CL Educate Limited (CLEDUCATE) Earnings Call Transcript & Summary

Thank you. Good afternoon, ladies and gentlemen, and welcome to CL Educate Limited's Q2 FY '24 Analyst Call. My name is Arjun Wadhwa. I'm the CFO of CL Educate, and I'll be your host today. Once again, I welcome you to our homegrown Metaverse platform called VOSMOS. I think this is the seventh call in a row that we are hosting through the platform, and I'm sure by now all of you would be very familiar with the same. The video we just showed you as a precursor to this session was the platform that we have developed for HDFC Life. We have quite a few such interesting use cases now for our platform. And I encourage you to follow our Kestone business Instagram handle to get regular updates on what our MarTech business is doing. We'll surely share that link with you. And if you've joined us a little late and have missed the video, we'll put up that video and a few more on our investors zone and you can take a look at these at your leisure. This analyst call, as always, will be recorded, transcribed and made available in the investor zone on our website within the next 24 to 48 hours. Should you have any questions at any point in time during the session, I request you to just put them in the chat window on your screen, and we'll surely take them up come the end of the session. Joining me today on this investor conference call is Mr. Satya Narayanan, Founder and Chairman of CL Educate; and Mr. Nikhil Mahajan, also 1 of our Co-Founders and the Executive Director and Group CEO of our Enterprise business. I'd like to start by inviting Satya to share a brief overview of our business and key focus areas for the rest of the year ahead, after which Nikhil will run us through the presentation, spending some time on the financials and business and corporate updates, following which we'll take up your questions. Over to you, Satya.

Thanks, Arjun. Good afternoon, everybody. I hope I'm audible, Arjun? Okay. So I'll take a few minutes to give us a quick broad sweep of the recent past, as well as a little bit of a commentary on how I see H2, and also perhaps a little bit of observations on the medium term, let's say, next 4 quarters or so. The highlights of H1 on the EdTech side was a lot around 1 good news is the update about the CAT takers going up to 3.3 lakhs from the last 5, 7 years, where it was hovering around between 2.2 lakh and 2.6 lakhs. So that's 1 good early news. We will know how many of those 3.3 lakh students would take the exam. And that would augur well for us for the next 4 to 8 quarters when students are beginning their preparation for CAT '24 and CAT '25. That's 1 broad update. The second is law exam, as you know, and we did cover it in the last quarter also, law exam CLAT moved from the May, the summer exam season to December. That has caused a little bit of a flux in terms of seasonality for students. As you know, law is taken by students who are in Grade 12. So the clash between the preboards and the seriousness of boards and all of that, that has come in the way this year. And what it will result is in the recalibration of the seasonality in students' and parents' minds. So what will happen in our view is that the long-term programs, which will be a 2 year or a 12-month -- 24 month or a 12 month program, those are likely to have a lot more takers as we move into the future. And the crash program used to be a large contributor in the -- right after the board exams are over, a 60-day program, that literally has vanished from our summer season for law. As you know, the job market is challenging, especially the mass recruiting industry, which is IT and IT-related. That also is likely to be a good news. Because that is the time when students, if they don't get a good job, what they do is to take a competitive exam such as CAT or GMAT or GRE and they pursue higher education, so that they postpone the job taking period in their careers by a year or 2 years. That also normally has got a negative beta to the job versus competitive exam variables. On the H2 part for Test Prep, the focus will have to be on CUET for 2024 season, along with the IPM crash, which also is the 2024 season. That is 1 very important thing. And as we look a little bit longer into the horizon, there are going to be benefits coming out of the NEP-led changes that have happened. Those are throwing up some good opportunities. We are cued in there. For example, the number of students coming into India by taking the Indian competitive exams, that is something that we grow over the next 4 to 8 quarters. The number of students from India going abroad, that is going up, that is likely to go up by a factor of 70% to 100% over the next 4, 5 years, which is from about 750,000 to 1.4 million. That -- those are the estimates. So our emphasis and our focus on building out our international bouquet of products also is currently underway, but we will see results of it more in the medium term. A couple of broad points on Kestone side is that -- and you will see the evidence of what I'm saying when Nikhil takes us through that. The internationalization of Kestone is gathering traction. You will hear more about it. And what it also does is to improve the profit margins compared to the India services that they provide. The other thing also Kestone is doing very, very consciously is to slowly cut down on the low EBITDA/ pass-through businesses that we used to take earlier. And that's why you'll also find that while the revenues, some revenues we are compromising consciously, but the profitabilities will be going up. The Metaverse, a sample office that you saw, it is still at early stages of incubation, but the high-quality organizations who are testing it out, who are doing the early betas with us and early sign-ups. I think those augur well, and Kestone in the medium term could end up having its own strategic path to which we are committed. So these are some of the broad brush observations that I wanted to cover. I'll pause here, and we will come back to respond to any questions at the end of the presentation. Back to you, Arjun.

