NIIT Limited (500304) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of NIIT Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Thadani, Managing Director and Vice Chairman of NIIT Limited. Thank you, and over to you, sir.

Thank you, Margaret, and thank you, everyone. Good afternoon to all of you. I thank you for joining this briefing on our quarter 3 results and development and also for your continuing interest in NIIT. We have had a very exciting quarter, and we are in exciting times that I will share with you. We will talk about key business performance of third quarter of financial year '22. After that, I would like to share with you some significant developments, which were approved by the Board of NIIT Limited today, which I believe have solid potential to pave the way for significant value creation for NIIT's customers, NIITians, as we call our employees, and NIIT's shareholders. This is happening at a very appropriate time because we also crossed an important milestone in the life of NIIT during the quarter as we completed 40 years of our foundation on December 2, 2021. While Sapnesh will talk about quarter 3 results, I just wanted to give you a highlight of the fact that results continue to show the strong growth opportunity and momentum that both businesses have be driven -- which is strongly driven by and led by Sapnesh and his team through agile and decisive actions taken for the company, which have taken the volatility in the environment and use it to our advantage. The depth and breadth of our experience in learning technologies, which have contributed to realizing that opportunity and the strong execution capability where all NIITians, even though from 20th of March 2020, have been operating, working from home have delivered an exceptional quarter once again, and I think each quarter has been within that. This has definitely helped the company to transform and continue to meet and exceed our customers' expectations. We do see some improvements in the environment as organizations are starting to invest in their growth agenda. And talent becoming the top priority for every corporation is creating a significant multiyear growth opportunity for us. So that being the background, I hand you over to Sapnesh and then we'll get into more detail. We keep our briefs short and give more time for questions and answers.

Thanks, Vijay, and thanks, everyone, for joining. I will take you through the results now. NIIT's revenue stood at INR 3,836 million. It was up 51% year-on-year and 22% quarter-on-quarter. Please note that the financials include impact of acquisition of RPS Consulting that got consummated on 1st of October 2021. Excluding RPS Consulting, the revenue was at INR 3,534 million, up 39% year-on-year and up 12% quarter-on-quarter. Both the businesses CLG and SNC are on a strong growth path. I will cover each business in my subsequent discussion. The EBITDA stood at INR 827 million, up 75% year-on-year. EBITDA margin was 22%, up 295 basis points year-on-year. PAT stood at INR 550 million, and the resulting EPS is at INR 4.1. Going to our Corporate business. The Corporate business continued its growth trajectory, our investments, disproportionate investments in digital capabilities and sales and marketing are enabling scale and acceleration of this business. These have helped this business outperform our stated guidance driven by growth in new customers and scope expansions with existing customers. In Q3, the revenue stood at INR 2,961 million, up 36% year-on-year and up 9% quarter-on-quarter. In constant currency terms, the growth was 7.6% quarter-on-quarter. We saw a strong sequential growth, predominantly driven by accelerated ramp-up of new customers and expansion and share of wallet of existing customers. Some of the higher year-end spending also helped grow the business for quarter 3. The EBITDA was at INR 735 million, up 47% year-on-year. The EBITDA margin was 25%, up 181 basis points year-on-year. As guided earlier, margin was down quarter-on-quarter. This was due to the planned ramp-up in sales and marketing expenses in order to enter new market segments in the United States as well as Europe and some of the transition expenses experienced due to new customers that got onboarded in the previous quarter. During the quarter, the Corporate Learning business acquired 4 new MTS customers, including 1 aerospace giant, 2 technology companies and on BFSI major. We expanded 3 existing contracts and also renewed 3 contracts that came up for renewal. That continues our 100% renewal record in terms of renewing all contracts that come up for renewal. As of December 31, the revenue visibility stood at $326 million versus $294 million in the previous quarter. The number of active MTS customers now stand at 65. Last quarter, I had indicated that the current year growth target was going to be at about 30-plus percent with margin levels in the mid-20s. Based on the strong performance in Q3, we now expect full year growth to be in the mid-30s and the margin expectations remain steady at mid-20s. Coming through our Skills & Careers business. The revenue for the quarter was INR 874 million, and that was up 144% year-on-year. Excluding the revenue due to the acquisition of RPS Consulting, the revenue stood at INR 573 million, up 60% Y-o-Y and up 36% quarter-on-quarter. Please note that this is a seasonal business, so Y-o-Y comparisons are more appropriate than sequential comparisons. The quarter-on-quarter performance in addition to the acquisition of RPS Consulting includes an impact of growth in organic business as well as the seasonality that I just talked about. StackRoute and TPaaS, our key product lines, continued to remain strong and continued to grow both at a significant year-on-year level as well as quarter-on-quarter. The business is emerging as a strong digital learning platform across domains for both career seekers as well as working professionals, leveraging the strength of our brand, deep expertise in pedagogy and the use of technology to drive learning outcomes. Addition of RPS Consulting has reinforced and further strengthened the offerings, specifically with respect to the Working Professional segment. The business provides training in emerging digital technologies to working professionals, a segment that has seen strong demand due to digital transformation across businesses. As shared on the previous call, we have accelerated investments in the business, which has helped lift -- help to lift revenue -- our revenue run rate. We see a multiyear cycle for growth in demand for digital talent. And as businesses increased adoption of digital technologies, we see a great opportunity for our business -- for our Skills & Careers business. Between StackRoute, RPS and our enterprise business, we have strong coverage of GSIs that are the key enablers of digital transformation globally as well as GCCs who are key early adopters of digital technologies. We also see a lot of opportunities in Indian enterprises adopting digital technologies to pave the way for digital transformation in their enterprises. We now have a range of offerings of digital skills, including programs for 5G, cloud technologies, cybersecurity, game development, data sciences and full stack product engineering as well as programs in digital marketing, business development and virtual relationship management for the digital enterprise. In terms of balance sheet, our metrics continued to get stronger. The cash position improved quarter-on-quarter by INR 250 million to INR 12,180 million versus INR 11,930 million last quarter. Please note that this is despite the payout for the acquisition of RPS Consulting during Q3. DSO was at 57 days as of December 31. Same time last year, the DSO was 63 days. So a 5-day -- a 6-day improvement in DSOs. Operating cash flow in Q3 was INR 1,067 million, and free cash flow was INR 1,023 million. The operating ROCE has seen significant improvement over the last several quarters. And our operating ROCE has improved to 78.5% at the end of this quarter versus 73.5% previous quarter. Overall, both businesses have tremendous opportunity in front of them. The Corporate Learning business, that sees a market of $350 billion to $400 billion annually, is ranked among the top 5 managed training services corporations worldwide, 1 of the only 2 specialist learning companies in the top 5. It enjoys differentiated positioning, market-leading growth, profitability and cash generation capability and a track record of creating successful outcomes for customers in helping them transform their L&D organizations as well as helping transform their talent, improving their efficiency and effectiveness and helping them run training like a business. The CLG focus continues to remain on North America and European markets. The Skills & Careers business represents a $15 billion to $20 billion training opportunity. Acceleration of digital transformation, leading to awards for talent has created strong headwinds for this business. The young population in India and the improving enrollment ratio into higher education shows that this opportunity is going to be a multiyear opportunity for us. Strong demand and continuing skills upgrade for working professionals due to digital transformation is going to add tailwinds to the opportunity that SNC faces. Overall, I feel that both the Corporate business as well as the Skills & Careers business have a very significant opportunity for growth expansion. Corporate business could become a $400 million business in the next 4 to 5 years, and the Skills & Careers business could become 5x of what it is today in the next 5 years. As you can tell, both have ambitious trajectories, both leadership teams are very driven. In the Corporate Learning Group, our ambition is to be the global leader in managed training services. In the Skills & Careers business, our goal is to be a dominant player and a top education brand in the markets we serve, including India and many emerging markets. In 5 years, like I mentioned, I expect the CSG business to be upwards of $500 million and the -- and the Skills & Careers business, as I mentioned, to be 5x its size today. We will continue to pursue investment opportunities, both organically and inorganically, drive growth across the CLG as well as the SNC business. In CLG, we will continue to focus on expansion in improving geographic coverage, specifically around Continental Europe and Latin America, addition of new capabilities so that we can service new segments and new opportunities across our customers and improve share of wallet. And then obviously, penetration of new market segments, as I talked about a little bit earlier. In SNC, we will continue to invest to achieve leadership and a dominant position in the markets that we cover, including India and some of the emerging markets. With that, I'm going to hand you over to Vijay to take you through some of the more exciting news that the Board approved today.

