NIIT Limited (NIITLTD.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '26 Earnings Conference Call of NIIT Limited. [Operator Instructions] I now hand the conference over to Mr. Vijay Thadani, Vice Chairman and Managing Director, NIIT Limited. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. Welcome to NIIT Limited Q3 FY '26 Earnings Call. This is a busy result season, and for you to spend your time with us, we're truly grateful to you. And we always learn from your questions, and they lead us to deep introspection and sharpening our strategy. Today's agenda is covering the quarter 3- and 9-months results for financial year '25-'26'. We'll talk to you about the performance highlights. We would also like to explain to you, this time it requires more explanation, as to what changed this quarter and how we are handling that. And lastly, we'll also talk to about outlook and priorities for quarter 4 and beyond. So to address all your questions, I have the full management team here: our Chairman, Mr. Pawar; another Executive Director and Co-Founder, Mr. P. Rajendran; the CEO of the company, Pankaj Jathar; Sanjeev Bansal, who's the CFO of the company; Ms. Shilpa Dua, who is the CHRO; as well as Mr. Sapnesh Lalla, who is a non-Executive Director and also CEO of NIIT Learning Systems Limited. In addition to that, we have the Investor Relations and senior colleagues from finance and business functions. Just to set the context, our performance in quarter 3 did not meet the expectation that we had from ourselves, and we had entered the quarter with a double-digit plus growth based on the schedules as well as the order book that we had at the beginning of the quarter and what we were expecting. But we fell short driven primarily by a sharper-than-anticipated slowdown that happened because in fresh hire training. We have all been reading about the fact that fresh hire training in technology has been very muted. But this quarter, we also saw that happening at a larger scale in BFSI, which was quite sudden since it happened in the second half of the quarter, where we had to push the dates out, and therefore, to that extent, we could not record the revenue that we wanted. And our expenses remain at the levels, and they were having planned for this and the future growth. So taking into account that and how we have handled the situation, how AI-enabled revenue is actually changing the way we are looking at things, how the pivot that we did in technology training a few quarters ago, which helped us grow as technology part of the trading by 20% this quarter. And more I have Mr. Pankaj Jathar, CEO of the company to brief us, and then we'll open it for Q&A.

Thank you, Vijay, and good afternoon, everyone. I will cover Q3 performance first, starting with revenue and order intake, and then look at segment trends and profitability, and finally, what we are doing in Q4 to improve execution and momentum. Q3 FY '26 performance. Revenue and order intake. Revenue in Q3 was INR 1,014 million. This is the second consecutive quarter with revenue above INR 1,000 million. That's INR 100 crores. Revenue was up 3% year-on-year. Excluding iamneo, revenue was down 10% year-on-year, largely due to compression in new hire training, most notably across large private sector banks and top IT services firms that are large customers for us. Order intake was at INR 822 million, marginally better than last year. What changed was the expectation is that we saw onboarding plans weaken materially in the second half of the quarter, which pushed training start dates out and reduced PAT volumes, where BFSI & Others contributed most to the shortfall. In terms of go-to-market mix and what worked for us, the Enterprise go-to-market held up despite BFSI & Others moving down. Our Enterprise go-to-market execution was strong despite a significant slowdown in the large private sector bank hiring training. Overall, Enterprise revenues grew 8% year-on-year, led by Enterprise, tech which grew 18% year-on-year. Importantly, excluding iamneo, Enterprise tech grew 9% year-on-year, reflecting an underlying improvement to the business. Why do we think this worked? We are trying to achieve a balance across early careers and working professionals. Our strategy to increase penetration across lateral job roles through upscaling, reskilling has created a healthier balance between early careers and working professionals in Enterprise tech. This mix made Enterprise tech structurally more resilient even as fresher hiring and onboarding remained volatile. On the Consumer side, it's overall down, though tech is a bright spot even within that. Consumer business declined 3% year-on-year, driven by BFSI & Others, where revenue was down 36%. At the same time, Consumer tech grew 22% year-on-year, reflecting continued demand for tech skilling from job seekers and working professionals. Our direct-to-college strategy through iamneo is paying dividends as tech clients become more discerning on talent, quality and job readiness. Consumer tech grew at 22%. This is a good indicator of the traction we are getting. In terms of product mix, this translated to the following. The mix shifted meaningfully this quarter with Tech:BFSI becoming 76:24, which was 65:35 last year. The proportion has changed decisively in favor of technology. Technology programs revenue was at INR 766 million, which is up 20% year-on-year. The key drivers behind this, an increased investment in GTM and focus on advanced programs for the working professional audience has helped stabilize the business against hiring [indiscernible]. Iamneo contributed INR 128 million revenue in the quarter and is scaling well. The pressure was concentrated in BFSI & Others segment. BFSI & Others revenue at INR 248 million was down 27% year-on-year, led by reduced volumes for our TPaaS business. I now invite Sanjeev Bansal, our CFO, to talk through some of the financial metrics.

