Ladies and gentlemen, good day and welcome to the NIIT Limited Q1 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. 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 and good afternoon to all of you. Or good morning or good evening, depending on where you are joining from. First of all, thank you very much for joining us here on this call. It's very important for us that you were able to, or you are able to spare your time in this busy result season, and the fact that you devoted this time to this call is truly appreciated. The agenda today is to discuss the business performance of NIIT Limited in the first quarter of financial year 2022-2023, and the quarter ending June 30th, 2022 is what we will be discussing. While I have the full team from NIIT, including our Chairman, Mr. R S Pawar, Sapnesh Lalla, who is the CEO right now, participating from the U.S., where he is right now. Sanjay Mal, who is the CFO. Kapil Saurabh, who leads the Investor Relations and M&A function. Prateek Chatterjee, as well as some of our Directors on the Board, who are on the call from different locations, including my colleague, Rajendran, who is the Joint Managing Director. All of us are here to listen to your comments as well as try to answer all your questions. The only thing I would like to paraphrase this meeting, before I request Sapnesh to give a briefing of what happened in the quarter, is that it's been another quarter of strong performance despite a rapidly changing macroeconomic environment, increasing global uncertainty. I think, I feel very good about the fact that both businesses have done well in this quarter and are on their on the trajectory that they had planned for themselves. The trajectory may have a few bumps, which Sapnesh will talk to us about. Overall, the trajectory remains strong, and I think the capability, the brand presence as well as the strong culture that NIIT has enjoyed over the last 40 years and a strong position in the minds of our customers gives us a lot of confidence for the future. With this, I would request Sapnesh to first provide an update on the operating performance, and also talk about the business seasonality, which does affect us from time to time. Based on your questions, I may also provide an update on the reorganization process that we had started earlier this year. With that, over to Sapnesh. Thanks, Vijay, and thanks everyone for joining this call. It means a lot to us. As a quick reminder, please note that, based on the proposed reorganization of the company, the residual institutional business, which was earlier classified as an asset held for sale, is now classified as continuing operations. The financials have been consolidated in the current as well as previous quarters for like-for-like comparison. Let me start with the overall highlights. The revenue for the company stood at INR 4,048 million. It was up 34% YoY and 8% QoQ. Both the businesses achieved robust growth and on a strong base from last year. Excluding the inorganic growth, wanted to remind everyone that, NIIT acquired RPS Consulting, in October of last year. If you were to exclude that acquisition, the revenue was up 23% from a year-on-year perspective. The EBITDA was at INR 740 million. It was up 5% year-on-year. This includes the impact of the ramp-up in planned investments, and partial resumption in travel and premises costs. Net other income was INR 3 million. It was down quarter-on-quarter versus last year, primarily due to the mark-to-market impact on fixed income investments of the company because of the rising interest yields on bonds. The tax was at INR 127 million for the quarter. Please note that in Q4 of last year we had a one-time gain in taxes as per the accounting standards. Profit after tax was at INR 443 million, resulting in an EPS of INR 3.3. Coming to corporate learning business, the revenue was at INR 3,125 million. It was up 6% QoQ and 18% YoY. In constant currency, the revenue was up 3.2% QoQ and 14% YoY, despite environmental headwinds. The EBITDA was at INR 739 million. EBITDA margin was 24%. It was down 57 basis points on a quarter-on-quarter basis. As guided earlier, margin was down QoQ predominantly based on investment in transition for multiple new contracts that we acquired earlier, late last year. Entry into the education segment as guided earlier. For both the accounts that are in transition as well as for the entry in the education segment, we expect to record revenues over the next two quarters. We also have a planned ramp-up in sales and marketing expense. As we have guided over the last several quarters, we will invest disproportionately in sales and marketing, and we are continuing to do that. We also have partial resumption of travel and premises expenses in some of the geographies. Our investments are continuing to help our front office add and scale contracts with marquee customers. During Q1, we signed four new contracts, two customers in the life sciences segment, one in the technology segment, and the last one, a large conglomerate business. The value of managed training services customers now stands at 68. The visibility at the end of Q1 was at $ 304 million. We continue to see a healthy pipeline of new customers as well as opportunity for expansion of our wallet share across existing customers. I shared earlier, many of the existing customers have reduced their consumption of training from levels as the pandemic hit. While spend stabilized at lower levels in FY 2022, growth started to bounce back as a result of proactive investments in sales and marketing and in new capabilities, which allowed the Corporate Learning Group to continue to improve its competitive position in the market. The growth was driven by accelerated ramp-up of new customers as well as expansion in the share of wallet of existing customers. The sharp increase in volatility last quarter impacted the volume of a couple of our customers. We expect the pace of consumption to pick up as the uncertainty starts to go down. This was reflected in 3% QoQ growth in constant currency versus our earlier expectation of 5% QoQ growth. Like I stated, while a large majority of our customers have grown, but a couple of significant customers have experienced lower volumes this quarter. Favorable impact of exchange rates has helped achieve 6% growth in INR terms. Expect the near-term headwinds to continue to have a marginal impact over the next couple of quarters. Based on this, the base case organic growth for the year is likely to be in the 15%-16% range in constant currency terms versus the 20% constant currency growth expectation we had set earlier this year. In reported terms, however, we continue to expect 20% growth and greater than 20% margins at prevailing exchange rates. For Q2, we expect about 3% growth on a quarter-on-quarter basis. In terms of our preparedness and capability set, we are more than confident in our ability to execute. We are scaling up our investments and believe that in the medium to long term, our growth trajectory of 20%-25% is right intact. In our skills and career business, revenue for the quarter was INR 923 million. This was up 145% on a year-on-year basis, and 16% on a quarter-on-quarter basis. Not including the revenue from the acquisition of RPS, the organic growth was at 54% year-on-year, driven by significant growth in key product lines, including StackRoute and TPaaS. StackRoute and TPaaS grew at 114% year-on-year and contributed 39% to SNC revenue in Q1. This business has shown a smart recovery and is on a robust growth trajectory. EBITDA was INR 