Thank you, Sapnesh. That, I'm sure you would agree, was an exceptional performance in the quarter, and I think, over the year. But keeping these changing market conditions and the rapid digital transformation taking place as well as the preference of various stakeholders evolving over a period of time, the Board had formed a special committee to get into details and -- of this and build a strategic plan, which involve working closely with the senior management of the company on one hand, and on the other hand, to engage with relevant industry experts and advisers and then present the proposed plan. So earlier today, the Special Committee's plan for CLG and SNC businesses, after engagement with external efforts and feedback, were shared. And what emerged was, as Sapnesh rightly pointed out, the talent is the top priority for every organization. And in that scenario, there is a multiyear growth opportunity for each of the 2 businesses that we are involved in, which is CLG and SNC. The company has a strong balance sheet and market-leading offerings, and we are, therefore, very uniquely positioned to take advantage of the current environment. So this was the overall positive. The committee also felt, based on the advice that we received, that in a certain way, the businesses are also becoming increasingly different. With unique market dynamics in the markets that they operate in, CLG operates in North America and Europe, the SNC business is predominant in India and the emerging economies, customer sets are different. The customer sets for CLG business are Fortune 1000 companies, global companies. On the other hand, for SNC, the customer set is learners, individual learners, career seekers as well as working professionals. The offerings also automatically are different. One is focused on outsourcing services, which is CLG; and SNC, which is predominantly focused on delivering learning across multiple domains through a digital learning platform. So given these differences and the positive momentum that each of the businesses has shown as well as the great opportunity that lies for both these businesses, the committee felt that the targeted customers need undivided attention, a differentiation focus and a clear positioning. We also need to provide the management teams with agility and independent decision-making as well as capital to support the value creation for our customers. NIIT has the requisite capital and a strong balance sheet, and therefore, creating 2 independently run businesses with significant growth capital will propel both CLG and SNC to realize their true potential and the aspirations that they have built. Based on this, the Special Committee recommended creating 2 independent entities, which will help CLG and SNC to realize this aspiration that we talked about. The Board approved the composite scheme, which is essentially consisting of 3 things: One is reorganization of corporate learning business as an independent company, separately listed on the exchanges. All assets, resources, contracts and investments, including the subsidiary company of sales which service the CLT business will form part of the CLG business and will be transferred and vested into NIIT's wholly-owned subsidiary, NIIT Learning Systems Limited. After that, this vertical split will result in -- NIIT would continue to run the SNC business and the CLG business, which is now housed in NLSL, where in lieu of NIIT shares, NLSL will issue 1 share each to every shareholder of NIIT and thus get listed. So the shareholders, at the end of this exercise, will hold 1 share of NIIT Limited and 1 share of NLSL, both of -- both these companies being listed on the stock exchange. This reorganization will involve regulatory approvals and -- under Section 230 to 232 of Companies Act. And this will be subject to shareholders, creditors, customary approvals as well as NCLT and SEBI. And this exercise can take between 12 to 18 months to complete. Our endeavor will be to complete it as fast as possible. But given the fact that the appointed date is 1st April 2022, while the CLG business would continue to be held in trust by NIIT Limited, the accounts for both these entities will be available individually from that time onwards. We believe that this move will significantly help the leadership team to give undivided attention to their respective customers. It will simplify decision-making and more important than not, give them capital at the time and the way that they would require it, and thus result in unlocking of value for each of these 2 businesses. So we'll be happy to answer more questions on this, I'm sure there would be. Also, along with the approval of this scheme, the Board also said that the important milestone of 40 years of existence on December 2 deserves to be recognized along with the exceptional performance and the landmark moment when I think both these companies are poised at an exciting growth journey. So the Board approved -- has approved an interim dividend of INR 3 per share, which will be 150% of the face value. The Board also deliberated that in lieu of the pending scheme of reorganization that is underway, it would be prudent for the respective boards to consider any further recommendation of dividend only after the scheme gets approved and affected. So in other words, we have the exciting news of CLG and SNC getting listed as 2 independent, separately listed companies as a dividend to start that process in -- at INR 3 per share that I wanted to share with you. So with that, I suggest that we open it up for Q&A. Margaret?