Thanks, Satya. Nikhil, I'd like to invite you in now to cover some of the other areas before we throw things open for the Q&A. Yes.

Thanks, Satya. Thanks, Arjun. Please, confirm if my voice is clear and audible?

Yes, Nikhil.

Okay. So let's jump into the financial update straightaway. So as compared to last year, in the first 6 months, we have seen steady but definitive progress, with our revenues growing about 15% half year to half year, EBITDA growing about 22%, and PAT and EPS growing about 18% in the equivalent comparative period. For the PAT and the EPS, I would just want to highlight that we have adjusted the figures for the exceptional gain which had occurred in the first half of last year, on account of a sale of a land parcel. And the figures which you see on the screens are actual apples-to-apples business performance out of the 2 lines of businesses which we have. So we are showing consistent revenue growth, from EBITDA growth and matching PAT growth during the half year over the previous year. The company had gone net debt-free about 4 quarters ago. We continue to be debt-free totally -- net debt-free totally. We currently have a gross cash of over INR 110 crores, and we have current borrowings, which we use, CC limits from a couple of banks, they have marginally increased as compared to March '23 because of seasonal requirements of greater project execution in Kestone in both India and Singapore. But due to the execution of those projects, the collections, which will come in the month of November and December, we will see, again see a dip in the borrowing figure in Q3 and Q4. And we -- we expect to have a stable borrowing figure of around INR 10 crores to INR 11 crores in March '24. So our overall cash position will stay at around INR 9,500 crores at net cash level, depending upon how much cash is accreted through operations and how much buyback we are able to complete, how much cash gets deployed in the remaining period of the buyback, which I will come back towards the end of my session. Here's a bit on our segmental performance. While our segmental revenues, which is the operating revenues, have grown 12%, our segmental EBITDA has grown 23%, which clearly indicates an expansion of our EBITDA margins across businesses. You would also notice the MarTech EBITDA has grown: despite more or less flattish revenues in the MarTech business, our EBITDA has zoomed by about 60%. And that is predominantly driven by a significant repivoting of businesses -- of the business mix and the revenue mix, and what Satya mentioned in his introductory remarks about letting go of certain low-margin business support services business, and we are gradually pivoting away and focusing on developing the core high gross margin business and letting go of the low margin, not so profitable BSS business. And that comes at an obvious cost of a slower revenue growth or a marginal revenue contraction. But on an overall basis, I think that's a positive move and has happened with a lot of effort in bailing out new customers and focusing only on the core business of Kestone. Also, as Satya mentioned in his introductory remarks, about 30% expansion in the CAT registrations, which we expect that some bit of the expanded market of test takers will result in an expanded CAT students coming in for prep assistance for CAT '24 and CAT '25 at the beginning of the new season, which starts in January. So we are extremely positive of the market expansion for Test Prep in CAT segment for CL in the next 4 to 6 quarters. Arjun, can we move forward. Okay. Now that was H1 to H1 comparison, now on our Q2 quarter-to-quarter comparison, our revenues in quarter 2 have been almost flat, but our EBITDA has increased by about 25% on flatter revenues, indicating a robust margin expansion. And here again, the EBITDA growth in EdTech business is about 17% and the EBITDA expansion in MarTech business is about 65%. The reasons for a flattish, not so aggressive revenue growth in EdTech has been, as Satya outlined, realignment of the academic season with the CLAT exam moving from the summer exam to December. And I think that is -- that market will take another 2 to 4 quarters to stabilize in terms of students pivoting from crash course, which accounted for about 40% of our enrollment when the exam used to be in May, to longer duration, 12- to 24-month programs as we go ahead. And that will have a significant positive ruboff as the longer duration programs are sold at a higher ARPU and obviously come at a higher margin. And this would result in both revenue expansion as well as margin expansion as we go into the next 4 to 8 quarters. So it might seem for a short term a slight hiccup, but from a long-term business perspective, I see an enabling factor, which would enable a migration from short-term crash programs to long-term 12- and 24-month programs, enhancing both revenue as well as margins. A brief deep dive into our EdTech business. Our H1 volumes have increased about 16%. Billing is about up 14%. The H1 to H1 pricing is almost flat. [ Last year ], while MBA billing has increased by 19%, the CAT taker registrations, the numbers of which came out only in October, has seen a 32% increase. This currently has not reflected in the CAT takers coming from Test Prep assisted to either us or to the key competitors in our market. And we expect that the rub-up of the expanded CAT market would start reflecting in our numbers over the next 4 to 6 quarters. In the UG segment, which basically comprises law, CUET, IPM, BBA, engineering, medical/tuition, et