1 million as compared to a loss of INR 51 million in Q1 last year. The business is a strong digital learning platform across domains for both career seekers and working professionals, leveraging the strength of our brand, deep expertise in pedagogy, and the use of technology in training. The business provides training in emerging digital technologies to working professionals, a segment which is seeing strong demand due to digital transformation across businesses. We continue to see a multi-year cycle for growth and demand for skilled talent. Given the large opportunity, we have accelerated investment in this business, which has helped us lift the revenue run rate. Between StackRoute, RPS, and the enterprise business, we have a strong coverage of GSIs, GCCs, and other large Indian enterprises. With a wide range of offerings for upskilling in digital skills, including programs for 5G, cloud technologies, cybersecurity, game development, data science, and full stack product engineering, as well as programs in digital marketing, business development, and virtual relationship management for digital enterprises, we are well-equipped to help our customers with their talent transformation needs. NIIT has contributed to the growth of the IT industry over the last 40 years and continues to help the industry deal with its talent shortage. We are continuing to help organizations onboard over 10% of their new hires and ensuring that they are day one and hour one ready. The sharp increase in the volatility last quarter impacted the volume for a couple of our customers, as I pointed out earlier. We expect this pace of consumption to pick up as the uncertainty starts to wane. While the large majority of our customers have shown growth, a couple of the customers had lower volumes than we had expected. We are now, as I mentioned, onboarding over 10% of college graduates entering the technology careers in India, and making them first day, first hour ready continues to be our key goal. Our B2C programs are ramping up and helping the learners achieve a very strong career outcomes. Learners that join us have been getting offers that are almost double the average of starting salaries for on-campus hires, with recent starting offers as high as INR 10 lakh. Our balance sheet metrics continue to be strong. Net cash position improved quarter-on-quarter by INR 158 million to INR 12,592 million. The DSO was at 49 days as of end of June, versus 48 days end of previous quarter. Our ROCE has improved sharply over the previous three quarters. It stands at 20%. Our operating ROCE, excluding cash on books, was at 81.9%. I think overall, the opportunity in front of both of our businesses is robust, and I believe we are in good stead to address that opportunity. The global corporate training market is a large $350 billion-$400 billion market, and NIIT has established a strong right to win with strong differentiation and value creation for customers in terms of both effectiveness and efficiency. We continue to expect strong growth, strong and consistent growth, strong margins in an asset-light, high ROCE business model. For our SNC business, our opportunity continues to be strong. India has a high young population with a high graduate enrollment ratio into higher education. NIIT has been a premium provider for technology training to individuals and enterprise learners over the last 40 years. Over the last two years, the business has pivoted to a digital learning platform. We now have a strong right to win with investments in platform, curriculum, proven outcomes, and strong relationships with GSIs and GCCs. NIIT has established a right to win that is an envy of a number of our competitors. We will continue to pursue investment opportunities both organically and inorganically to drive growth across the different dimensions that we have talked about earlier. We would like to pursue opportunities that help continued expansion of our corporate business through expansion of geo coverage, addition of new capabilities, and penetration into new customer segments. For SNC, we'll continue to invest to achieve leadership in digital learning. In summary, we continue to see a large opportunity and are confident for achieving multi-year growth. We have a strong competitive position and a right to win in the markets we operate in. Near-term uncertainty may have short-term impact for the next couple of quarters, post which we expect growth rates to pick up. Growth in SNC business has remained on track, and we expect that to continue to be robust. We remain on track to deliver the guided margins of over 20% for CLG and a small EBITDA profit for the SNC business for the full year. That was the set of highlights I wanted to present as prepared comments. I would now hand it over back to Vijay. Thanks, Sapnesh. I think, at this point of time, all that I want to explain is about the scheme of arrangement, the reorganization that is for which we had briefed you earlier in the year. A quic u pdate on that is that the composite scheme of arrangement was filed, and we have received all the SEBI and Stock Exchange approval which were required based on which it was filed with NCLT. The first motion hearing of that was completed on July 25th, and orders have been reserved. We expect the order to be released in the next four to six weeks with direction for convening meetings for seeking necessary approvals from stakeholders, various stakeholders, including shareholders. That's the update. In short, the scheme of arrangement is on track as per the original timeline of ±1 year that we were anticipating. I would stop here and now open this floor for questions. F or Q&A, m y colleagues who are on the call as well as some more who are elsewhere in the world would also participate as they require. Over to you, operator, if you can please open it for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star then one at this time. First question is from the line of Baidik Sarkar from Unifi Capital. Please go ahead. Gentlemen, good afternoon. Sapnesh, the quarterly acceleration in CLG was obviously good, but there seems to be some softness on the order book. How should we read this over the medium term? If you could perhaps carve out the percentage of our order book and revenue dependency on sectors that are perhaps aligned with cyclicality, right? Like Canadian and North American housing and so on. Secondly, Sapnesh, given the sharp inflation on the cost front, is your pricing environment supportive of the new cost structure? Would you reckon we have the pricing levers in the quarters to come from the margin front in CLG? Thanks. Thanks for those questions. If I understood your question right, you wanted to know, from a growth perspective, are we able to absorb the challenges that you have outlined, from a growth trajectory perspective? Second question was from a margin perspective, with cost pressures, will we be able to manage our margins? Did I get the question right? That's right. If I could just, you know, rehash the first one. Look, I think the commentary on the order book expression, the visibility of order book, over Q3 and Q4 of last year was very different from, I think, what you're expressing today. You know, it's quite dramatic, actually. If you could just kind of help us read the situation better. Let me answer the question on the visibility front first. Our visibility is quite a bit dependent on the renewal cycle for our contracts. I don't believe the change in visibility has been dramatic. It's gone down marginally from, I think, about INR 328 million