[Operator Instructions] The first question is from the line of Nirmal Bari from Sameeksha Capital.

[indiscernible]

Your voice is breaking up. We cannot hear you very well.

[indiscernible]

Can you please look for a better reception area?

Ready. I'm well now.

We can hear you better now. Separately, Mr. Bari. I would request you to rejoin the queue. In the meanwhile, we'll take the next question. The next question is from the line of Rahul Jain from Dolat Capital.

Yes, am I audible?

You are, except that the volume we can't hear well, so if you can speak a bit louder.

Yes. Okay. Let me move to the handset. Is it better?

Yes, sir.

Yes, this is okay.

Yes. And congratulations on very strong numbers. A couple of questions here. Firstly, do you think the size of the 2 businesses were ideal to do the transaction? And what has -- consideration went into this kind of a thought process? Because I believe the cash and the assets will also be divided in such a way that they have to chart their own trajectory individually post demerger? And didn't you see any reason of coexistence, given that RPS is also not a very different kind of business from what CLG is doing? So any reason why we would not have considered that element as well? So this is related to structuring. If you want to answer this, I can ask another question?

No, certainly, but you want to ask your questions first and then we'll just...

Okay, you can possibly answer this as my last one.

Okay. All right. So first of all, the consideration. I think the consideration is both businesses have achieved adequate size and scale and are poised for accelerated growth. That is, I think, the strongest reason. The strongest reason is our ability to meet our customers' needs. And I think this has not happened over now, but it has been happening over the last 5 or 6 quarters. The SNC business, which had to pivot from a brick-and-mortar to the digital transformation or a fully digital model and now kind of a hybrid -- digital hybrid model, I have to admit, got aided by COVID. But nevertheless, I think it has happened at a rapid pace, and this is because of some very resolute or decision-making by the leadership team led by Sapnesh, which has brought the business to this level where it has achieved the size and scale and are now right on the right to regain its dominant position in the -- as a most trusted brand in the country in education and training. So this was one. I think CLG has a very, very strong run -- has had a very strong run with -- even if you see the new contracts, which have been added this quarter, actually positions it extremely well to look after, to go after its aspiration. So that was a strong point. We have a strong balance sheet, and that balance sheet, obviously, the capital had to be allocated accordingly based on the needs of the 2 businesses. Both have needs for organic investments as well as inorganic investment. And these investments would need to be directed for the benefit of those customers that are there. And I think this segregation or making it into 2 independent companies will give both management teams an opportunity to serve their customers well, which will also result in those employees getting the benefit. And of course, the value unlocking, which will emerge out of the 2 businesses discovering their own value and being compared with their own peers in the marketplace. So I think those are the driving forces, and I'm sure I can answer follow-up questions or if you would like to understand this a little more, I can ask Sapnesh to explain through example.

Just one bit on this and I'll ask my next set of questions. First is that, will that need to set up a different leadership to run this business? Because I think aspiration that we have highlighted just now on this call of getting 5x on this business over coming years is a daunting task in itself. So will that mean getting up a new set of people to run the show? Or do we have -- you will run with the existing set of people? Secondly, which is more broader, which is, anything incremental that we are witnessing in the market that has added to our confidence of having this $400 million CLS in 5 years, which is -- may translate [ to 7% to your DR and ] 5x in SNC. So any reason now for this new found conference?

