NIIT Tech has large exposure to high-growth niche verticals such as insurance and travel. New service lines would boost non-linear growth and lead to improvement in realizations. NIIT Tech has been able to achieve volume growth in Europe despite economic headwinds.

Recent wins in the Indian market: Five-year BSF contract of Rs2,280mn;

Good performance in the BFSI and travel & transport verticals, which contribute ~73% to revenue;

Large untapped opportunity in the APAC markets, which are expected to be highest IT spenders in CY11;

Strong order book and high growth in top 10 clients; and 5) Stable EBIDTA margins at 22% in the IT services business, highest among mid tier peers.

Our top-line estimates vary from consensus by ~4.4%, underpinned by stronger volumes and modest uptick in pricing for FY12. Our EBITDA margin estimate for FY12 is 22.1% higher than consensus estimate of 20.7%. Our FY12 EPS estimate is 13% higher than consensus.

1) Slower recovery in Europe; 2) Sharp currency volatility; 3) Higher attrition and wage increments; and 4) Project delays and cancellation of government contracts.