to INR 304 million in spite of addition of four new contracts. That's because of the timing of some of the renewals which happened towards the end of calendar year. I don't believe there is dramatic change in the visibility. Like I pointed out, we continue to have strong velocity in terms of getting new customers. That velocity has only increased over the last few quarters. To answer your first question, which was, are we able to continue to see the growth opportunity? Like I pointed out, in medium to long term, we are able to continue to see the growth opportunity. Like I mentioned, we've seen softness or lower consumption of training across a couple of our customers. While the large majority of our customers have increased consumption and we've seen stronger quarter-on-quarter growth across a large majority of our customers, like I mentioned, a couple of our customers have lower consumption over the last quarter given the uncertainty. I expect that that consumption will pick up once the uncertainty leaves. I think your other first question was around margin. Like we had guided, we were expecting margin to go down from the earlier highs of 28%, 29%, 30%, to gradually get to approximately 20% margin. The corporate business at its typically cost basis is about a 20% margin business, and we expect it to normalize to about 20%. Sure. If you could please come again on the growth endeavors for the coming year. Did you say constant 20% and reported 17%? Did we get that right? I'm having a hard time hearing you. Say that again. Yeah, on. If you could please come again on your reported growth endeavors for the year. Did you mention 20% constant currency and about 16%- 17% in reported growth? Is that the number that you gave out? No, the other way around. That we will do about 15%-16% in constant currency and about 20% in reported currency, which is INR. Sure, sure. Thanks. Could we just squeeze in one more question on the SNC front? Great acceleration there. Could you perhaps explain how our customer acquisition strategy here is working across B2B and B2C segment? And I ask this because at your current margins, obviously, your customer acquisition cost and the cost of delivery is quite high. So by when do you think we will reach an equilibrium of good growth as well as margins coming back? If you could just expand on that, please. So as I have pointed out in the past, we have had a head start on the customer acquisition side, specifically with respect to GSIs and GCCs, and we consolidated that position with the acquisition of RPS Consulting. Across the large employers of technology talent, we have a strong position, and we have a strong right to win. We have a very efficient customer acquisition with large GSIs and GCCs. Several of the top GSIs and GCCs are our customers, and we continue to grow our business with them. Over the last two years or about 19 months, we pivoted our B2C business from a brick-and-mortar business to a digital platform-based business. That business is in its ramp-up stage and is requiring cash as an organic initiative, and that's where we've made investments. From an overall perspective, I expect that business to grow rapidly. I think what we pointed out earlier was that this year, that's FY 2023, we might see a little bit of an EBITDA or by and large, breakeven. Over the next couple of years we'll see significant margin for the overall SNC business. Thank you, Sapnesh. I'll get back for more. All the best. Thank you. Baidik, I will just add one line to what Sapnesh was explaining about renewals. Sapnesh, you may just want to highlight when do renewals take place predominantly? Yeah, that's why I was saying that- During the year. Renewals take place towards the later half of the year, especially, what's our Q3, but for most North American organizations and several European organizations, the calendar year- end. No, no, that's helpful. That adds a lot of context. Thank you. Thank you very much, Mr. Thadani. Thank you. Thank you. The next question is from the line of Shradha from AMSEC. Please go ahead. Shradha, please go ahead. Yes. Yeah, hi. I just wanted to check that you had indicated that some of your large customers had stabilized at a low level of consumption in FY 2022. Have you started again seeing a decline in those large customers or are they still stable accounts for us? Like I pointed out, a couple of our customers who had actually seen accelerated growth over the last few quarters have seen lower consumption. These are customers that we started out over the last eight to nine quarters. These customers had accelerated at a very fast pace, and given the environment, are seeing a little bit of a decline in consumption. However, as our wallet share has expanded and we have acquired more new customers, the vast majority of our customers have actually seen growth from a QoQ perspective. Right. Secondly, just to repeat on the previous question, you did indicate that your renewals happening towards the latter half of the year, which is December month for us. If I look at the historical revenue visibility numbers, we've shown QoQ growth in first quarter each year barring this quarter, barring this time around. Is it something to do with macro business this year or a higher seasonality that we are seeing this year compared to the previous year trends? I would relook at what you're seeing from a visibility perspective. Like I said, part of the visibility is based on new customer acquisition, and that part has stayed robust. The other part is based on renewals. Like I said, some of the renewals get bunched towards the end of the calendar year. From an overall perspective, we've not seen weakness in new customer acquisition. Right. What was behind the downgrading the guidance in just a quarter's time despite? Yeah. Hello? Sorry. You're getting cut off. Can you say that again? Yeah. I was just asking as in, you know, what is the reason behind downgrading CLG's guidance in just a quarter's time when we maintain that the new customer acquisition is pretty much on track. Is it just because we have been seeing significant decline in some of our existing customers that is leading to a sharp reduction in guidance in just one quarter? No, not sharp decline. Like I said. From 20%, we are coming down to 16%, 15%, so that's a good cut down in just one quarter. Like I pointed out, we are seeing decline in a couple of customers, as well as the fact that whenever there is uncertainty, given that training or a fair part of training tends to be a discretionary expense. Organizations tend to hold back or defer training related investments. Also, sometimes hiring gets onto a pause at large organizations. That results into lower consumption of training. It's a cycle that we have seen for every time there has been uncertainty in the environment, there is a pause or deferment of training, and I think that's happening this time around as well. Right. Sir, on the SNC business is maintaining their profitability guidance of either flat or breakeven profits. What about the revenue guidance? I think last quarter you had indicated a 50% YoY growth in SNC. Will you still go with that number or is there any change in that revenue outlook? Yeah. We are staying with 50%+ growth forecast for SNC. Okay. Just one last- Consider, Vijay here. Yeah. You have to consider this quarter 145% is actually with the acquisition which was not there last year. Right. If you count that, then it's 54%. That's consistent with what we have guided. Got you. Yeah. Yes. Appreciate that. Again, we have RPS Consulting. What