Okay. So first, let me answer your people on -- answer your question on people. So we have strong operating teams on both sides of the business. Very strong operating leaders we have on both sides of the business. Sapnesh has had and has displayed exceptional leadership and has grown the business to this level. So he would continue to be involved in the governance of both the businesses. Of course, he would put his personal time more on driving the larger entity, which is CLG entity and that is the base in North America, but he would be involved in the governance. We are strengthening our operating teams further. And as time passes by, we will add more news as they develop. So that, I think, is the point; a, we have a strong team; b, we will strengthen it further. Second part, where is the confidence coming from? Let me hand you over to Sapnesh to talk about it.

Yes. I think in really simple terms, the confidence comes from the point where today, like Vijay pointed out, we have established a right to win whether you look at the Corporate business, which has had among the best years in terms of customer acquisition as well as expansion of existing contracts, at a time when consumption of training has gone down given the uncertainty. So to be able to demonstrate growth, not just in new customer acquisition, but also share of wallet for existing customers who have choked on their consumption of training is something that's phenomenal that the Corporate Learning Group has achieved. In a similar way, the SNC business, which had to reinvent itself just about 2 years ago, has shown remarkable resiliency as well as innovation to transform itself into a digital business and now boasts a large number of GSIs, GCCs and in key Indian enterprises as their customers. The business, as you know, has traditionally focused on career seekers. But now with the addition of RPS Consulting as part of NIIT, we are able to expand the audience to working professionals in India as well. So across the board, there is significant confidence given the resiliency, given the innovation, given the ability to pivot to digital, given the ability to create offers in time to take on opportunity, has given us the confidence that this might be the right inflection point where such a decision would result into value creation.

I appreciate the color. Lastly, if I can squeeze in a real quick one, which is, the revenue from RPS looks muted on a Q-o-Q basis. Any reason for this, given that environment is very conducive from hiring ability scaling over the training point of view?

RPS has done exceptionally well this quarter. It was their first quarter of operation with us. So they have actually done fairly well and, in fact, very well. And, again, I'm saying the opportunity is primarily driven from one basic principle around which or one basic premise around which the whole IT industry is also evolving, as well as the rest of the industries are transforming, which is the emergence of digital technologies, which are affecting every single element of management and decision-making and servicing customers. Add to that the new input of working from home, and therefore, it is also a changing future of workplace in addition to future of work. I think this creates a huge talent transformation opportunity and NIIT, through its worldwide operation, I think, is poised to do that. But they need to be addressed differently in each geography based on the requirement. I think that's where we are coming from. So Sapnesh, you wanted to add something more to this question?

No. I think like -- as Vijay pointed out, I think the timing is good, the confidence is there. The -- both the teams have established the right to win. And I think from an overall perspective, a lot of confidence is in this action.

Yes. Just a small clarification because I think we have INR 105 crore number for LTM at the time of acquisition. Now it's INR 30 crores in this quarter. So is it more like a flat Q-o-Q? Or anything you want to share on that?

It was INR 105 crores LTM, last 12 months. And INR 30 crores this quarter means if we were to extend that, we are at a run rate of INR 120-plus crores already. We can share these numbers with you much more in detail. And just to let you know that RPS Consulting is ahead of its numbers.

I appreciate that and I'll go back into the queue.

And by the way, so is StackRoute and TPaaS. I would say all 3 are ahead of their numbers.

The next question is from the line of Nirmal Bari from Sameeksha Capital.

Yes, sir. Am I audible this time?

Yes, sir.

Nirmal [indiscernible] but we can hear you broadly.

And so my first question is broadly in line with what the previous participant asked, but slightly different. So what is it that we couldn't have probably achieved in the current setup that we intend to do in the new setup of 2 different companies? As in -- because the 2 different businesses were anyways being handled by different teams and they had their own P&Ls and all, right? Earlier as well. So what is it that we would achieve by separating both into different companies now?

Okay? I think, let me attempt my bit to it, but we saw there were multiple benefits of which some of them you already talked about. One is a focused attention to customers. Second is independent management focus. And now this part was already happening because we have strong operating leadership available in both the companies. I think the agility, accountability and responsibility to these teams and allocation of capital, which was in optimization stage will now be maximization stage, which means what is valid for each business will get its value. Last but not the least, I think there is an opportunity to unlock value for each of the shareholders, which perhaps you would have to think about or you would have talked about. Sorry, are we able to -- are you able to hear us?

Yes. I was able to hear you. So the second question was on the cash that we had on the balance sheet of around over INR 1,200-plus crores, which is roughly about slightly less than 25% of the market cap at present. And we won't -- after this INR 3 dividend, there won't be any dividend until the businesses are separated. So how will this cash be divided between the 2? Or is it that Corporate Learning Group will be separated and this cash will remain in the parent company?

Okay. So as I said, first, let's understand the principles behind, and then I can tell you the way it has been approved by the Board. So the first is both businesses are poised [indiscernible]. Both businesses need capital, both for organic as well as inorganic activity. So that's the second thing. The third is, 1 business is cash generating business and the second is cash consuming business, a little bit in the near term or would not generate as much cash. So therefore, keeping these considerations in mind and making sure that the growth appetite for both the business is fulfilled, fortunately, this cash comes in handy in making sure that both aspirations are met. So taking your INR 1,200 crores number, it is proposed that about INR 700 crores will go to SNC side of the business and INR 500 crores to CLG side of the business. CLG, while it is generating adequate cash on its own, requires a strong balance sheet for it to participate in global RFPs, which require a strong balance sheet, #1. #2, it also has an appetite for inorganic activity, and we do not want that to be delayed, or for that matter, to be questioned or looking for other sources of finance. So the idea was to give both businesses adequate money in confidence with their needs. And that is what I think has been done.