cetera, basically catering to students of Grade 10th, 11th and 12th, our enrollments are up by about 35%. IPM and the BBS segment has seen a massive growth, almost of 80%. And the law numbers have held for us, despite the lower CLAT test takers. And last year, CLAT market saw a slight decline. And as the student community realigns its priorities between the CLAT market and its Board prep, I think over the next 4 to 6 quarters, it will find a stable middle ground, and we will again start to see an expansion in the CLAT test takers. Student mobility business has been growing at a fast clip, with almost 90% plus growth on a half year to half year basis as compared to last year. We expect this -- this business is going to be a fast-growing business, though on a smaller base, and will continue to be 1 of our core focus growth areas over the next 2 to 3 years. And a lot of effort and energy from an organizational perspective is getting focused on this line of business. Now to the other 2 businesses of -- other 2 line businesses in EdTech. Our platform business grew about 30% in H1. We added 42 new clients. The publishing revenue grew by about 18%. And with the commodity pricing stabilizing, the paper prices came down by about 18% to 20% on an average, which have resulted in slightly better margins. The paper prices have stabilized over the last 2, 3 months. And we hope that, that stability will continue resulting in a positive contribution to our gross margins. On the platform side, September was a big month for us, contributed to highest ever billing. We continue to see extremely positive traction for our product and services in that line of businesses, with increasing number of existing customers and new customers joining our [ bellwether ]. Our repeat customer strike rate is upwards of 90%, and with healthy accretion of new clients I think this business is on a fast clip. We have also launched a new IP-based product, a Common Application product on a SaaS platform, which we are working towards driving applications for the top 50 institutions and universities for getting students from not only our student base, but also inquiry database. We launched that product sometime in early October. We have seen a positive traction and I'm extremely positive of it becoming a critical pillar in our future growth going forward. Another positive thing was that whereas our billing grew 30%, our collections grew by a healthy 40% in this line of business. I think we are constantly working and enabling towards shortening our working capital cycle. And on an overall year basis, I think we should be almost reaching a 100% collection to billing ratio. In H2, we expect to maintain similar growth rates as was achieved in H1. Publishing business in terms of sales and volumes has been pretty steady, growing at about 17%, 18%; aided by lower paper prices has resulted in considerable margin expansion. BYJU's used to be -- used to purchase a lot of books from us for their internal consumption. Last year in the comparable first half, they have purchased about INR 2.5 crores of books. We were able to achieve a 18% top line growth even without a single paisa of BYJU's business this year. And as we widen our bouquet of institutional customers, which enables healthy and a faster collection, I think this business is a steady, good, attractive 30%, 35% margin business. And we are focusing on continuously growing institutional and online business as well as adding a couple of big name authors and influencer digital marketer. And we expect H2 to see a similar growth rate in terms of volumes and revenue. Yes. Arjun, please. I've already covered that while the top line growth in the MarTech business was more or less flat, our EBITDA grew by 60%, and that was predominantly to the reason I already shared, that we let go of certain low-margin business, support services business and focused on high margin, experiential marketing and B2B demand generation businesses. And that has really pivoted our gross margin by a couple of percentage points, resulting in a significant margin expansion. We have added new clients in terms of -- in different sectors despite a not so positive macro environment where due to higher interest rates, compressed IT spending, some of our IT customers, their marketing spends have been slightly curtailed. But we have added customers in FMCG, we've added customers in services business like Deloitte, and we are continuously adding newer customers in sectors like fintech, financial services and automobile. Virtual events continue to do well, internationally has been growing at a stable clip in India. As I have shared in my previous, we launched our Indonesia operations in Q1, and the Indonesia team has started hit the ground running. And we have already, in the first full quarter Q2, we have already crossed $100,000 of business. And on a full year business, we are on track to achieve the goal which we have set for us, that will lay the foundation for a rapid growth in FY '25 and FY '26 in that market. We have a strong pipeline of projects to be executed in H2 across business line and across geographies, and to garner enhanced business at a faster clip. We are further enhancing and strengthening our B2B enterprise presales team. And I think, as shared by Satya, we clearly see that this line of business might see -- it might chart its own course over the next 2 to 4 quarters. There are various engagements which are currently underway, and once they reach a certain stage, would be shared with all of you at an appropriate