is the update in terms of sort of cross-selling opportunities or in terms of new customer acquisition on the B2B side through RPS? I think the first couple of quarters have gone off quite well. RPS has been on track with their numbers. We've had a few areas of synergy where execution has started and we've seen some value come through that. It's still a little bit early to go on full-on synergy. The first step was to ensure that they're part of the family and from an overall perspective they reach the speed that they can reach on their own. Over time we expect a lot of synergy across customers. We've seen some synergy where RPS is working with the GCC in India and that relationship has caused a number of conversations with the parent outside of India. A number of conversations have started, and as you might expect, over a period of six months. Not a hell of a lot has materialized, but a number of things have started. Right. Just one last bit of technical screen. On the large RECO deal, do we see further deterioration in 2Q on that particular deal or do you think, you know, it's already reached its bottom? We don't comment on specific customers for obvious reasons, and we won't comment on specific customers today as well. What I would say is, reiterate that a couple of large customers had lower than expected consumption over the last quarter given the uncertainty. Great. That's it. Thanks a lot. Thank you. The next question is from the line of Saurabh Sadhwani from Sahasrar Capital. Please go ahead. Yeah. Hi. Congratulations on the good growth numbers. I was just wondering if the growth that we have derived in the FY 2022 and also this quarter is a momentum because of the accelerated digitalization in corporate world? Will this momentum continue? Because for many of the clients, it was necessary to shift their training online, and it wasn't possible to do it offline. Is our growth because of that? I would say it is a culmination of or a combination of two or three dimensions. The first is, like you pointed out, many organizations wanted to become digital. With NIIT, they saw a platform to take a lot of their training into digital, which improves access as people were working from home. That's certainly the case. The second area is that in NIIT a number of large organizations are finding a viable partner to whom they can outsource their training, and that enables them to focus on their core business. That's something that has worked well and has accelerated. We saw acceleration in velocity of new customer acquisition, so that helped. The third is we added on new market segments as well as new capabilities. We brought on life sciences as a segment about four years ago, and over the last couple of years, that segment has started maturing and it now contributes over 10% of our business. Lastly, we also invested in a few new capabilities over the last few years, and those capabilities have resulted into additional wallet share from our existing customers. These are a few things that have come together to help us grow over the last couple of years. As I have pointed out earlier, we have continuously disproportionately invested in sales and marketing and we are continuing to do that notwithstanding the uncertainty in the market. Because every time we've seen uncertainty in the market, as organizations come out of that uncertainty, we see a fill-up or a ramp-up in the propensity to outsource. We expect that as things start to stabilize, and more certainty comes to the market, we will see a ramp-up in outsourcing, and we are well-positioned and have a strong right to win to accelerate our business. What do you think that would drive the growth for the next three years? I mean, what capability of NIIT and what sectors or what verticals of NIIT would drive the growth? See, we are currently positioned well in a number of key segments. For example, if you look at India, we are well-positioned with GSIs, GCCs, banks, and large enterprises. If you look at our business outside of India, which predominantly tends to be a corporate business, we have strong coverage in with market segments that have high mandatory training requirements, high share of regulated businesses, which tend to be businesses in the energy segment, in the commodity segment, in the BFSI segment, or the life sciences segment. So we have strong coverage there. We also have very strong coverage in the technology and telecom segment, where given the nature of or rate of change of technologies, the consumption of training is high. We have expansion opportunities, for example, in professional services, GSIs outside of India, as well as we have opportunities to grow presence in continental Europe. While we are well-positioned to accelerate our business, there are also opportunities for us to build capabilities, whether it's geography or market segment, so that we can accelerate our growth. Okay. What is the problem that we are solving for higher education in the U.S.? You commented, you told us last time that we have traction from two universities in the U.S. What is the problem that we are solving for them? See, a number of universities or institutions of higher education in the United States have seen a gradual decline in their enrollments. That decline is because people are looking very critically, or fresh students are looking very critically at the value of degrees in terms of economic mobility that they can get if they acquire that degree. Most degrees are resulting into high personal debt because of the expense involved with the four-year education model that's prevalent in the United States. Alternate credentials which result into economic mobility in a shorter period of time are gaining traction, and a lot of universities are not well-placed to pivot or add alternate credentials to their lineup. NIIT, with its vast experience in India as well as outside of India with respect to especially digital training that helps enable digital transformation. We're able to bring those alternate credentials to universities who can then outsource that part of the business to NIIT and rely on NIIT to service their students for alternate credentials. Is this like what upGrad is doing where I mean they have affiliated courses from various universities? Is it similar to that? It is not. What upGrad does, I think is different from what we do. Our business is an outsourcing business where a university that wants to get into alternate credentials is working with NIIT or is outsourcing that activity to NIIT. Okay. They would do that on their own portal and not like upGrad is a platform basically, and they will have their own portal when they do this with you, right? Well, it's two different business models. We could- Okay. Yeah. ... get more detail, which will take some time to explain. Mm-hmm. But the two models are quite different. Okay. Just one last question about RPS Consulting. In the press release it was mentioned that RPS Consulting will be also adding offerings to our MTS side of the business. What kind of offerings? Can you explain that? I mean, how is it enhancing the MTS business? Like I pointed out, answering a previous question, I had mentioned that RPS has a number of GCCs as their customers. A lot of, I mean, those GCCs have their principals outside of India. I think there is a misunderstanding on RPS having MTS offerings. What we meant is that RPS has GCCs, Global Capability Centers in India, as their customers. We have an opportunity to work with the principals of those GCCs outside of India and convert them into NIIT MTS customers. Okay. One