Thanks, Pankaj. Good afternoon, everyone. I will talk to some of the financial indicators including EBITDA, other income and financial and cash flow. Despite the revenue mix, we delivered positive margins in Q3. This was enabled by tight cost control even as we continue to invest in GTM capacity and new AI offerings. Depreciation was at INR 76 million. Net other income was INR 132 million, which is comprising of other income of INR 191 million, which is offset by exceptional expenses of INR 54 million. Other income of INR 191 million includes treasury income of INR 101 million and other income of INR 90 million. And INR 90 million includes interest on tax refunds of INR 63 million, rental income of INR 17 million, and there is some transition-related expense recovery of INR 5 million and other miscellaneous income of INR 5 million. Exceptional expenses of INR 54 million includes onetime impact of New Wage Code implementation, sub-INR 40 million, and there is an expense of INR 8 million, which is related to scheme of arrangement for merger of RPS and IFBI into NIIT. Other expenses, INR 5 million, includes net finance cost of INR 3 million, a ForEx loss of INR 2 million. All this has resulted to PAT of INR 39 million and EPS of INR 0.29 per share. As stated earlier, the business is in investment phase currently. We are investing into making the business resilient across hiring cycles through expansion of GTM, new products and offerings, partnerships and inorganic investments. Now coming to balance sheet and cash flows. DSO is at 59 days versus 68 days last year, though it was 55 days last quarter. CapEx INR 87 million in Q3. This is consistent with our investment cycle. Cash and cash equivalents stands at INR 7,122 million against INR 6,846 million last quarter. This is driven by working capital efficiency and treasury income. Headcount stands at 939, which is flat, which is up from 720 last year aligned with growth investments, this includes a new headcount. Thanks. Back to Pankaj.

Thanks, Sanjeev. Let me now talk a little bit more about the last 9 months of FY '26, the performance and operating context. For the first 9 months, order intake was INR 3,340 million, up 16% year-on-year. And revenue was INR 2,904 million, up 7% year-on-year. For the last 9 months, we've navigated conflict-related impact on volume, a prolonged and continued period of subdued IT hiring, where we successfully derisked growth via GTM expansion, new customer additions and scaling AI offerings and inorganic investments. Q3 for us has historically been a seasonally weaker quarter for some parts of our business. In the last few years, it had shown better trends with a changing mix. However, the primary driver of the quarter-on-quarter decline this quarter was the pushout of planned Q3 trainings due to the BFSI onboarding slowdown, especially in the second half of the business end of the quarter. Some of the actions we've taken this year. We've been investing in building blocks that widen the funnel and improve resilience across cycles. On the go-to-market, we've added 5 sales leaders across NIIT, including MDRs and 8 enterprise sales managers, expanded coverage across GCC's, banks, NBFCs, Indian enterprises, and with iamneo coming into the fold, universities and colleges, increased brand visibility and targeted influencer-led campaigns. We are seeing early results in the form of logo additions and customer-based expansion across technology companies, financial service firms, Indian enterprises and universities. We added 37 new enterprise logos in the 9 months of FY '26, along with 20 new universities and colleges. The 20 new institutions are in addition to the more than 70 that were already iamneo customers when they became part of NIIT. One of the interesting things I would like to mention is that our social media strategy is working, and we just hit 1 million subscribers to the NIIT YouTube channel. In terms of platform and products, we've revamped the learning platform, launched deep skilling in new age technologies, integrated AI to enhance learner outcomes and internal products, pivoted focus towards advanced programs on working professionals, which have structurally better stability than fresher-led hiring cycles. Solutions and differentiation. We've added generative and agentic AI, AI digital coaching for banks and enterprises and sectoral solutions for auto, telecom, consumer electronics. These solutions are improving differentiation and supporting share expansion within key accounts, while acknowledging that realized revenues depend on client onboarding and rollout timelines. Iamneo integration. iamneo brings an AI-first deep-skilling SaaS platform, which includes coding labs, assessments, placement automation and talent acquisition. This opens up the higher ed channel for us. In terms of simplification and agility, we announced a merger of 2 wholly owned subsidiaries, RPS Consulting and IFBI with NIIT Limited to simplify our structure and reduce complexity, thereby improving our agility. This process is on track. What are we doing now? We'll accelerate what's working, tech, AI and onboarding new logos, continue scaling AI programs and workflow offerings, expand penetration into GCCs and India enterprise when demand signals are comparatively healthier, position reskilling around role evolution, particularly AI-enabled role redesign through outcome-led programs. On the BFSI & Others front, we are putting in place a recovery plan. We are diversifying beyond the top 4 private banks into a broader set of financial services, including NBFCs and insurance players. We are also broad-basing across more banks to reduce concentration risk. And structurally, we are increasing the share of lateral upskilling programs to reduce dependence on fresher onboarding cycle. Given the volatility that we saw last quarter, we have to accelerate this transformation. On the iamneo new integration and synergies, we are maintaining a strong execution in this higher ed channel, pursuing cross-sell opportunities into enterprise relationships in a measured way, prioritizing conversion quality and delivery readiness. The road ahead. We are seeing improved consumption of our differentiated outcome-oriented offerings across the technology landscape, including working professionals and job seekers. Our investment thesis is showing in new logos, digital engagement and pipeline. BFSI remains cautious in the near term, and we are actively managing concentration and phasing risk. In terms of guidance, we expect to be breakeven to low single-digit margin in Q4 given continued investments. Medium to long term, we still see substantial opportunity. We remain fully committed to our strategic objectives, although timelines are difficult to predict given the fluid environment. With that, Vijay, I hand it back to you.

