri: I see 13% okay great and also on your order book position I think it seems like most of the order intake has been say extension of business or say renewal of business for a longer period of time. Would it be kind of possible to break out this $223 million order win over the last half year into may be completely new business which has come and may be renewals for a longer period of time I mean is it possible to give some kind of break up on this?

Arvind Thakur: See usually…oh you mean completely new business from existing client?

Srinivas Seshadri: Yeah it could be from existing or even new client. What I mean to say is where you will be required to stay deploy additional resources or it


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would basically add to your revenue base rather than kind of give more sustenance to it. I just wanted to check what would be the sustenance element in the order booking and what would be the incremental business in this whole thing.

Arvind Thakur: Yeah I do not think we will have that breakup, but for example when we had a supporting maintenance extension which we did with one client we said you know not only should we extend our contract but this other work that you are doing with other people also should happen with us, you know that is the consolidation. But exactly how much is that and how much is the normal business we do not have that breakup.

Srinivas Seshadri: I mean any rough sense Arvind you get out of whatever the large deals have happened on this?

Arvind Thakur: I beg your pardon just come again.

Srinivas Seshadri: I just wanted to check your own rough estimate on this based on may be whatever fairly the top 3-4 deals whatever you have done or what kind of number could this be?

Arvind Thakur: I think one thing there is to understand is when we are talking about this contract extension these are all confirmed businesses alright. Revenue is normally more than the intake you know which keeps happening in terms of additional work that comes over and beyond the capacities that they have committed. So, probably the other way I can say is if I look at the order executable over the next 12 months that is $99 million.

Srinivas Seshadri: Actually that is one thing which concerns a bit because that number has been kind of stagnant on a year-on-year basis even though I mean obviously your order intake has shot up quite a bit, I mean I was coming from that standpoint as to whether I mean is this more of a sustenance kind of order intake or there is a significant kind of incremental business element to this order intake?

Arvind Thakur: Yes that is what I just explained. The intake is you know the confirmed business over 3-5 years then every quarter you keep getting more, which is, you know over and above all this. So, this is the minimum volume commitment you know that you had so it is always good to see that. Last quarter, for example, it was 95 million now it is 99 million so it is good to see that improving.

Srinivas Seshadri: Okay I see. And just a couple of other bookkeeping question if I may squeeze on it? One is KT you said that you adjust whatever accumulated FOREX loss against the reserves. I just wanted to check where the contra entry for these goes in the balance sheet? Does it fit in the current liabilities?

KTS Anand: No it goes into….yeah that is right. In the other part it goes into the current liabilities, but let me explain it to you it is only for the forecasted transaction where we have the effective hedges.


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Srinivas Seshadri: Okay right. And just one more thing, I just noticed from your statutory filing that there is some kind of funding you have done for an employee trust in which there is a significant deficit now I just wanted to understand I mean one is what are the objectives of this trust in terms of I mean why it is setup and I mean why the company is actually giving loan to this trust other than the trust actually raising finance from beneficiaries and then investing? I just wanted to understand the whole mechanism of why the trust was established and how it is being funded and run?

KTS Anand: This is a NIITian Welfare Trust, which primarily works for the benefits you know welfare benefit of the employee.

Srinivas Seshadri: When you say benefit I mean what exactly I was not quite clear because the term is…

Arvind Thakur: There are a lot of schemes which the trust runs for example scholarship scheme, exigencies, medical schemes, severe dislocation schemes so they have several schemes that is what the trust runs.

Srinivas Seshadri: Okay. And just coming to the funding side obviously I mean this loan which you have given is this some kind of perpetual loan or is this like something that has to be paid back by the trust over some period of time?

Arvind Thakur: It has to returned by the trust in you know 3-5 years’ period of time.

Srinivas Seshadri: Oh I see, and how does…

Arvind Thakur: And they have taken a loan earlier which had returned once. And the trust makes investments and the returns it gets in those investments is what is used for staff welfare.

Srinivas Seshadri: Oh I see. Okay and just wanted to check have you…I mean given that there is a significant deficit now in the trust. Was there any kind of collateral or something which you got against the loan which you gave apart from whatever share which they have purchased? I am just concerned that there is some possibility of some write off on this account let us say this deficit does not improve over the period of the loan just wanted to check what would be the I mean options for you after that period?