last question. What is the revenue mixture you are thinking would be appropriate for SNC business, TPaaS, StackRoute, and the B2C business? Like I pointed out, we expect greater than 50% growth in the SNC business for this year. I mean, revenue mix. What percentage would be TPaaS, StackRoute and yeah. Like I said, the NIIT Digital business is a fledgling business. We pivoted from the brick- and- mortar business to a purely digital platform. The large majority of our business is gonna come from RPS, TPaaS and StackRoute. Okay. Thank you. Thank you. That's all from my end. Thank you. Thank you. The next question is from the line of Sarath Reddy from Unifi Capital. Please go ahead. Hello, sir. Could you help me understand the bridge to the EBITDA? You're building a business that has an old component where you deal B2B and a newer component which you used to be strong in, and you're sort of reinventing it on a digital platform for domestic people who want to learn with NIIT. You're incurring higher costs in that process. You will make maybe INR 400 crore of revenue or thereabout this year, which is a high growth. You don't expect to make much EBITDA, maybe breakeven this year. In the next year or two, you hope to make a significant EBITDA. Please, can you help me understand what is significant and percentage? Sure. What is the bridge from the current cost structures you have? Will you raise prices to make money, or will you continue to offer same prices but benefit from just volumes? Are there some spends that you're incurring now which are of a start-up nature, which you don't expect to incur next year onwards? I'm just trying to see clearly. Yeah. I think the answer lies in what you already said. A vast majority of our domestic business is actually profitable. The RPS business, the TPaaS business, and the StackRoute business, all those which form a large majority of our business is profitable business, reasonable profitability. That profitability is actually getting invested, or that profit is actually getting invested in standing up or pivoting the B2C business onto a platform business. The way to think about it is that the business that is already profitable will continue to grow. It's growing, and it will continue to grow and improve its profitability. There is, however, investment required to stand up the B2C business because we pivoted from a predominantly classroom-based business to a digital business. That investment cycle has another year, or a 1.5 years left. As that investment cycle gets completed, we'll see unit economics which are profitable in that business. That business will stop taking away profit from the business that's already reasonably profitable. Both the business will start showing profitability. No, no. I mean, you're not answering me. I know what I asked. My question actually had the same understanding that you've given me. I want to try and improve my understanding. Your new business, B2C business, which is taking investment, I'd like to understand in what aspects is it taking investment and how will it turn profitable? Is it that, for example, you're spending on advertising or on content creation or on platform development, and these will all be expensed this year and therefore will take away whatever earnings you have, and you will not need to maintain that rate of spend and therefore it will turn profitable? I'm trying to understand the guts of how... I think you have a pretty good understanding. Like you pointed out, we are making investments in all aspects of the digital business. We are investing in customer acquisition higher than we would normally do in a running business. We have invested in the platform. We've invested in digital curriculum. All of those investments or a large majority of those investments are organic expenses and are getting expensed. As that business scales up, the unit economics become more efficient and start releasing profit. I mean, I don't think I'm telling you any rocket science. It is the trajectory that any new business has. It starts off with unit economics that are not efficient. It achieves the product market fit. We think that we have parts of that covered l ike I pointed out. The students who are graduating from that business are getting placed at jobs that are paying them almost 2x of what those same folks would have got if they had got placed out of campus. We are encouraged by the outcomes, or the transformation that we are able to cause for a student. There are inefficiencies with respect to acquiring customers. There are some inefficiencies with respect to teaching, but those inefficiencies to some extent will get solved through scale and to some extent will get solved through improvements by applying lessons we are learning from a sales and marketing perspective. Notwithstanding what I've said, as we implement those learnings and achieve scale, that business' unit economics start improving. We've seen some improvements over the last three quarters. I think those improvements will cause the unit economics to become favorable and start delivering profit. I see. Okay. What's the current split of this INR 400 crore or thereabouts that you'll do this year? How much will be from the B2C, the new one? Pretty small. I think about 90%. Like I said, the large majority of that business is the B2B business. Okay. B2B business makes what sort of EBITDA margin? I think we are going into detail which we don't normally talk about. Like I said, that business that is BAU business is at reasonable profitability. Okay. What is your what is the reasonable expectation in the next year and the year after? What will satisfy you as a measure of accomplishment for your efforts? The next couple of years we should get to mid-teens in terms of profitability. 15%. Okay. Th at's quite healthy. All right. Thank you very much. Thank you. Thank you. The next question is from the line of Siddharth, Individual Investor. Please go ahead. Yeah. Hi. Good evening. Firstly, thank you for the opportunity. Another good quarter in difficult circumstances. I have a series of questions. Should I just ask you one question at a time rather than putting them all upfront at once? Depends on how hard they are. No, no, they're very simple questions. Short answers also. How long will it take for you to ask all the questions? Just five minutes. My first question actually is on the ESOP. The fact that the company would be issuing almost 2% equity at INR 352 a share. Just wanted to know, this would be new capital being issued next year? ESOPs are... Let me try to answer that. These are grants which are made which vest typically over next three years, and only when they get exercised do they become stock. Yes. At the earliest, they will become. I don't think it is 2%, but right now let me park that thought. What is important is that you can assume that new stock will be issued if all the ESOP which are vested get exercised on the date on which they were vested. They'll become stock issued at whatever price that previous day was. We issue options at market price. Understood. Perfect. Thank you. My second question would be on the loss of INR 10.5 crore that we have had in mark to market. Are we right to assume that this will be written back in the next couple of quarters, since we might not have closed the trade and it's only an M2M loss, which is just a loss on the books at the moment, which will be reversed maybe in the next quarter? Yeah, this is a non-cash loss. Basically next- A non-cash loss, sorry. Basically in- This is a notional loss based on the mark-to-market