Okay. Before I open it up for Q&A. I just thought I'll give an update on two important items, one, which Pankaj has already spoken about, and that is the how iamneo is getting integrated into the NIIT system. The second thing which I thought I would like to talk about is the merger of RPS Consulting and IFBI, the 2 subsidiaries of NIIT, which are being merged into NIIT. And this process is on, and we expect to complete it in the next 8 to 10 days. And we'll, of course, keep you updated on that. In closing, I would only say, while Q3 was a challenging quarter and the numbers in terms of the outcomes don't appear to look very effective. Our strategy set is very much in place and is actually strengthening. Our AI offerings are being very well appreciated. I think Pankaj referred to the 17.65% that they contribute to our revenue, the AI enabled. And we are widening the demand base. We are accelerating the parts of the portfolio that are working, especially in tech and AI. And we are maintaining cost discipline by continuing targeted investments. So we would like to open this up for Q&A. And based on your questions, we will then include other colleagues of ours in this discussion. Pankaj, do you want to say one more thing?

Yes. On the guidance, we are expecting double-digit growth year-on-year in Q4. That's the guidance we wanted to give for Q4. Yes, Vijay that's it. We can open it up for questions.

[Operator Instructions] The first question is from the line of Ganesh Shetty, an individual investor.

I just want to have some information regarding our inorganic activities. Like last quarter, we had one small investment in iamneo. Apart from that, as we have a good cash in our balance sheet and our growth targets are quite high, so I wish to ask you that whether there is any challenge in acquiring new capability or new company because of fast pace of change of technology or hiring freeze in big companies. So can you throw some light on this, our inorganic initiative? And also, I wish to know whether we wish to target any new sectors as talent building and also for AI capabilities, which may be required by other sectors apart from BFSI and technology. Can you please throw some light on this, sir?

Right. So let me try to respond on the inorganic part, and then Pankaj will also talk to you about how we are extending the capability that we have in here to help other sectors, in fact, some other plans that we are working on. So inorganic activity, as you know, our approach has been to look at new segments, new capabilities, new geographies. And in these three areas, we've been looking at niche companies where we'll make investments. We have an active funnel. We are in discussions, in some cases, fairly advanced discussions. But obviously, we can talk about these only when a deal materializes, otherwise, it leads to speculation. But yes, we have a fully committed team which is working on this, and we will be sharing areas that we are looking at. The areas that we cover, as I said, at the broad level is segment geography and capability. But it can be a new sector that we are looking at, for example, ER&D or manufacturing. And we are open to opportunities where we can find companies and teams which can add value to our strategy. At this point of time, that's what I would like to share. We are very hopeful that we'll be able to share some new [indiscernible] in the coming quarters. We are making continuous investments in AI on three dimensions. One is the dimension of building capability to build solutions as well as agents. For example, you heard about the new programming with building agentic AI systems that we launched. But we are also working on one building agents and working in doing R&D in that area. The second is building an AI-powered platform, which many parts of the organization are working on. And third is to create AI learning content, which to start with was generic and was organized across various dimensions in the organization from literacy to expertise, fluency and expertise, which now we have got -- we are making sure that we make them more specific in particular domains. So that work is going on. But I'm sure Pankaj will have many more things to say and can perhaps give you a couple of examples also.

