{"id":1156,"date":"2020-08-23T21:54:00","date_gmt":"2020-08-23T21:54:00","guid":{"rendered":"http:\/\/oscillationss.blogspot.com\/?p=1156"},"modified":"2020-08-23T21:54:00","modified_gmt":"2020-08-23T21:54:00","slug":"niit-ltd-disruption-in-training","status":"publish","type":"post","link":"https:\/\/oscillations.in\/?p=1156","title":{"rendered":"NIIT Ltd- Disruption in Training"},"content":{"rendered":"
\n<\/p>\n
\nI am just putting a short note on NIIT as I think it may have a run very
\nsoon. So due to lack of time I am just touching some of the most relevant
\npoints and will share the detailed study at some other time. First time, I advised
\nNIIT at this blog in 2015 at 39 (Click here)<\/a> and now at 120 I think it is still a great buy. Off late, i am buying it regularly from 80 levels and picked last week at 100.<\/span><\/div>\n
\n
<\/span><\/div>\n
\nPeople still consider NIIT as an IT education firm offering IT courses
\nand as Indians care more for certificates and degrees than authentic knowledge
\nso no doubt this image of NIIT is a drag at least for the share price. NIIT is
\nthe one who turned millions of Indians into Techies in the 90\u2019s when our Govt feared
\nhow they would survive with huge population. Our education system and
\nuniversities were not capable of technical education to masses but the likes of
\nNIIT and Aptech brought a big revolution in tech education in India. They
\ndesigned and developed their own content for Indian market and managed their
\nbusiness with precision and professionalism and they were one of the big
\nreasons that Indians tasted success in IT. But
\ncurrent avatar of NIIT is not about IT education. It has modified its approach
\nat the right time. Our world now is changing very fast and skills are getting
\nextremely specific. So degrees are no longer that important as skills are. That\u2019s why IT\/Tech education is moving online as more and more people are doing these
\nonline courses for developing a particular skill for a particular job which is
\nnot there in university degree as there the focus was more on theory and
\nconcepts. <\/span><\/div>\n
\n
<\/span><\/div>\n
\nSo, online tech education is disrupting the learning and education
\nmodels. A great revolution is happening in tech education and the likes of
\nPluralsight, Lynda and Udacity are the new tech unicorn of the US with revenues
\naround $100-150 million (700-1000 cr). But they have big daddy in the form of
\nSkillsoft with revenues of around $ 500 m to $1 Billion. Cornerstone onDemand
\nand Topyx are the other big names. These online tech education companies are
\nmostly into B2C model even when they are having subscriptions from
\norganizations. And these companies have changed the lives of many with their
\ncheap education services\u2026both of the content providers and students who can
\ntake up the courses and do something better with their life regardless of their
\ncurrent education and economic backgrounds. However, NIIT was also having a similar business
\nunder Element K and it sold of this business to Skillsoft in 2011 for some
\n500-600 cr. So it may look surprising that NIIT sold that high growth business. But I think
\nthat it was a wise decision because that enabled NIIT to cut its debt however most
\nimportantly there was a strategic decision at NIIT to leave that business to
\nfocus more on Managed Training Services business (MTS).<\/span><\/div>\n
\n
<\/span><\/div>\n
\nManaged\/outsourcing Training Services- next big thing in corporate training
\nand learning<\/span><\/span><\/span><\/u><\/b><\/div>\n
\n
<\/span><\/u><\/b><\/div>\n
\nThere was and still is high competition in online tech education
\nsubscription based business model. But big corporations like Citi, Shell, Rio Tinto, GE, Toyota
\ndo not opt for these online portals. They need something more serious and
\nconcentrated and current trend is for outsourcing their training function to
\nthe experts in this field. For these large corporates, training is not core to
\ntheir business but a necessity for improving the skills and productivity of
\ntheir employees in today\u2019s highly competitive landscape. So development, management
\nand delivery of training is a big costly distraction for them. But for training
\nmanagement companies this is their core business and so they are highly skilled
\nfor this important task. HR department people are not skilled in knowing and
\nunderstanding the complex training and learning needs of employees. In every HR
\nmeet, there is big noise around machine learning, Artificial intelligence,
\naugmented reality etc. which are the current buzz words in the field of high end information technology but nobody is aware of how to implement these breakthrough
\ntechnologies. <\/span><\/div>\n
\n
<\/span><\/div>\n
\nSo now is the time to outsource complex training and learning task to
\nthe professionals. Further, some businesses with high regulatory and compliance
\nrequirements such as oil & Gas, Pharmaceuticals and banking have very
\ncomplex training and learning requirements and they have no scope for any
\nmistake in tight regulations as associated costs are very high like one mistake
\nin complying with the requirement of keeping full records of data\/tests for a drug
\nmay result in big losses in the form of cancellation of manufacturing license
\nor recall of medicines from the markets. So there is scope for significant value addition by MTS professionals in the form of high quality training\/learning and cost savings. And whenever a process can add create value for itself in the entire business chain then it has a viable high growth business model.<\/span> US spends the most on training of its
\nemployees and now the trend for outsourcing the same is rising. India, as
\nexpected is still a very small market for MTS but the pace is going to increase
\nin India because Indian employees are terribly short of training.<\/span><\/div>\n
\n
<\/span><\/div>\n
\nAnd I feel this is where NIIT has made a brave and visionary decision
\nbecause NIIT had everything to support and motivate this business because of
\ntheir 30 years\u2019 experience in developing content and running a software
\ndevelopment company (NIIT tech). And if we see the results; it prove that NIIT
\npromoters were right in their vision. MTS is growing fast across globe and NIIT
\nhas some 40 clients globally with the likes of Shell, Citi, Riotinto, Nokia,
\nABB, Sanofi, GSK, Signify, Ebay, Skillsoft, Hitachi etc. In MTS, NIIT does everything
\nfrom content development, technology services, delivery, selection of third
\nparty suppliers, consultancy etc. NIIT has managed to grow their MTS\/CLG business
\nfrom 85 cr in 2011 to 700 cr in 2020. <\/span><\/div>\n
\n
<\/span><\/div>\n
\nWe have not yet counted the possible growth of India business in CLG.