which occurs because of the movements in interest rates- Understood. ... and the prices of the NAV. As the interest rates stabilize, the yield which is underlying the NAV will start showing up, and it will reverse itself over a period of time. Okay. If we do not redeem, basically, have a majority of this. Right. If you then don't book it, it's not a real loss. Effectively next quarter we may see INR 10.5 crore additional income on our books, non-cash? No, you will not see additional income. You will have maybe a stability of no interest rates move higher. All right. It will not get reversed [but it will stay] over a period of time if things remain stable. Okay. If interest rates remain stable between now and the maturity of that plan, it ill recoup. You will get small gain. If interest rates drop again, there will be a mark to market correction. It's a non-cash entry. Yeah. Typically what I'm trying to understand is the investment would be in the form of a bond. As the interest rate goes up, the face value of the bond goes down. But since we don't redeem the bond, eventually at the end of the bond cycle, the issuer of the bond will pay you the full amount back. Effectively we don't suffer a real loss? Correct. Would that be fair? Perfect. Perfect. Absolutely. Right, sir. Sir, thirdly, I just wanted to know granular details. You know, we've been talking about disproportionate expenses on sales and marketing. If we could just get some more details on what exactly do we mean by that. Secondly, on the RECO contract, it comes up for renewal sometime towards right now to the end of the year because it was signed in 2017. Are we hearing anything from the RECO guys on that front? The first thing I would say is we don't talk about specific customers. Given confidentiality reasons, I will not be able to comment on when it comes up for renewal or when we'll be renewing. That having been said, we have a few years on the contract. Mm-hmm. What was the second question that you asked? Sir, if I may, just add to that question. The fact was the contract, as mentioned in media, says five years plus an optionality to renew for another two years. Are they exercising that optionality according to you? Are we in negotiations about that? That's exactly the same way that I answered earlier. Right. We do not comment on specific customers, and we are not about to change that today. Right. Sir, you also mentioned something about seasonality of business. One quick- Yeah. Hello. One quick clarification. While the contract was signed in 2017, we had what was publicly available and we had disclosed is that there is a period of development ahead of start of execution of the contract. The execution only started in the middle of calendar year 2019, so you need to start whatever timeline you're starting from that period. Understood. Sir, you spoke about a certain amount of seasonality in business. While we have shown growth from say Q4 - Q1 right now, and so can you just explain the seasonality that you're talking about? Or is it what you answered in terms of bunching up of renewals towards the end of the year? There is seasonality with respect to consumption and then there is seasonality with respect to renewal. My earlier answer was seasonality with respect to renewals to answer the point about visibility. In terms of consumption, there is some bunching up that happens in our Q3 or calendar Q4 given the end of year budget completion with several of our customers. Mm-hmm. Understood. Sir, just wanted to know also the impact of the rupee depreciation. You're guiding for 15% growth and 20% growth on rupee terms. What are we generally pegging the rupee at the moment for our numbers when we are coming to this? And are we able to- [We base on..] Are we- Based on FX? Yes, sir. Are we able to get direct benefits from our customers in terms of expansion of margin because old contracts are already signed at old dollar terms? Or are there some clauses where, you know, then some of that amount is passed on back or something like that? We don't go into specific contracts, but the contracts do not have reverse flow in case currency changes. Okay, sir, you had recently signed a deal with HDFC Bank. There's Axis Bank, you guys, you've been doing some training. Today we signed with Bajaj Finserv. In the Bajaj Finserv deals, I saw that, you know, the cost of the course is INR 2,000, and the rest Bajaj Finserv is paying for it. What sort of revenue accretion are we going to see from this BFSI space in the Indian context in the next couple of years? Or is this more of sort of a branding exercise that we're getting into to basically enhance valuation of the SNC vertical? In the BFSI space, we have significant business across some of the top names, including ICICI, HDFC, and now Kotak as well as Bajaj. We expect to grow that business in a significant way. That growth is going to contribute to the 50% + growth that we are expecting in this business in the next year. Okay. All right. Sir, just one last question and then one suggestion. Sir, in terms of the margin compression that we're looking at, say over Q2, Q3 and Q4, could you break it down for us? Since you said Q3 and Q4 should be better than Q2, what sort of a beat, a disruption in margin should we look at on the EBITDA levels for, say, Q2 because of the uncertain environment? And do we have a significant exposure in Europe considering the things going on in Germany and U.K. and France at the moment? Overall, we expect, and I've pointed this out, the corporate business is a 20% margin business. We are expecting it to be so for this year as well. Right. Right. Thank you so much, sir, for your time. Just one last, you know, suggestion. I mean, I think it's been a very good luck for us that we've had an old NIIT tagline that you can't spell training without NIIT. I think that's taken the company very far over the last five, six years that I've been with you. We don't have that anymore on our presentations. Would love it if, you know, we guys put it in a small place somewhere on some of our PPTs, even though we've done an entire rebranding exercise. I think old good things shouldn't be forgotten. You are so right. You can't spell training without an NIIT, and a lot of customers believe that. Thank you for the suggestion, and we'll look into it. Right. Thank you so much, sir. Thank you. Truly appreciate it. It's passionate investors like you that really make the day for us. Thank you. We'll take the next question from the line of Kaushik Poddar from KB Capital Markets. Please go ahead. Yeah. Both my queries are from SNC division. See, first one is suppose HDFC takes every year X number of trainees. So out of this X number of trainees, how much percent of such X will be going through this program which you have tied up with HDFC Bank? That is number one. Number two question is, you are talking of 20% margin in SNC business sometime. When is that sometime? The first one, I would say we will not talk specifics about customers. In general. Yeah. Our typical contracts like this are contracts where NIIT would provide a majority of the folks that they would recruit for either that business or that capability or that competence. In most of these opportunities, the way we would set up contracts is NIIT would be the majority provider of talent for either a specific job role or certain competencies or a certain division of that organization. What was your second question? Your second question was about margins for SNC, right? Yeah. When we reach the 20% landmark. I think I said that we get to mid-teens