Arvind Thakur: I would say this is an unsecured loan. I think the real reason why this point has been highlighted is because the market is volatile so I think once the market position improves the trust should be able to return this loan.

Srinivas Seshadri: Okay but in the worst case let us assume that there is a deficit which is basically happened over a lot of funds even in India and outside India then what is I mean the legal position in terms of what loan has been given I mean is it that they would liquidate whatever they have and partially pay the loan or you would have to give some kind of extension, just wanted to understand it from a risk perspective.


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Arvind Thakur: I suppose yeah they would need to liquidate and then return the money.

Srinivas Seshadri: Okay and you would have to probably bear the loss to that extent.

Arvind Thakur: Yeah.

Srinivas Seshadri: Okay and is this like I mean you mentioned that this trust is also for NIIT Limited employees, so is it like a joint funding by NIIT Limited and NIIT Technologies or is it like you are sponsoring the fund solely?

Arvind Thakur: It is for both.

Srinivas Seshadri: Okay. Alright thanks that is all from my end. Congrats on a good quarter again.

Arvind Thakur: Thank you.

Moderator: Thank you Mr. Seshadri. The next question is from the line of Mr. Ashwin Mehta from Mangal Keshav Securities, please go ahead.

Ashwin Mehta: Hi sir. Most of my questions have been answered just one bookkeeping question. What is the CAPEX expected for the next quarter?

Arvind Thakur: CAPEX for the next quarter is about 40 Crores.

Ashwin Mehta: And in terms of our SEZ campus what is the CAPEX envisaged over the next year?

Arvind Thakur: Of the 40 Crores 30 Crores would be for the campus in the next quarter and I would think another 20 or 30 Crores in the next year.

Ashwin Mehta: Okay thanks a lot.


Moderator: Thank you Mr. Mehta. The next question is from the line of Mr. Alpesh Lodhia from Edelweiss Capital, please go ahead.

Alpesh Lodhia: Good evening sir.

Arvind Thakur: Good evening.

Alpesh Lodhia: Sir what kind of revenue visibility do you have at present apart from 99 million order book?

Arvind Thakur: Well firm visibility is 99 million and I cannot comment anything beyond that.

Alpesh Lodhia: What kind of growth are you looking at going forward FY10?


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Arvind Thakur: Well again as you are aware NIIT Technologies does not provide you know that kind of guidance.

Alpesh Lodhia: Okay sir thank you.


Moderator: Thank you Mr. Lodhia. The next question is from the line of Mr. Ruchir Desai from Pioneer InvestCorp, please go ahead.

Ruchir Desai: Hi good evening. Just another question on ROOM solution. You did win a contract for your new platform in this quarter. I do not know whether you will be able to provide the value of the contract. And also two is in the earlier quarters you were mentioning that you expected some bounce back in ROOM solutions in the second half of FY09, what is your stance in the current market environment and do you see any possibility of recovery ROOM’s growth rate in FY10 considering the environment in your European market?

Arvind Thakur: Yeah okay so as you know we launched a new solution on 2nd October and good news is that we have acquired two customers. I do not think I have that liberty to disclose the contract value but good news is that within the three months of the launch we have two customers and had it not been for the pound weakening ROOM would have had a better quarter and I think we have a pretty strong pipeline going into quarter 4.

Ruchir Desai: So what is the confidence that you have on these deals closing? Have you seen any delay where they were supposed to be signed you know in the last couple of weeks but they have been delayed by a few months’ time by the client? Have you seen any delay in terms of new contracts?

Arvind Thakur: No in fact of the two clients one of them which is a subsidiary of Munich Re they have actually gone live so you know now we have a live case in a live situation which is always better than you know trying to talk to people on Power Point and demonstrations.

Ruchir Desai: Right, right. A just coming back to pricing you know you made comments that you know in your renewed contracts you have not seen pricing pressure and no discounts in fact you have been able to get some price increases but at the same time you also made you know comments that there is immense pressure on pricing so could you talk about you know certain instances where there have been out of term price cuts or pricing discounts which clients have asked and what is the quantum of that?

