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What Baring Private Equity Gets From NIIT Technologies Buyout

How NIIT Technologies stacks up against its peers.

An employee works on a laptop . (Photographer: Dhiraj Singh/Bloomberg)
An employee works on a laptop . (Photographer: Dhiraj Singh/Bloomberg)

Baring Private Equity Asia was one of the contenders to buy VG Siddhartha and the Coffee Day Enterprises’ stake in Mindtree Ltd. before the Larsen & Toubro Ltd. group announced its plans to take over the mid-sized information technology services firm. But that hasn’t deterred Baring from investing in other Indian IT firms.

The private equity firm said on Sunday it will acquire 56 percent stake in NIIT Technologies Ltd., including an open offer for 26 percent shareholding. This wasn’t Baring’s first acquisition in the IT sector. The company, through its investment arm HT Global IT Solutions, owns 62.7 percent stake in Hexaware Technologies Ltd.

Here’s how NIIT Technologies stacks up against its peers:

Revenue Growth, Operating Margin

NIIT Technologies’ revenue growth may have slowed to a four-year low, but it’s expected to grow faster than Hexaware and Mindtree over the next two years, according to Motilal Oswal’s estimates. Among the three companies, Mindtree has the highest annual revenue while NIIT Technologies leads when it comes to earnings before tax, depreciation and amortisation margin.

Earnings And Valuations

NIIT Technologies is the tenth-largest information technology company by market capitalisation but it’s the fourth-most expensive stock on price-to-earnings basis projected for the year ended March 2019, according to Bloomberg. It’s a notch cheaper than Mindtree but costlier than Hexaware by that yardstick.

That difference falls when considering projections for the year ending March 2021.

Verticals And Geographical Reach

Hexaware and NIIT Technologies’ revenue largely comes from banking, financial services, insurance and travel & transportation verticals, with one difference. While the contribution of insurance to NIIT Technologies is higher, banking and capital markets is Hexaware’s biggest vertical.

North America is the largest market for both the companies, contributing 49 percent to NIIT Technologies’ revenue. Over three-fourths of Hexaware’s revenue come from the region.