in about a couple of years. Okay. The 20%, did I hear you say the 20% something? Or... The 20% guidance is for the CLG business. The CLG business is a 20% business and we think that is going to stay that way. Okay. You're guiding mid-teen in a couple of years for SNC, right? That's what you're saying. That's right. It's going to be close to breakeven, a little bit positive this year. It should be in mid-teens in a couple of years as the investment cycle turns to a business cycle. Okay. This, say, HDFC or Bajaj or Kotak, whatever you have tied up. These people... This will be for the new management trainees or for whom is this course to be there? Um, again, um- You can give a general answer. You need not talk about HDFC. All of these programs are for fresh hires in different roles, though, for each of these institutions. Okay. Thank you. Okay. Thank you. Thank you. The next question is from the line of Deepak Mehta, individual investor. Please go ahead. Mr. Mehta, please proceed with your question. We still have a few people in the queue, so can we just restrict it to one person each, if that's okay with everybody? Sure sir, I'll make the announcement. Request to all the participants to please limit your questions to one. Should you have a follow-up question, we would request you to rejoin the question queue. As there is no response from the current participant, we'll move on to the next question from the line of Sangeeta Purushottam from Cogito Advisors. Yeah. Hi. Thanks for taking my question. My question is on the margins of the Corporate Learning Group. What you've guided is that this is essentially a 20% EBITDA business. The margins as we've seen in the last two contiguous quarters have been around 24%. Are you expecting this to decline as the year progresses? What would really be behind it in terms of do you expect more costs to come into this business? Is it because of investments in sales? If you could just give some color. I think you answered the question. You're right on both sides. There are a number of costs that we did not have to incur during COVID. Some of those costs have started coming back. Over the next several months, costs such as premises or travel, both direct as well as indirect travel, they will start coming through. There are a number of costs that we've not had to incur, which we will incur. On the other side, we have investments. You pointed out sales and marketing investments, but we also have investments with respect to market entry investments like I've pointed out previous quarter. We are entering the higher education vertical, which requires investments. We will continue to make those organic investments, which result into disproportionate expenses towards sales and marketing. The combination of some of the costs coming back and the investments we are making to accelerate the growth in business will result into the margin guidance that we have made. Margin is the guidance more for the medium term, that is say next couple of years as you're making these investments and then can we expect that margin to sort of track up as the investments start to bear fruit? Or you think on a long-term basis this is going to be the sustainable margin? I think this business from a long-term business is a 20% margin business. Both from a medium term as well as long term, you should look at it as a 20% business. Thank you. Ms. Purushottam. May we request that you return to the question queue. Okay, fine. Thanks. Thank you. The next question is from the line of Amar Maurya from AlfAccurate Advisors. Please go ahead. Sir, thanks a lot for the opportunity. One question from my side. Like, you know, in terms of the technology and telecom, energy and natural resources, life science and BFSI. In terms of your CLG business, what would be the mix currently? I think you mentioned a bunch of them in one breath. I'd say- I'm saying technology, energy, life science and BFSI. What would be the broad revenue mix for the CLG business? For the segments that you mentioned, those segments form the large majority of our business. The segments that you mentioned, which I think included technology and telecom, BFSI, life sciences and energy, those four segments put together contribute about 70%+ of the CLG business. Okay. Can I get the individual breakup like technology, energy, life science and BFSI? Let me find that for you. Not right off my- No issue, sir. I mean, I'll stay in the queue. If you get it handy, I mean, it's okay. Otherwise, I'll take it separately. We'll have- Amar, we can take it offline. Yeah, yeah. Perfect. No issues. Thank you. Thank you. The next question is from the line of Saurabh Shah from AUM Fund Advisors. Please go ahead. Hi, Sapnesh. If it's possible to get some color on this revenue visibility and this continuing pipeline, how is that related to your pricing of the past? What industries are these in? You know, over a period of time, I think the question that has been asked consistently is, are these kind of story helping you to taper up to a better margin levels at all? I know it's partly related to your discretionary costs, but just on pricing, if you could give us some sense of how this is playing out, and also if you're diversifying your industries significantly. Thanks. Let me try to repeat your question. Your question was around how our pipeline is and how that would relate to the visibility. Is that your question? No. What pricing levels do you have in your pipeline, relative to the last maybe year or so? You know, as your proposition becomes stronger with some of your customers, you've got four new contracts, you've expanded on contract. Are you seeing better pricing? Do you expect, you know, as you get more embedded with your customer service to create, you know, the next two or three years better pricing trajectory or is this still at the same levels or, you know, different levels from what you've been doing? We've seen improvements in our pricing over the last couple of years. In fact, we bake in both the opportunity as well as cost side in our pricing, and we've seen improved ability to increase our price points over the last couple of years. No, what I meant is this current pipeline that you have just now, is that like relative to last year's, you know, because you have often multi-year contracts, whether it's like a, you know, 5%-10% better pricing or any guidance you can give us over there? Each contract has a price increase baked into that contract. I won't go into specifics of what each contract has, but each contract has, like you pointed out, each contract is a long-term contract and each contract has price increases baked in. Okay. Shouldn't that, over a period of time, you know, because your costs are usually front-loaded from what I realize, shouldn't that help you with margins going forward? In some cases, it does, and it has. Then it also has to take care of increased inflation. I'm sorry, but I think there are still couple of people waiting in the queue. It would be unfair to them h aving decided we have one question at a time. We can take your questions offline if you would like. Sure. Thank you. Let's finish this round, and we'll come back to you. Thank you. Thank you. No problem. The next question is from the line of Saurabh Sadhwani from Sahasrar Capital. Please go ahead. Thank you for the opportunity. I was just wondering, we had 66 MTS clients in quarter four, and now we have 68 MTS clients, and we added four. Was there a customer attrition this quarter? There wasn't any customer attrition. There are times when one or two customers are