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SSI to sell training centres to franchisees

SSI Ltd, a leading Indian software education and services firm, is in talks with its existing franchisees to sell some of its company-owned computer education centres, the firm's chief said on Thursday.

"It is part of a long-term strategy to further growth of the education business through a franchise model, where SSI focuses on strengthening the brand, content and supply chain," chairman and chief executive Kalpathi Suresh told a news conference.

Suresh said the move would involve selling a majority of the 42 centres owned by the firm to franchisees. He said the action would significantly boost cash flows and reduce capital expenditure on the education business.

He declined to put a specific figure on the capital savings or one-time earnings the firm expected to gain through the move.

"We intend to do this in a phased manner over the next two to three years and will primarily look atselling these centres to our existing partners. We will however retain a few centres in some key regional cities."

SSI, which has computer training partnerships with leaders like Microsoft, Oracle and Sun Microsystems, currently operates 601 centres in India and 18 overseas centres spread across Asia, Africa and the Middle East.

The firm's education business contributed over 55 per cent of its operating income in the third quarter ended March. The firm's earnings per share rose 60 per cent to Rs 12.98 in the quarter.

SIGNIFICANT LAYOFFS UNLIKELY

Suresh said the firm did not foresee significant reductions in the 1,300-strong workforce at its education business.

"We expect to minimise the layoffs by redeploying as many people as possible in other roles in the division or moving them to areas like software development or giving them a choice to continue to work at the centres with our franchisees," he said.

The firm said the 559 franchisee-run centres, including 232 centres partly-owned by the company and run under an educational service provider model, currently contributed two-thirds of the revenue in the education business.

"We expect revenues from the franchise operations to continue to grow steadily in the coming years as we move to have our ESP centre operators also become full-fledged franchisees by buying the centres over the next four to five years," Suresh said.

Suresh said the firm's operating margins in the education business would also change in the next couple of years during the course of the transition.

"Our operating margins in education today are at an average of 26 per cent, varying from 34 to 35 per cent for owned centres to 15 to 20 per cent for franchise centres. Over time the margins may lower as a percentage but the size of profits in the education business should continue to grow year-on-year," he added.

SSI's shares closed at Rs 293.15 on Thursday, up 0.8 per cent.

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