time. Well, as you know, we had announced the buyback through market route in our previous Board meeting in August. Till November 3, that is last Friday, we had completed a buyback of about 4.8 lakh shares for a value of about INR 3.7 crores. The buyback was offered at a [ highliest ] price of INR 94 per share. However, currently, the market price is still around 18% to 20% -- 15% to 18% lower than the buyback price. The buyback has been impacted by certain new rules and regulations, which were introduced by SEBI at the beginning of this year. And some of the key constraints are that the buyback not does not take place, unlike previous year, in the normal end window for shareholders. There is a separate window on stock exchanges with a separate strip code for buyback. And unfortunately 98% to 99% of our shareholders, despite repeated updates in communications, haven't -- are unable to reach the desired point to be able to offer shares for buyback. The bigger challenges, these public vendors and the [ strip ] ports are not available in some of the commonly used trading apps by some of the shareholders. And that has been a big challenge. SEBI had also introduced caps on when company could operate, we can't operate in the opening and the closing 30 minutes. Our limit is constrained by the [ deep ] volume limits in the value terms. Over the average of last 10 trading days, we are limited to over 25%. And also the price is limited to plus/minus 1% of the last traded price. So the constraints which SEBI has introduced in terms of market-driven buyback has resulted in far lower number of shares being getting offered for buyback than what we had anticipated and planned for. Last year, we had offered a buyback for about INR 10 crores and we were able to achieve our volume in about 18 trading days. This time, unfortunately, because of the constraints and the challenges we seem to be behind. As of now, roughly around -- we have achieved about 28% to 30% of the value for buyback. Though we have, still have some time to go, but we are waiting and hoping that more shares do come back at appropriate value. So while we offered the buyback price at around 20%, 22% premium of the last 20 days, when the last 50 days when we had opened the buyback. We, as management, still feel that the market is still not -- market price is still not reflective of the correct and appropriate value of the stock. We are convinced that the fair value of the share is definitely upward of INR 100 and higher, and we are continuously working towards enabling and we hope that in not so long-term future, the market revalues and re-rates and the stock price hits what we think is a fair value of the stock. Let me give you a brief outlook on our H2. Next slide. While I'm not going to give you a definitive revenue guidance or margin guidance, I'm going to restrict myself in terms of what we see as the directional indicators in terms of our EdTech and the MarTech business. We expect that -- as shared earlier, because of the realignment of the exam date, we expect UG segment, especially law, which account for roughly around 30%, 35% of our business, [ our ] long-term programs which would be good from a long-term perspective in terms of revenue accretion, because the average ARPU will see significant upward movement. It might have impact on short-term revenues and short-term margins, but over 4 to 8 quarters, I think this realignment and pivoting would be extremely positive. We expect MBA segment test takers, numbers growth to start growing into the prep company numbers over the next 4 to 6 quarters. And that should get reflected in higher revenues in our MBM market. Our focus areas of study abroad and expansion of our partner network continue to remain key focus areas, and we will -- we are continuously working towards accelerating our growth in study abroad as well as reaching our stated partner network goal. And over the next 4 to 6 quarters, you will see partner numbers beginning to trend upwards of 300 and what we have outlined in our plan a couple of years ago to you. In the MarTech, I think the revenue mix between domestic and international is already -- the international revenues are already about 25% of our total revenues. And we are continuously focusing on international markets, including APAC, U.S., as we are not only able to generate higher margins due to an arbitrage opportunity. So our effort and energy in enhancing revenue growth in Singapore, Indonesia and U.S.A. has been conversely accelerated. We are also beginning to focus on non-IT sectors because we expect IT sector to remain slightly tight in terms of its marketing spend for the next 4 quarters. Though we have seen initial signs of the big IT companies' revenue growth and profitability growth beginning to reflect positive momentum. It might take another 2 to 3 quarters before that starts flowing into increased marketing spend. VOSMOS and Metaverse, the cases which we are [ in aid ] helping organizations migrate and transform their businesses into Web 3.0, is continuously showing positive traction. We have added, signed up contracts in hospitality sector. We just showed you what we are doing with HDFC Life and a couple of other initiatives, which have rectified. And we -- this business is still, is in a state of early adopters. And I think as and when the early adopter, it starts flowing into mass adopters, this will see rapid increase [ in fill up ] to our business over the next 4 to 6 quarters, hopefully. With that, I come to an end. Happy to take any questions from all of you.