not consuming as much of our services to cross over the threshold. In those cases, we do not include them into MTS customers. Okay. Thank you. Thank you. The next question is from the line of Pradyumna Choudhary from JM Financial. Please go ahead. Thank you for the opportunity, sir. Just to follow up on the previous participant itself. Usually, like my assumption here was that for MTS contracts, we have a minimum revenue or some sort of a contract like where there's some certainty in terms of revenue. Could you just shed some more light on how these contracts are structured to qualify a customer under these? Because over the years, this particular calculation mismatch has been there. In simple terms, customers outsource either all or part of their training to NIIT as part of their contract. When I say all or a part of, whatever they are doing, as training activity or part of a training activity, they outsource to NIIT. Sometimes they consume a lot more training and sometimes they consume less training. For example, in times of uncertainty, organizations defer a lot of discretionary training but consume only a large part of mandatory training. Therefore, volumes go up and down. On our contracts get our customers to do whatever training they are doing on what they have contracted with us, with us only. They don't have the ability to bring on others. If their volumes fluctuate, then their volumes fluctuate. At times if they are doing a lot less than what they had anticipated earlier, we downgrade them from an MTS customer to a project customer. Okay. Understood. Thank you. Thank you. Thank you. We don't have any more questions, so we can get back to that gentleman who was asking and I had to interrupt him. It was Saur- Saurabh Shah. Saurabh Sharma. Shah. Shah. Checking the line, sir. Saurabh Shah, your line is in talk mode. Hi. Thanks for this. Sapnesh, I was asking about, you know, you know, from a longer term engagement with your key clients, how do you see the, you know, margin equation playing out as, you know, have invested, as you said, disproportionately upfront. If your costs are also, you know, largely upfront and, you know, your margin is higher usually I would think at the back end, even inflation would hurt you less, right? Because you have incurred the costs upfront. Over a period of time, shouldn't that help you to transition, especially with your older clients to a higher margin level? This is for the CLG course. That is a confusion in your mind. It's not right that most of our costs are bunched at the beginning of the contract. We have some transition costs that are incurred upfront, but that is not the large majority of our costs. The large majority of our costs are direct costs that are incurred during the contract. There are some transition related costs that we incur upfront and in most cases, the customers pay for at least a part of the transition related costs. Like I pointed out, most of the costs are incurred during the period of the contract. In terms of margins, yes, as we start the contract. For example, in the first quarter or first five months of the contract, the costs tend to be a little bit higher. After that, the costs normalize for the contract. Like I pointed out, we have in most contracts inflation baked in as price increases and we get a package of those price increases. Often, or at times those price increases are compensated by cost inflation. Okay. Sorry, maybe I misunderstood. When you take on this training contract, isn't that the time when you customize the course material, et cetera, for that particular client and, you know, maybe later it's more maintenance? Of course, there could be some incremental change. How would your typical cost construct for, you know, contract fee? You know, they have 100% for the entire contract time. How much is your initial transition, as you said, then course development, customization, and then, you know, sort of updating for any changes? I think I understand, but just broadly, is there some range you would be able to share? Okay, let me correct that perception. I think your perception is that for our contracts, we start with a base rate program. We customize and that's where we incur costs, and after that we continue to deliver that. That is not the case for the CLG business. The CLG business is around training services, and those services are provided as such. Only a part of the CLG business is IP -based, where we invest in the IP and we then monetize the use of the IP. That's only for a part of the business, but the large majority of the business is services business where costs gets incurred in line with revenue. Nice. From, you know, as you said, you're spending disproportionately now for sales and marketing output. Is it possible to give us some sense of what exactly, you know, this expenditure, number of salespeople with, you know, offices, geographies, I mean, color you can provide? I think it's across the board. I mean, suffice it to say that, we, our expense on sales and marketing grows north of 5 percentage points beyond our growth. If you grow at 10%, we would invest 15%. The sales and marketing would grow 15%. If we are growing 20%, sales and marketing would grow significantly more than the growth of the business. Okay. Thank you. Thank you. For more questions we can connect offline. There is one more participant in the queue. We'll just take one more question and then close. Operator? Sure, sir. The next question is from the line of Jay Daniel from Entropy Advisors. Please go ahead. I wanna know, is this training part of services provided discretionary in nature for the customer? Would it get hit quite badly in a recessionary environment, economic environment? Uh- Would it be the first to get cut, for the company, for the customer I mean? If you look at our customers, a very large proportion of our customers are customers who operate in a regulated environment. For those customers, there is a large part of training which is mandatory training or license to operate training. Which means if they do not go through that training, they may have regulatory issues, or they may get debarred from performing a job. Because through training, they get licensed to do that job. However, like you pointed out, there are parts of the training which are discretionary in nature. As you mentioned, when there is uncertainty, some of that gets affected. Okay. What is this market opportunity that you're addressing in CLG, the size of it? You gave a number at the beginning. I couldn't catch on to that. It's about $400 billion. $400 billion. Okay. Thanks a lot. Thank you very much. Thank you. Okay. I think, that was the last question, and maybe at this time you should close the call. Would you like to add any closing comments? I think Vijay will be making a couple of closing comments if it's okay. No. First of all, I just want to thank everyone for staying on longer than we had originally planned. It's nearly 85 minutes. All of you have been there. Really grateful to you for all your very incisive questioning, as well as some ideas which definitely make us smarter for future quarters. We are available, the rest of us as well as Sapnesh. Everybody is available to answer any further questions which either we may miss, may have missed or you may remember later. With that, I thank you for joining this call. Looking forward to your continued cooperation and support. With that, we would like to sign off. Thank you. Operator? Thank you, sir. Ladies and gentlemen, on behalf of NIIT Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.