On the -- You covered the inorganic bits, so I won't go there. We've already -- we talked about things that we're looking at. I can talk a little bit about the building agentic AI systems program that we launched recently as part of our digital offerings and the direct-to-consumer go-to-market, right? So the building agentic AI systems program is designed to empower engineers with skills to architect autonomous, goal-oriented AI agents that drive enterprise transformation. It's a 25-week hands-on curriculum delivered through mentor-led online sessions and tactical projects. It equips participants with expertise in cutting-edge tools like LangChain, LlamaIndex and Azure AI Foundry, enables learners to build scalable, secure systems for real-world applications such as compliance automation and financial analysis. In designing this program, we aligned with industry forecasts from people like McKinsey and Deloitte, who've been projecting trillions in value from agentic AI. This initiative addresses the growing talent gap in India's AI ecosystem. This positions us, NIIT, as a leader in upskilling for the next wave of intelligent automation. We anticipate a positive response from the learner community to this innovative program. Beside this, on the enterprise side, there's a number of engagements we are running with customers. These involve GenAI and agentic AI programs spanning across leadership enablement to hands-on technical implementation. Our offerings include cloud-native GenAI programs across AWS, Azure, Google Cloud and Databricks. We also have data copilot development acceleration programs going on and specialized agentic AI training, covering lag applications, workflow automation with ChatGPT, Zapier and AI agent development. For leaders and decision makers, we deliver GenAI leadership programs tailored for manufacturing markets and cross-industry transformation. Alongside, we also have an AI mindset and transformative force of GenAI programs. These are series that are going on with customers across different industries. In terms of our foundational tier, we're also doing programs like AI for all, AI fundamentals and AI readiness programs, while our practitioner track features multiple cohorts of AI practitioners and AI builder league programs. We complement these formal programs with webinars, hackathon and campus initiatives, delivered both synchronous and asynchronous across enterprise for mid-career professionals as well as early career segments. Vijay, back to you.

Right. Ganesh Ji, I hope we have answered your question. If you may have a follow-up, we'll be happy to.

Yes, sir my -- That's good. Sir, my second question is regarding our B2B and B2C business. In spite of challenges in macros and hire increase, our B2B business is doing quite well due to our initiative with GSIs and GCCs. But our B2C business is quite soft during all these years. So I just want to have some flavor how the road ahead is for B2C business. That's all from me. Sir, all the best.

Okay.

Thanks Ganesh Ji for the question. On the B2B side, like you mentioned, we have taken some initiatives on engaging with a slightly different learner community within the same customer base, right? So while we were earlier largely dependent on fresh hire training, we've changed our go-to-market to also include working professionals and delivering training programs which are more deep skilling and transformational in nature. And this has helped us in that space. On the B2C segment, right, this quarter, one of the things that did impact us was the slowdown in fresh hiring. And while on the direct-to-consumer, the technology side of programs, we saw a good uptick happening there. So that did well for us in spite of the slowing down on the BFSI segment. So this is an area that we are focused on. We're -- as we've called out previously, as Sanjeev mentioned today, we are in the investment cycle. And we are building programs. We are investing in the technology platforms, investing in content and in creating new programs, like the agentic AI system that I just spoke about. That's a new offering that we've brought to the market in this quarter. And it's part of a curriculum that we are designing around AI offerings that we will bring more of these to the market. So we are hoping that this will help us grow faster in this segment. Like you, we have also noticed that the growth in this segment has not been as much as we would have liked to, and we are doubling down on bringing new products to the market to help this growth. Vijay, if you want to add anything?

All right. I think there would be other questions, operator.

The next question is from the line of Aman Prakash, an individual investor.

So it's very heartening to see that there's been a 20% year-on-year growth in the technology program. So I just wanted to like ask that we've been talking about AI on these con calls for a while, and now is the time when this industry is sort of really taking off in a way and NIIT is the right company to capitalize on it. So considering the courses, the agentic AI program is a very good one, I've seen it. And I just wanted to ask, I mean is it like maybe the cost structure is a bit too high? And I mean, what are your plans, like views on the cost structure? And how can you make it more broad-based? I just wanted to ask if it has not been too prohibitive to go like very mainstream. And would it be possible that there are like a shorter-duration, extremely specialized courses also especially for working professionals?

Thanks, Aman. I can take that question. So firstly, really glad that you've seen the agentic AI program and you think it's a good one. Thankful to you for appreciating that. And yes, it is part of a larger initiative we have, and we will bring in programs which will be at different price points for different audience. This particular one is a more comprehensive program that we have. It's a 25-week duration program. And the pricing was also done based on what we've seen in the market of similar programs with this level of intensity and engagement, right? So we believe that it is priced well enough for the market to accept, and we are seeing some early traction, which gives us that feedback. But noted. Your comment is noted. We are working on creating niche programs for different audiences within the working professional segment. And these will be both shorter duration, differentially priced. And we are creating a whole many of these programs. I hope that answers your question.

He was talking about cost structure.

At different price points I believe.

I thought he was referring to cost to the learner. I thought he was also referring to our cost structure.

[Operator Instructions] The next question is from the line of Rahul Jain from Dolat Capital.

What I heard about the guidance was the one data, which is like for Q4, we are expecting 10% Y-o-Y. Are we articulating something for the full year as well? Or the implied number would give moreover towards that number for the full year, which would be like low -- high single-digit growth for the full year. Is that the right implication?

Yes, Rahul, your understanding is correct.