Thank you, Nikhil. Those are the numbers that you can get in touch with us before I throw it open to questions. Just one more update from our end. We're planning an Investor Day for all of you in Delhi. It will be between the 15th of November and the 15th of December. We'll announce the exact date and send out specific invites with the details of the same in the coming week. So just mark your calendars once you receive that, and we'll be in touch with you shortly. We look forward to hosting you and giving you a chance to interact face-to-face with us, and also spend some time with our business leaders over the coming months.

I've received a slew of questions. I will start with the early ones that Vivek sent in. Vivek has sent in 4 or 5 questions. His first question is, what does the other income include and why is it so much higher than last year? I'll address that, Vivek. The other income this quarter includes a INR 2.5 crore award that we received on the legal front. And that is the reason that, that number is significantly higher than the same quantum that it was in the previous year. This is a legal judgment that came in our favor in 2012 as a result of an arbitration that took place then, and it took about 10, 11 years for it to go through other legal hurdles, including appeals, et cetera, before the amount was sanctioned to be released to us. Next question from Vivek is: The buyback is priced too low, any particular reason? Vivek, I think Nikhil has already addressed that when he mentioned a couple of slides back that we are limited by SEBI's new regulations, which allow us to stay within a price range of plus/minus 1% from the last traded price, and that prevents us strong pricing -- the purchases that we do on a daily basis, any higher than we're doing. The buyback, of course, was announced at a maximum price of INR 94. Next question, is it likely to be completed by 28th November? Nikhil, would you like to address that?

Yes. So I think 28th November is the last day [ as per SEBI ] because it only gets 66 trading days for buyback to be operated. And so whatever number of shares we are able to buy back until the last day legally allowed, we'll go on and buy, and then inform the regulators according to what has been achieved and what could not be. They want to be informed of the challenges, both the stock exchanges as well as the regulator, about the challenges we are confronted with because of the new regulations.

Thanks, Nikhil. There's 1 last question from Vivek Joshi before I move on to the next person. He's asking about the number of new centers added this quarter. Satya, would you like to address the network expansion plans and how they're progressing for this year?

Yes. I think overall, we have added 13 centers. And interestingly, in addition to that, we've also had this in the last 6 months, key centers coming up in overseas geographies, including Dhaka, Katmandu, Colombo, et cetera, where we are beginning to expand our international basket of products. So the rate at which we would like to expand is still lesser than what we would -- what we had set out to do for the year, Vivek. At the same time, what we are not desperately going after is to increase the numbers where the profile of the potential partners doesn't meet what we think is the demands of the day for somebody to be a successful partner over a 3- to 5-year period. And the good thing is that the partners that we have chosen over this financial year, some of them are offering exceptionally successful stories, including a couple of them in places like Delhi, Meerut, Trivandrum and so on. So the goal of 500 in 3 years, it stays. But this year, instead of getting to a number of about 250, you might end up cumulative numbers to be around 200 to 210 from the current 165, 167.

Thanks, Satya. I'll move on to the next set of questions. Nitya Shah from KamayaKya has posted a question about year-on-year top line growth, which has been flat for Q2. Could you please elaborate on the marketing initiatives taken? And how much of the cash available on the balance sheet can be used for more aggressive student acquisition?

I'll take that, Arjun. Yes?

Yes, please.

So we've done some interesting and successful experiments in the NCR region. That's Nitesh, Arjun?

Nitya.

Nitya, and which includes a good mix of digital as well as above the line, including radio, which has come very actively into our portfolio in this financial year. And there are some scaling up of goals that we will do in select geographies with a lot of focus and will not go for anything which is pan India at this point in time. So funds available with us is not a constraint. I think what we are only being very calibrated about, is that we do some good [ POCs ] of brand-building investments. And based on the outcomes and based on fine-tuning those strategies or designs, we are scaling those to maybe half a dozen markets in H2 along with our partners. Yes, Arjun.

Thanks, Satya. Nitya has also asked a second question about the pathway towards utilization of the INR 100 crores of net cash that we currently have available, and our utilization plans for the same.

Okay. One is some more proactive or aggressive organic investments like what we just covered, in the form of brand investments and technology investments, that will happen Nitya. In addition to that, in areas such as international product basket, international education business, or even in the realm of a new opportunity, which has got opened up through NEP 2020, which is around, universities can now offer online programs. So in these 2 newer areas for us, there could be inorganic opportunities that might come our way. And as and when any of these conversations -- some of those conversations have been underway for the last couple of quarters. As and when any of these conversations will cross a certain threshold and mature into shareable status, we will be happy to share that. As you know, we already have a small investment in a company called 361 Degree Minds, which is doing online degree programs for universities, and universities such as Anomali University, et cetera. Yes, we have 6, 7 universities who are our clients and this is available online. Happy to spend any more links. So I think in international education and in online universities, there could be inorganic opportunities that can come our way. And that's where some of these funds could be deployed over the next 4 quarters. Let's see.