On an organic...

Sorry.

Yes. On an organic basis? Am I audible?

I'm sorry, your voice breaks. I heard on an organic basis after that, you...

Yes. So what was the EBITDA for SNC business for Q3?

What was the EBITDA for the SNC business? Is that your question?

Yes. On organic basis, excluding RPS Consulting.

It was just above 0. It was 3% at $17 million. Excluding RPS business, SNG grew by 60% year-on-year, 36% quarter-on-quarter.

Thank you. I would request Mr. Bari to rejoin the queue for follow-up questions. The next question is from the line of...

Nirmal, if you have difficulty in getting through Kapil, Sanjay, myself, Sapnesh, all of us are available to answer your questions separately or you would like to write to us, we would then respond and be available to everybody.

Thank you. The next question is from the line of Garen Kumar Gupta, an individual investor. Request you to kindly unmute yourself from mobile. And due to no response, we'll move to the next question, which is from the line of Kaushik Poddar from KB Capital Markets.

Yes. Mr. Lalla spoke about the kind of growth numbers for both the divisions. I missed it. So can he repeat both the numbers as to what is the kind of growth we see in 4, 5 years or something he quoted?

From the Skills & Careers business perspective, we expect it to become 5x of what it is today...

In how many years?

[indiscernible] INR 240, INR 250 crores today. We expect that, that business should be greater than INR 1,200 crores in 5 years. The Corporate business is at approximately annualized $150 million today, and we expect that to be in the $400 million to $500 million ballpark in the next 5 years.

Okay. I just wanted that only. And -- and the margins also, can you give any ballpark, say at the 5 years down the line? Or I mean, do you have any numbers? I mean...

On the Corporate business, we have reasonably established growth and margin pattern, and we expect the growth, like I pointed out, to be in the 20% or a little bit higher than that range from an organic perspective, and the margins to be in the 20% range. The Skills & Careers business is going to improve its margins from where it is today to reach closer to the 20% mark towards the fiscal year.

The next question is from the line of Shradha Agrawal from Amsec.

Congratulations to the management team on another strong quarter. So just to ask the first question first. On the timing of this demerger, it will get the first quarter of consolidation of RPS and we were probably would have -- should have waited for 1 or 2 quarters before going in for this demerger. Do you think that would have made more sense rather than doing it right when you were actually a strong growth trajectory that we would have probably explored more opportunities in a consolidated way and then would have taken different directions for both the businesses?

First of all, I don't think the discussion is on whether we should have waited for the timing of a certain activity or a certain action. It is an overall strategic call and the call was taken. In fact, the discussion on the strategic plan happened much before. And over a period of time, we added RPS into the system. RPS is a perfect fit to realize the dream that SNC has, and I think it is a perfect fit also from the point of view of leverage, which the CLG business may want to do in future. So I do not think the issue is whether we should have waited or not. The important question to answer is, is this the right moment for us to take on the strategic paths that we have defined for each business. So that, I think, all of us would agree, including you, that the timing is right. And I think how to realize that, this is the time to make sure that, that happens. So that's the belief our team has had, and that's the belief our Board has had. That's the belief our advisers who advised us on this action had. So I think there is a consistency in that thought process. At the same time, you seem to indicate that maybe it will create some kind of a confusion. Definitely, we would love to have a discussion and discussion and debate on that, and I'm sure you would have a point of view since you are so familiar with the company, and we would definitely like to take that into consideration. But I think at this point of time, this decision stands very well validated by all the parameters that we have seen.

Sure. I appreciate that. And one thing, you also indicated that what these businesses require growth capital for both for organic and inorganic activities. So inorganic in FMC would be more biased towards B2B business or more towards B2C? Because consolidation of RCS further enhances our proposition on the B2B side. So any further acquisitions would be to further pass down in B2B? Or would it be to increase that path of market share in the B2C segment, in FMC particularly?

Okay. So I think, first of all, at least, we would like to believe that the definition of B2B and B2C is a pre-digital era definition. And over a period of time, I think, especially in the emerging markets such as India and China, I think there is a gray area between what is B2B or B2C. For example, you take our TPaaS. Now a TPaaS offering starts from the fact that a corporate defines the requirement. But it is a -- so to that extent, you can call it a B2B opportunity. But it's a B2C opportunity because it's an individual who actually joins the course, pays for it and has a job guarantee. So I think finding -- to remain in the 2 silos perhaps would deny us the opportunity of being -- of taking advantage of places which are evolving, the marketplaces which are evolving. And I think we should try to chase what is the opportunity for career seekers? What is the opportunity for career seekers and working professionals to build a long-term value for themselves by being associated with NIIT? Now once you start looking at that, then in the early part of the journey, the person is paying for it. The slightly later part of the journey, the organization may be paying for it, and over a period of time, both may be paying for it. Or organizations will switch to our model where they ask individuals to invest in their reskilling because they are the long-term beneficiaries of that. All these business models are evolving. And I think we have to be at the right place. In mature markets, such as the global markets, where outsourcing is the issue. Here, the individual takes the decision to be with a particular entity or not or with a particular institution or not. In case of a CLG kind of a business, his employer actually takes the call as to which entity the person would be associated with because the outsource -- the whole business gets outsourced to CLG. So there, I think the call is that of the employers. And here, primarily, the call is that of an individual. If you were to look at it that way, the 2 businesses are very different. There can -- there are many more colors to it, and we can talk about it, and I'm sure Sapnesh can give you many examples.