Arvind Thakur: Well I said you know if you recollect my conversation there is definitely a pricing pressure. What we have been trying to do is to get people’s mind off pricing to overall value and that we have been able to do quite successfully with our existing customers. Now when it comes to new business perhaps we may encounter pricing pressure because that is a reality in the market place at this point in time.


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Ruchir Desai: Yeah a couple of datapoints. You took Rs. 24 Million mark-to-market loss on to your P&L. What was the amount taken to your balance sheet this quarter?

KTS Anand: In balance sheet we have added you know net of deferred tax 352 million.

Ruchir Desai: What is the realized rupee-dollar rate for the quarter? Would it be 41.51 or would it be lower than that?

KTS Anand: Like this time it is 49.65 which is the average rate of realization but we have hedged it at on average of 41.51.

Ruchir Desai: Correct. Okay fine. Thank you.

Moderator: Thank you Mr. Desai.

Arvind Thakur: Okay. I think we will be able to take only one last question now.

Moderator: Sure sir. The last question comes from the line of Mr. Ritesh Rathod from UTI Mutual Fund, please go ahead.

Ritesh Rathod: Yeah sir, can you first tell us do you have any customers which are overlapping with Satyam’s customer as of this point of time and have they approached to you for any business queries or transition of the current business?

Arvind Thakur: I think we may have may be one or two customers which are overlapping, but by and large our business does not overlap with Satyam.

Ritesh Rathod: And second question on this trust you said they make investments so what sort of investments they make? They make only equity shares investments and other than NIIT Tech has anybody else provided funding to this trust?

Arvind Thakur: Both NIIT and NIIT Technologies have provided funding and their investments are in stocks of NIIT and NIIT Technologies and others.

Ritesh Rathod: And how about our current cash where is it placed and what sort of banks can you disclose on that front?

KTS Anand: Yeah listen the fixed deposit with you know with all scheduled banks like Indian Overseas Bank, Oriental Bank of Commerce and all that. It is nothing with the private bank per se. Not much in the private banks per se.

Ritesh Rathod: So being a good amount of cash why do you have loan on our book I did not get it? Can you just reconcile this thing?

KTS Anand: The loan if you look at it is primarily we took it in UK par acquiring ROOM Solution which happened year before which we are repaying it on the regular basis and apart from that there is a small loan which we take it for you know vehicles and all that. During the quarter I


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mean we have utilized some working capital for the purpose of you know some payments here and there but it is not much, it is hardly 15 Crores.

Ritesh Rathod: And sir final one how about the CAPEX done till date this year 9 months? Can you just make out this month and the FOREX loss in the balance sheet is 155 Crores right?

KTS Anand: Yeah. That is right.

Ritesh Rathod: 155 and how about CAPEX?

KTS Anand: 155 Crores that is you known net of deferred tax.

Ritesh Rathod: And gross would be how much?

KTS Anand: It is 173.3.

Ritesh Rathod: And how about CAPEX done till date I mean in this year FY’09, nine months?

Arvind Thakur: It is 100 Crores.

Ritesh Rathod: So we expect another 40 Crores would be 140 Crores CAPEX for 09 right?

Arvind Thakur: That is right.

Ritesh Rathod: Okay thanks. That is it from my side.

Moderator: Thank you Mr. Rathod. Ladies and gentlemen that was the last question. I would now like to hand the floor back to Mr. Arvind Thakur for final remarks.

Arvind Thakur: Thank you very much for participating in this call. I really appreciate your comments and questions and let me take this opportunity to wish you all a very Happy New Year and all the best in the coming times. Thank you very much.

Moderator: Thank you very much Mr. Thakur. On behalf of NIIT Technologies Limited that concludes this evening’s conference call. Thank you for using the Chorus Call Conference Service and you may now disconnect your lines. Thank you.

“NIIT Technologies Limited Conference Call”Chairman, Rajendra Pawar, CFO KTS Anand and Investor Relations Manager, Mohit. I would like to begin by just commenting on the environment

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