Thanks, Satya. Couple more questions for you. Rahul Bhansali has asked, what is the current revenue contribution from CUET and study abroad? And how is it likely to move specifically going forward? And also what is the reason for slower growth in the EdTech segment other than the reduction in the law test takers?

I think CUET, overall, if you looked at the numbers last season, we did approximately 10,000 students in terms of numbers, Rahul. We are hoping that the coming season, if we can double from there, it will be a great place to reach. And the IE, or study abroad, which we are currently -- as you know, it has got 2 parts. One is the student revenue-based thing which includes test preparation and consulting. I think that, too, we are looking at -- if this year ends at about INR 7 crores to INR 8 crores of revenues, can that grow by 2, 2.5x next year. So these are the 2 growth areas organically that we are thinking we will achieve. But in the meantime, if anything inorganic happens, that would be in addition. The admission, study abroad has got the university relationship-based admission thing, Rahul, as well as the other one. There, our student applications that we are able to submit to the universities and then universities recruiting from our submissions, that still is this year going to go through a full year of focused effort. So we are looking at can we do 1,000 submissions this year with about a 30%, 35% success rate there. So in the international education, the test prep and consulting part, already the acceleration stage has begun. But the university relationship-based revenue part we need to go through 1 more cycle for that to gather momentum, okay? Any more detailed questions on this, happy to respond if you send us a question or set up a separate call on that.

Thanks, Satya. There are 2 or 3 follow-up questions on the center additions. Whether we'll still be on track to meet our targets of adding 100-odd centers each year. There are questions on what are the challenges we are currently facing while scaling up the business? And what would be the mix of FoFo and CoCo centers going forward, are questions from Rishikesh, Vivek and Rahul.

Okay. So there are 2 or 3 in that, Arjun. Let's take 1 by 1. The -- I'll take the last question that I remember clearly. The CoCos will be fewer and far between for very specific reasons, Rahul or Rishikesh. So for instance, even in prominent city markets like NCR or Bombay or Bangalore, what we see growth coming from is in the density of our centers going up. Because of a lot of time that it can save for our customers. So in a place like Delhi, can we go from about 25 centers currently to NCR, to about 100 centers in the extended NCR region is, for example, will give you a sense of the way we are thinking. And such a thing is possible in Bombay and Greater Mumbai, Bangalore, the enlarged city, Hyderabad and so on. So the focus will be a lot more on partner-driven network with select centers run as CoCos. For instance, in Delhi, we will continue to have a few. In Bombay, you might have 1 or 2. In Hyderabad, we have a couple, and we will continue to stay with that and so on. Even in the Middle East, we have franchised out a couple of company-owned locations to entrepreneurs, because I think that's the way we can scale. And there are a lot of other reasons which we can get into in a more in-depth session on why that works from a unit economics and growth and [ aggregation ] and ROI point of view. On the challenges of this, one of the things that has happened over the last few years, and this is what we are very mindful of to make sure that we implement it in the right way, is that the -- we are looking at partners who have the ability to not just take 1 center and run with it for the next 10 years, which is what would be the typical profile of the CL successful partner in our first 15 years of existence, out of which about a dozen of them have grown to have 3 or 4 centers. In the 2.0, we are looking at people who have enough financial strength to be able to set up 3 to 4 centers within first 2 years of their signing up, and -- which means that their ability to invest and expand without necessarily waiting for all expansion capital coming from internal successes and accruals, is a very key shift that we have made. Because as you are aware, the input costs, the input investments have all gone up dramatically in the last 5 years, whether it is real estate or marketing or people costs and so on. And also, given the larger market, larger product portfolio that we have, you would want to look at people who can run 4 centers and do INR 10 crores to INR 20 crores of business in 3 to 4 years' time. Hence, the number of centers are going slower than what we would like, but our hope is that if you stay put with this, we might find a good number of partners who can do multiple centers in a given city or in a couple of cities and help us accelerate as we move forward. So finding that profile of people who have a good mix of interest in education and investment capability, that is the magic sauce that we need to continuously build assiduously.

Thanks, Satya. One last question on centers before I give you a break and take a couple of finance questions. The next question is, what is the franchise interest in CUET specifically? And that pertains to both new franchisees and our existing networks picking up CUET as a product.