Got it, sir. That's helpful. And just one last bookkeeping question. The CLG business saw an impact of growth to 400 bps and [ what was sales ] to indicate their margin has been. Is it possible for you to quantify what was the impact of each of these things on margins?

The CLG margin that dipped -- we are not able to hear it today. Margaret, I don't think the problem is with caller's phones, maybe there is some issue with our own line. But just to say, I heard you correctly Shradha, and that is that what caused the margin and can we quantify it?

Right.

And can we quantify [ it for her ]?

I think I won't go into quantification, which is very, very specific given that this is public -- this becomes public information. But suffice it to say that the predominant part was investment in organic initiatives, which we have to expense given the accounting principles we follow are significant investment in sales and marketing to enter new market segments in the United States as well as investments in NIIT Digital, including sales and marketing and platform-related work for the India business. That was the predominant part, maybe close to [ 3, 4 ]. The second part, like I mentioned earlier, was the onboarding of the expansion-related work for an existing customer for whom we had very significant expansion over the last quarter.

So exactly, Sapnesh, my point was, I mean, how much was this impact because probably this would be non- [ declaring ] in nature, and maybe we might get the benefit on this account next quarter?

Well, I think we will see continued disproportionate investment in sales and marketing. This is something that we have done in the past and it has paid handsome returns, as well as continued investment in opening the market segment that I talked to you about, as well as NIIT Digital given where it is in its trajectory. I would agree on the transitioning of or onboarding the expansion of the customer. That's a onetime expense. But then, given the number of new customers that we have onboarded this quarter, it's possible that some of those will require additional expenses to onboard as well.

The next question is from the line of Vimal Gohil from Union AMC.

I'll just confirm 1 data point that you gave earlier. So the INR 1,200-odd crores of cash that we have on books or rather INR 1,100 crores of cash that we have not booked, so will be distributed at INR 700 crores in CLG and INR 400 crores in SNC. Would that understanding be correct? Have I heard it correct?

No. I think the understanding you got was slightly incorrect. INR 1,200 crores of cash, of which INR 700 crores will go to SNC and INR 500 crores to CLG.

INR 500 crores, okay. Fair enough. Sir, just wanted to understand in terms of the working capital of both these businesses, if you just make us understand what is the intensity, how would that be divided? Which of the business is more working capital intensive as compared to other, if you could just give us some sense there?

I would tend to feel that the business which is on the outsourcing side, the corporates have fixed payment cycles and fixed payment terms. And that is the one which would contribute to individuals. On the other hand, as we move in this side of the market, there is some parts which individuals pay and there is some part where the corporates pay for that individual. The individuals typically pay in advance, so therefore, the working capital is negative. But corporates work at the same credit cycle. So overall, working capital requirement of this side of the business -- or SNC side of the business is lower than that of CLG. However, the investments required to accelerate that business and bring it to the cruising altitude, if I may say, are higher. And to that extent, it will burn relatively more cash or release relatively less cash in the [ interim there ].

Right, sir. Sir, would it be fair to assume that the business is currently cash negative, the SMT business that is? And the network currently would be -- would it be positive as of December, the SNC network?

Yes. The SNC network is positive. And you are right, at this point of time that business is consuming cash.

Okay. When we say consuming cash, it will be -- obviously, it will be making PAT losses, and also we'll be incurring some -- but our working capital is negative. So basically, it is a PAT negative at this point in time, higher than our working capital [indiscernible]?

I will defer this question to the CFO, who will give you the intricate details of that. Yes, Sanjay.

So as Vijay mentioned, if you have a lower working capital. But you're right that it might be just breakeven keeping up the cash at this point in time, more from the investment perspective rather than the working capital perspective. At the same point in time, the treasury, which is just carrying that allocation will have a return and the path should not be negative.

But having said that, it is in an investment phase in business development, and therefore, based on the response that we see, we may accelerate business development expenditure. That goes out of operating expenses.

Sir, Sapnesh, this one is for you. When you say that there was some impact in this particular quarter given the fact that we've invested in sales and marketing. So when we say sales and marketing, generally, this will be -- we would have added to our hunting salespeople on the ground, right? That's where most of the investment would have gone into. Are there any other areas that you're sort of focused on or try to sort of strengthen?

Sure. So what you pointed out is very true for our Corporate business. We added salespeople and did some marketing-related expenses. However, as it pertains to the B2C India business or the NIIT Digital business, while we added more headcount, but we also spent on both BTL as well as APL marketing.

Could you just elaborate on BTL and APL?

Sorry, go ahead.

Just elaborate on BTL and ATL, what exactly would that be?

Newsprint as well as radio ads.

Got it. Okay. Fair enough, fair enough.

Local ad BTL is more local and below the line as marketing.

The next question is from the line of Nilesh Jethani from BOI AXA.

So my first question is on the [ other ] investment. So we were considering or we were actually in the process of investing into B2C digital platform are not exactly equal to some platforms like upgrade or [ put through a ] similar line. So I wanted to understand this business will post the division of the businesses where it will find its place? And today -- as on today, whatever investments we have done into it? And what do we envisage as far as investments are concerned? Any thought process on this?