\nIndian employees are terribly under trained; our tech students are markedly not
\nadequately trained in practical aspects. Earlier, Indian companies survived due
\nto low competition but now we\u2019ll see high investments in training from here on.<\/span><\/div>\n
\n
<\/span><\/div>\n
\nIts skill and careers business where it offers IT education has revenues
\nof some 230 cr. As compared to India, NIIT is a big force in IT education in
\nChina and has achieved great results in training around half a million students
\nin around 100 Chinese universities.<\/span> In China, <\/span>Job placement rate for students trained by NIIT
\nis over 90 per cent. I feel with proper planning and renewed focus NIIT should
\ndo well in India again as now the focus on skill based digital education is
\ngrowing in India and NIIT has one of the best content in IT education. Using training
\ncenters for IT education is a very costly choice and so not suited for all. But
\ndeep internet penetration is going to raise the demand for online IT courses in
\nIndia.<\/span><\/div>\n
\n
<\/span><\/div>\n
\nAny acquisition in Tech\/digital education space is the next big growth Catalyst <\/span><\/span><\/span><\/u><\/b><\/div>\n
\n
<\/span><\/u><\/b><\/div>\n
\nIn mar-2019 NIIT sold its 23.5% holding in NIIT Tech for some 2100 cr.
\nAfter paying taxes, buy back and dividends they have around 1200 cr in books as
\non Mar-2020 and this is where the real game will begin. I am sure that NIIT is
\ngoing to do some big acquisition in the field of tech\/digital education or MTS in
\nthe near time. Covid crisis may even help them in finding acquisitions targets
\nat lower value now. Traditional education delivery models and corporate training
\nmodels are going to see huge disruption in the near future and now is the right
\ntime to build the scale. That\u2019s why I think the best way to use the proceeds
\nfrom the stake sale is to build a new age business. Even the likes of Zee learn
\n(kidzee) will be a great fit for NIIT. Its promoters already have one of India\u2019s
\nbest IT education universities in Neemrana, Rajasthan (NIIT University). <\/span><\/div>\n
\n
<\/span><\/div>\n
\nIt has 1200 cr cash in books and at CMP of 120 it is trading at a market
\nvalue of 1700 cr so there is a huge valuation gap and margin of safety. Its EBITDA is around 100 cr
\non revenues of 900 cr and with further growth in revenues operating leverage is
\ngoing to come into the picture. Its promoters have raised their stake from
\n31.5% last year to 35.3% this year. Also recently, MIT has picked 2% stake in
\nNIIT and it already holds some 2% sake. Dividend yield of 8% is great and this
\nis going to be stable in the future.<\/span><\/div>\n
\nSo it has some strong high growth catalysts in the future in its business- 1) big
\norder wins in MTS business (right now orders for some 1700 cr in hand) 2) scaling up its IT education business 3) Any big acquisition
\nin Tech\/digital education field and I just feel that we are going to see all 3
\nhappening very soon. But as much work is yet to be done in these 3 catalysts and from hereon it will get most of its value from future performance (cash in the books is almost discounted and future is uncertain as of now) so treat this one as risky option and invest only riskiest capital into it.<\/span><\/div>\n
\n
<\/span><\/div>\n
\n(Views are personal and should not be taken as a
\nrecommendation for buying or selling a stock. Stock markets are inherently
\nrisky so kindly do your Due Diligence before investing. I am not a certified
\nSebi Analyst and holding the shares discussed in this Post. Reach me at
\noscillationss@yahoo.in).<\/span><\/span><\/span><\/div>\n
\n<\/div>\n

<\/div>\n","protected":false},"excerpt":{"rendered":"

I am just putting a short note on NIIT as I think it may have a run very soon. So due to lack of time I am just touching some of the most relevant points and will share the detailed study at some other time. First time, I advised NIIT at this blog in 2015 at 39 (Click here) and now at 120 I think it is still a great buy. Off late, i am buying it regularly from 80 levels and picked last week at 100. People still consider NIIT as an IT education firm offering IT courses and…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1156","post","type-post","status-publish","format-standard","hentry","category-blog"],"_links":{"self":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/posts\/1156","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1156"}],"version-history":[{"count":0,"href":"https:\/\/oscillations.in\/index.php?rest_route=\/wp\/v2\/posts\/1156\/revisions"}],"wp:attachment":[{"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1156"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1156"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/oscillations.in\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1156"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}