See, the interest in CUET is high in and around Delhi and the northern belt, for obvious reasons. Because the Delhi University, for example, is the biggest recruiter and it's a very aspirational university. So all the places from where students come to D.U.: JNU, Aligarh University, Jamia, all of these, wherever the source points are, there the interest for CUET is more. As the number of universities grow, it will gradually pick up. So this is going to be a 2- to 4-year journey where it becomes much more of a strong revenue stream that can help us do 100,000 students for just this 1 exam. What can help us a little bit more is the perceived -- how tough the exam is. I think that is 1 place still CUET can and must go a couple of notches up. And I hope that happens because this exam has the potential to move in the direction of whether it's a JE or a NEET or a GMAT or CAT or CLAT. These are considered very serious and tough exams for which serious preparation is needed, okay? The other route that it could end up taking if it doesn't pan out well is, like it is seen as a commoditized banking or SSC exam. Our belief is, our hypothesis is that since students going to the top-notch universities and top-notch colleges like LSR, Stephens, Jamia, JNU, SRCC and so on, it will take the path and emulate the JE and NEET. And that's -- when that happens, with a few more regional top universities coming in, then it will be a national movement. Along with that, I would want us to remember that CUET has already been conducted in 25 international cities globally. And that is not a trivial matter, because it has taken CAT 50 years to get there. This year for the first time, CAT is going to happen in 5 cities, whereas CUET has been launched in 25 cities already, even in places like [ Abishkek ] and Leningrad. And we can go and check out which countries they are in. So study in India, which is a very big initiative for the government, to take the students from 50,000 to 500,000 over the next 7 years, will happen through Indian test prep, Indian standardized exams, including CUET, CLAT, JE and NEET. So I think this has got a great potential. We just hope that it achieves its potential sooner than later.

Thanks, Satya. A couple of questions, as I mentioned on our numbers. Why have the bad debts increased this year as compared to last year? Just a quick update on our bad debts, that we have taken a write-off of INR 2.16 crores to completely clean our books as far as our vocational business receivables were concerned. So we have written that off as a matter of [Technical Difficulty] [ prudence ]. We continue to chase that money, we continue to work with the relevant departments of the government to ensure that we can recover as much of that as possible. And if it does come in, we'll record it as income appropriately. But for the time being, we've -- as a matter of prudence because it has been outstanding for more than 5 years. We have created relevant provisions and made necessary write-offs to that extent. Over and above that, the bulk of the write-offs are business as usual. The bad debts in the test prep business are typically between 3% to 5%. And when you net that off franchisee fees, it becomes considerably lower. So our bad debts, and provisions on that account, are very much in line with business in, with the exception of those that exceptional write-off we have taken on account of the vocational receivables. Nikhil, anything you would like to add?

No, I think you have covered that we continuously continue to work with the relevant authorities and still stay positive about recoverability of a significant chunk of that amount in the next 2 quarters, but then hopefully, we'll have a write-back in the next quarter.

Right. Thanks, Nikhil. The other question is the growth in our intangibles under development. It's a matter of normal course of business. We continue to invest in development of key products across different spaces. We're doing a lot of content and technology development in the EdTech space across the study abroad and the CUET verticals. So there's investment going in on that front. And in the MarTech space, we continue to invest in VOSMOS' and Metaverse's products. So our growth in our intangible assets is going to continue for the upcoming 4 to 6 quarters at least. Nikhil, anything you'd like to add there as well?

Just a slight modification. While VOSMOS as a product has now more or less completed with only minor additions, significant addition and new feature addition and new modifications are predominantly happening on the meta commerce and the Metaverse platform. The VOSMOS platform is more or less stable with only slight addition of tools, et cetera. So bulk of the IP expansion is on the meta commerce in the Metaverse platform, not on the Vosmos.

Thanks, Nikhil. And Nikhil, there are virtually no other questions on the MarTech space. So Satya, I just need to come back to you. What we'll do is we'll take questions for another 2 to 3 minutes, and then we'll wind up by 4:30, 4:35. A few more questions on CUET. What is our average pricing for that? And what is the likely growth trends that CUET students and revenues going forward, and how we compared on a quarter-quarter basis for the last few quarters?