Again, sorry, we were having difficulty in listening to you, so I'll repeat your question to demonstrate my understanding. Your question is, there is a digital platform around which the SNC business is running as well as, I think, there is a digital platform around which the CLG business also services its customers. Your question was, where will it lie. And the second question was what is the level of investment we have made so far and are likely to make. Is that -- likely to make? I don't think you asked, but you asked how much investment we have made so far. Have I heard you right?

Yes, sir. perfectly right.

Okay.

So our digital platform is a platform that we use across NIIT, across all of the CLG business as well as across the SNC business, whether the go-to-market is a B2C go-to-market or a B2B2C go-to-market or a B2B go-to-market, we use the same platform. This is a platform that we have invested in over the last several years, more intensely over the last 5 years, to power CLG's growth initially and then more recently to power both CLG as well as NIIT Digital's growth or SNC's growth. It would be hard for me to quantify how much we have invested in this platform over the last 10 years. But suffice it to say that it is a platform that's used by Fortune 500 companies and large corporations to deliver high stakes training to both their employees as well as extended employees. I would also point out that this is the same platform that's delivering high stakes real estate education in Canada, the project that we started about 3 years ago. So it's a platform on which we've made significant investment, not just from the point of view of technology, but product engineering, product management as well as pedagogy. So that when a student gets onto the platform, they are able to achieve outcomes in a purely digital service delivery model. This platform, as the reorganization takes place, will be available to both the organizations. And I think the opportunity would be for each organization to customize it, to achieve specific results for their audiences rather than continuing to invest in 1 platform, which hopes to achieve outcomes for both the audiences. The opportunity we have is to create a fork in the development process and let each organization or each publicly-listed company chart their own course on the digital platform that's available to them as very strong foundation. Now this is different from somebody, like you mentioned, where they've been dabbling with their platform over the last 2 or 3 years. The platform that we have has had the experience of over 10 years.

Got it. Sir, some clarification. Are we also in the process to have a B2C or B2C platform like the current start-up businesses? Or what's the thought process on that? Or we would like to liberated from that and focus on Corporate Learning Group and not go on to B2C business in that fashion?

I think your question also justifies the reason why we are looking at the 2 businesses very differently. The requirements of the 2 markets in terms of what they expect from the platform are different as well. And given that we have a strong foundation on which you can actually build 2 independent entities, which service different cultures and different marketplaces. And that's what, I think, Sapnesh alluded to. So this will provide that opportunity by looking at these 2 businesses differently.

The next question is from the line of Satish, an Individual Investor.

Margaret, I also wanted us to be mindful of time -- so we are already 7 minutes over. How many do we have, 2 or 3 more questions? Should we just restrict it to 3 questions?

All right, yes.

Everybody can ask -- okay. So 4 questions. 3 or 4 questions, I'm sure you would have 3 or 4 people waiting.

[indiscernible]

Go ahead and ask. Yes, sir.

Congratulations on the fantastic performance from NIIT as a whole. And what attracted me very well is the receivables, okay? The -- what you call it, outstanding, the [ DSO ] have come down from -- by 5 days. So that is an excellent indicator of a growing company. And your narratives are looking fantastic, and I hope the things going ahead will be much rosy and better in the coming days. One question I wanted to just ask you is by splitting the business into 2 entities, whether it will be, what do you call it, beneficial to the shareholder only the market will tell? Or you will be showing the right path and right guidance for those businesses to perform separately and strongly? So this is my question regarding the split of the business. Otherwise, I'm very happy. You have delivered fantastic figures and all the explanation given until now, it's completely fine with me.

These are very, very encouraging remarks. I think we are absolutely honored and must feel -- feeling very flattered with the words that you had to say. I think both our businesses will discover their independent value. Today, both the businesses actually -- both the businesses together do not belong to any category. But I'm sure in this independent value discovery, both businesses, with their projections and their unique differentiation features, would be able to discover their independent value. As I said, 1 share of NIIT Limited will entitle shareholders for 1 share of NLSL. Both will get listed and both will have their own projections and future, much of which Sapnesh already alluded to and explained, and I'm sure more clarity will emerge as we go through this process. Based on that, we do believe, and that's all our advisers also believe and so have others who have -- we have spoken to, that there is an opportunity for value unlocking for each of the 2 businesses. I hope we have answered your question. If not, we would be very happy to have an individual conversation with you whenever you would like and I'll provide you with more details. Thank you very much for your very kind remarks. It's very encouraging for our teams to hear comments like this. It propels us into moving into faster or higher gear. Margaret, can we take the next question?

The next question is from the line of [ Ashish Agarwal ] from Pareto Capital.

Congratulations on fantastic quarter. I had 2 questions on the gross assets of the business. First, you mentioned about 2.5x growth for the CNG business and a 5x growth for the SMT business over the next 5 years. Is this story organic? Or have you also assumed some inorganic growth as part of this growth target?

Sapnesh, can you let potentially got it, [ Ashish ] repeat it and maybe a little slower. We are hearing there is some trouble also on this line.

Sir, my question is, with respect to growth [indiscernible] about 2.5x ...

I'm sorry, you audio even is unclear to me. If you can come on the handset mode, please. If you are on speaker, please come on the handset mode and ask your question. There's an echo from your line.

I think after -- we all got bits of what you said. So I'm putting it together. I heard you say that this $400 million to $500 million dream for CLG and 5x for SNC, is it based after inorganic activity or it's only organic? So it is extending it from where we are right now. And right now, we have had -- we have included 1 acquisition, which is already in and is consummated. If there are any more, those will be additional. We can't anticipate the value of an acquisition before it happens.

