NIIT Tech signs $85 mn JV pact with Morris Communications

NIIT Tech signs $85 mn JV pact with Morris Communications

New Delhi: Mid sized information technology (IT) firm NIIT Technologies Ltd has announced a joint venture with Morris Communications, US-based media conglomerate, marking its entry into the media vertical. Named NIIT Media Technologies Incorporated, the joint venture, in which NIIT will have 60% stake, will provide integrated IT and business process outsourcing (BPO) services the group companies of Morris and is also targetting to service other media companies.

To start with the partnership will result in a revenue of $85 million for NIIT over a period of five years from servicing Morris companies. The venture will entail a total investment of $3.2 million out of which NIIT will invest around $2 million through cash infusion while Morris’ contribution will be through transfer of its exiting assets – IT infrastructure, people and application landscape — to the new entity.

Steve K. Stone, senior VP and CFO of Newspapers and Shared Services at Morris Communications said in a statement issued by NIIT that the partnership will significantly reduce the company’s costs of operations and services. Morris’ group companies were earlier being serviced out of in-house firm in the US and post the partnership, the work can be outsourced to NIIT’s operations in India, which will make it cost effective.

Explaining the rationale behind the move, Arvind Thakur, CEO of NIIT said for the company the partnership means an entry into the “emerging" media sector, in which NIIT is currently not present. "The domain know-how of the media sector is coming completely from Morris, which will help us tap into other companies as well," he said.

Srishti Anand of brokerage firm Angel Broking said that it is “good to diversify" for NIIT which is too concentrated on travel vertical. “The media sector has started spending significantly on IT as companies are looking at digital consumer behaviour, online portals and digitisation etc." She added that companies such as HCL Technologies which have been focussing on the vertical have been doing very well.

The centre will be in Augusta, Georgia in the US and will mark NIIT fourth centre in the US. Thakur also said since it is “low-cost centre", it could be used for servicing NIIT’s other customers as well, if need be.

Considering that there is transfer of assets involved, the revenues from the deal will start accruing from the October- December quarter of the current fiscal, Thakur said.