That's a full 3-credit course question. Okay. So -- but to capture the essence of it, the summary of it -- the crash programs, they get as a realization. As you know, CUET is a multiple subject program. So a student would take anywhere between 3 to 5 subjects. And each subject has a fee attached to it. So depending upon the number of subjects that you take, our realization changes. So it's not like in CAT, where you come and pay 1 fee for CAT and it includes quant, DI, RC, VA, everything is covered in that. It's not like that. Here, you choose, I want maths, I want economics, I want applied maths and so on. So for a crash program on a per subject, which is a 45-day program, it would result in a realization anywhere between INR 5,000 to INR 8,000 per subject, which means if the average is 3 to 4 subjects, it gives a realization of between INR 15,000 to INR 25,000 on a per student basis. And why am I taking a range? Because the pricing in Aizawl will be different from Calcutta, which will be different from Bombay or Delhi. So that's why the ranges. The same configuration continues for our 1-year program and our 2-year programs. There the realization, instead of it being around INR 20,000 to INR 25,000 would be more like between INR 60,000 to INR 75,000, INR 80,000 for a 1-year program. And for a 2-year program, it could be INR 1.2 lakhs to INR 1.7 lakhs. I'm giving you a very broad set of numbers. And on the trends, some of those trends will take a little time to build up, but our preference would always be to catch them young and then get them in for a 2-year program right after Class 10. But that is enabled quicker if the exam is perceived to be tough, which was not the case last year, and it is -- we are told that it will get tougher, in various conversations, for a bunch of reasons and customer feedback and institutional feedback that has been received by the examination bodies. Now even the exam gets tougher, your 2-year programs and the 1-year programs that take off much faster, the exam is easier, then the children wait for the boards to be over and they come for a 2-month or a 2.5-month crash program, okay? The number of takers already are in double-digit lakhs. So if a outside-in perspective is taken, and if CL is able to replicate the student share, student market share divided by the total exam takers, which means distribution again becomes key, online becomes key, then CL normally would aspire to have between 20% to 35% of the exam, serious exam preparation people as a market share. That becomes a very large number for CL, okay, which means if you take a, if you take a 10 lakh people who appear for the exam, if 5 lakh of them, back of the enveloped, are preparing for it. If we get a 20% market share in that, we're talking about 100,000 students. So if you ask me, keeping a whole lot of other things apart, this is the 3-year, 4-year goal that we must take and implement it. If it becomes faster, great. If the mix is more towards the 2 year, 1 year followed by the crash, it is even greater. But some of these number crunching, it is likely to be a little too premature if we stop observing the market and focus a lot more on these numbers. What we're trying to do is to manage both of them. And from whichever side we look at it, the trends -- we should say that can we double it continuously for the next 3 years? Then it becomes an easier problem that can be decentralized, and every center can aim at that. We can do that again online. And the newer centers also when they jump into this movement, it can be quite exciting as a segment or a product that decorates our portfolio.

Thanks, Satya. I've also got a whole set of questions asking about specific numbers and revenues of product basket wise. We just shared with you what we've said in repeated presentations in the past. Unfortunately, the bulk of our competitors are not publicly listed companies. And when we share such information in terms of specifics with you guys, we're actually sharing a lot of competitive intelligence out there, which we have to work very hard to get from the marketplace. So we generally refrain from sharing the exact number of enrollments and the exact billing and revenue we generate from each of our product categories. The idea is to give you a range, just to give you an idea of where we are in terms of those product categories, so that we don't throw too much data out there, which could help our competitors. There's a question on our intangibles and whether -- why we create intangibles and whether we should be converting them into expenses straight into our P&L. The reason, logic for that is very simple. It's the useful life of a particular product that we envisage or that IP that we create. If we feel that the useful life of it is 3, 5, or 7 years, we create an intangible for that duration, and we write it off over a period of time. There's 1 last question, Satya, which we'll take and then we'll wrap up. A couple of people are asking when we expect to hit INR 100 crores in our [ NBN lot ] businesses individually.

I think at least it perhaps is, doesn't come naturally to me to, as an institutional organization to be very specific about such future numbers. But what I would definitely tell you is that the numbers that the product [ hegs ] and the businesses carry for both of these are significantly north of those numbers. Depending upon tailwinds, competition, and a couple of other of other external factors, it could be a year this side or a year that side. But we just hope that the way MBA is beginning to show green shoots in terms of growth again, I hope it continues to accelerate, and we hope that the law aspirant takers' dip this year is more of a blip because of the shift in seasons, and not something more fundamental than that. I think the rest of it is in our control, and our ambition or plans for the next 3 years are pretty much of that nature, of healthy growth on a continuous basis.

Thanks, Satya. On that note of healthy growth, I wish everyone here a very happy Diwali. And thank everyone, for being a part of this analyst call. We look forward to meeting a lot of you in person in Delhi, either towards the end of this month or early next month. We'll keep you posted about that date of that investor meet that we're planning, and we look forward to catching up with you in person. Thank you so much, and have a good day.

Thank you, Arjun. Thank you, everybody. Look forward to seeing you all in person soon.