We will move to the next question, which is from the line of [ Kunal Bokaria ] from [ Kunal Bokaria & Company ].

I want to ask 1 question, whether we are planning to tie up with any of the e-learning apps like mergers or anything in the future for strategic synergies and all?

Did you say...

Launch apps.

Sorry. Go ahead, Kapil, if you understood.

Can you repeat it? Did you say are we planning to launch similar apps?

Similar apps or any tie-ups with [ measures ] or any of the e-learning digital platforms for a better reach and synergies?

Okay. I think we have a very significant digital learning platform, and we would like to grow that platform. Having said that, we are looking at acquisition targets and alliances there, which can help us invest in ventures who can deleverage from our learning platform and grow on their part. And those are some of the acquisition targets that we would be looking at.

We'll take our last question from the line of Saurabh Shah from AUM Fund Advisors.

[indiscernible]

Sir, that is not clear. Please come on the handset mode. You're on speaker and it's unclear.

Hello. Is this clear?

Yes, this is better. Please go ahead.

Thank you. I just want to congratulate management team for an outstanding quarter. Question for Sapnesh first. Sapnesh, for the Corporate Learning business, I think you mentioned somewhere about the value proposition for NIIT Life Sciences post-Eagle and also the revenue visibility of INR 326 million. Could you just give us some idea about how the Life Sciences opportunity you expect it to pan out? And over what time the overall visibility of INR 326 million you think would kind of wind over revenues?

So let me first answer the Life Sciences related question. When we acquired Eagle Productivity Solutions, which was almost 3.5, 4 years ago to date, our revenue from Life Sciences was very close to 0. I think we had 1 life sciences customer at that time. Today, we have 12 managed training services customers in Life Sciences, and they contribute 14% of our overall business. Obviously, over these 4, 5 years, our business has grown quite significantly. And from an overall perspective, the Life Sciences' value proposition has become more significant and richer. And we could spend more time separately on exactly what it is. But suffice it to say that in addition to the typical outsourcing value proposition that we offer our non-life sciences customers, there are a number of specific life sciences-related point solutions that we are also able to bring life sciences customers. These include, but are not limited to implementation and training around the CRM packages they use, implementation of new product rollout-related training and so on and so forth. So a number of point solutions, in addition to the typical outsourcing solutions that we offer to our non-life sciences customers. So a very rich product set for our life sciences customers. I think you had a second question, which I think I forgot.

Before that put, what is in dollar terms as Life Sciences mean? You think, in 2025, this could become like a $100 million opportunity from the current levels that you mentioned? Or do you think -- I mean, please just give us a sense of how large is so significant this is for us?

So like I said, today, it's about 14%. And it's just from a round numbers perspective, we were at about $500 million 5 years down the road. It is possible for Life Sciences business to get to $100 million and 20% of the overall business. A lot of key opportunity, predominantly because training is so important in life sciences. It's a regulatory and compliance-related segment where there is a lot of mandatory training that life sciences folks have to go through. Also a lot of change, a constant change in life sciences. So it's quite possible that it could be close to $100 million in the next 5 years or so.

The other question, Sapnesh, was on this $326 million revenue visibility that you have. What kind of life should we assume for this in terms of the current revenue? And then what is the new revenue that you should continue getting? Is there a kind of broad time line around which this will [ happen on some level ]?

So this visibility is across the period of contracts that we currently have. And I think we would be able to exhaust most of this in the next 2 to 2.5 years.

Sorry, next 2, 2.5 years?

Approximately.

Okay, okay. My last question, Sapnesh, was on outsourcing costs, professional and outsourcing costs. They've increased 33% Y-o-Y. I just wanted to check. Is this because of you're needing outside resources that we don't have, and over a period of time should we expect this to come down?

Yes. I think given the expansion we've had both quarter-on-quarter and year-on-year as well as the product mix that we see, there are times when we have to resort to contingent staffing to ramp up rapidly. And then, over time, we reach a balance of contingent staff versus own staff. So at times of steeper growth, we rely on contingent staff and then make it -- and then normalize it as things stabilize.

So you would expect this to -- as a percentage of revenue, you'd expect us to kind of be at these levels given that you continue -- you will be growing? Or should we expect this to taper off in the next 2 or 3 years?

[indiscernible]

This was to expense your costs, I mean.

Say that again?

No, I'm just saying this is expensive relative to your own people, generally, right? So I'm just wondering from a margin standpoint, do we have any [indiscernible] ?

I think these are carefully made choices. We bring on people on our roles very carefully. When we have significant long-term visibility of those roles. Also, a lot of times, when we have a lot of [ payment ] delivery to do on diverse subject areas we use our contingent staff.

Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.

Thank you, Margaret. Thank you very much for being here with us and sharing this exciting day with us today. We do know that this is the results season. And -- at this time, you have many other priorities as well, but thank you for giving your time. I think you've made some very encouraging comments and some very interesting questions. Your questions always lead us to looking at ourselves further. And even the corporate action that we have driven today is based on your past feedback over periods of time. And I'm sure we will have your support in making that happen. Your encouragement will definitely help our teams to rise to the occasion even better and faster. And hopefully, we will be able to fulfill all the expectations that you have from your NIIT. So I would like to close this call now by thanking you and wishing you a healthy and happy New Year.

Thank you. On behalf of NIIT Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.