Ladies and gentlemen, good day and welcome to NIIT Learning Systems Limited Q4 FY 2026 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sapnesh Lalla, CEO and Executive Director, NIIT Learning Systems Limited. Thank you, over to you. Thank you. Thank you and good afternoon, everyone. Thanks for joining the NIIT Learning Systems Limited's Q4 FY 2026 earnings call. Thank you for your continued interest in the company. Our agenda is today to discuss the Q4 and FY 2026 financial and operating performance, the progress on our AI-first strategy and AI-enabled revenues, update on inorganic activity completed during the quarter, discuss the path ahead, open it up for any questions. First, let me set the context for this quarter. As you all might be aware, the global environment continues to remain uncertain. Client decision-making cycles are still elongated, and discretionary spending continues to be closely scrutinized. At the same time, we continue to see sustained demand for outsourcing and operating model transformation as clients focus on cost agility and productivity. We continue to see wallet share expansion across a wide range of our clients, though the overall environment remains dynamic. AI is continuing its rapid march to becoming mainstream with significant investments by early movers across segments. This represents a once-in-a-lifetime opportunity for us. Nowhere is this more consequential than in enterprise learning and development. AI is fundamentally changing what learning and development can deliver. NLSL is at the forefront of that transformation. I will come back to this topic of AI in detail before we open up for questions. Let me say upfront, we believe we are building something that will redefine how enterprises develop their people. This investment will not only supersize our opportunity but set us apart distinctively. In this context, as we closed out the year and the fourth quarter, our revenue for Q4 was at INR 5,252 million, was up 5% quarter-on-quarter and 22% year-on-year. In constant currency terms, we grew 2% Q-o-Q and 14% year-on-year, including contributions from inorganic acquisitions, including MTS and SweetRush. Excluding our North American real estate training contract, which closed in June of 2025. Q4 revenue was up 31% year-on-year, 25% in U.S. dollar terms at the overall level, and 18% year-on-year for the organic business, 12% in U.S. dollar terms. I want to be direct. Revenue came in below our expectations. A couple of large clients made transient but material reductions to their year-end L&D budgets as they recalibrated in response to increased macro uncertainty. We view this as timing-driven, not structural, and our ongoing engagement with both those clients confirms that view. Q4 EBITDA was at INR 1,002 million, was up 16.8% year-on-year at a margin of 19%. Excluding SweetRush that joined the NIIT family during the quarter and seasonally at its weakest quarter and early in its integration with NIIT, the margin was above 20% consistent with our full year delivery of 20.3%. Depreciation and amortization was at INR 205 million versus INR 194 in the previous quarter. Net other income of INR 144 million versus INR 3 million last year and INR 104 million last quarter, including treasury income of INR 36 million, lower year-over-year, primarily due to mark-to-market impact of interest rate changes during the period. Net exceptional gain of INR 286 million, comprising of a gain of INR 455 million due to fair value adjustment in future acquisition liability on account of St. Charles Consulting Group. Transaction-related expenses of INR 77 million, predominantly on account of acquisition of SweetRush, and a prudent provision of INR 92 million against carrying value of a minority strategic investment we had made in April of last year. Foreign exchange loss of INR 52 million. Net other expenses of INR 51 million. Net finance cost of INR 76 million. The tax was at INR 169 million. Effective tax rate was 18% versus 22% in the previous quarter, primarily due to no tax on gain from adjustment in future acquisition liability. PAT was at INR 771 million. It was up 58% year-on-year, with EPS of INR 5.61 versus INR 5.42 in the previous quarter and INR 3.58 previous year. During the quarter, we signed five new long-term annuity clients, taking the total additions during the year to 21. New clients for the quarter included a global leader in data centers and digital infrastructure, two of the world's leading financial institutions, a major EV battery manufacturer building gigafactories across North America and Europe, a Fortune 50 global technology company, and one of the world's largest PC and enterprise infrastructure providers. We also completed two renewals and delivered two scope expansions. As a result, our long-term annuity clients tally has increased to 110 at the end of the quarter, and the revenue visibility improved to $459 million. This is up from $415 million the previous quarter and $390 million last year. The increase reflects strong new bookings during the quarter, which include expansion of an existing top 20 client into a top five client. For the full year, FY 2026 was strong broad-based growth with full year revenue at INR 19,520 million. It was up 18.1% year-on-year and up 11% in constant currency. Organic revenue grew 13% year-on-year and 7% in constant currency. Excluding the North American real estate training contract, which concluded in September of 2025, organic growth was 14% in U.S. dollar terms. EBITDA for the year was INR 3,957 million at a margin of 20.3% within our guided range of 20%-21%, reflecting continued delivery discipline alongside targeted growth investments. PAT for the year was INR 2,477 million. It was up 9% year-on-year with an EPS of INR 18.09 per share. Growth was driven by ramp-ups and wallet share expansion within our existing client base. Revenue from existing clients grew 4% year-on-year. This was complemented by healthy new logo addition as well as contributions from MTS and SweetRush. Top five clients contributed 32% to the full year revenue. Top 10 contributed 50%, and top 20 contributed 69% of revenue. Among our customers, each of our top five clients contributed over $10 million in revenue in FY 2026, and each of our next eight clients contributed between $5 million-$10 million. Our acquisitions are shaping well. MTS added a new annuity client and delivered a significant scope expansion during the quarter. SweetRush expanded its engagement with a top 20 global pharma company, an early proof point of the strategic value of that acquisition. This performance places us clearly ahead of our peer group and both on growth and profitability as and as we enter FY 2027, we have a stronger platform than we had 12 months ago. The balance sheet and cash flow metrics remain strong. DSO stood at 65 days as compared to 74 days previous quarter and 56 days last year. Cash and cash equivalents were at INR 9,366 million. The net cash was at INR 6,692 million. Operating cash flow for FY 2026 was at INR 3,101 million as compared to INR 2,595 million last year. Free cash flow for the year was INR 2,657 million versus INR 2,123 million. The headcount stood at 2,546 at the year-end, up 136 year-over-year and up 113 quarter-on-quarter. On January 9th, as we have mentioned earlier, over 100 SweetRushians joined the NIIT family across the U.S. and Costa Rica, strengthening our creative and human-centered but AI-enabled learning capabilities. Let me spend a couple of minutes on the inorganic growth that we've witnessed over the last year. During FY 2026, we completed two strategic acquisitions that meaningfully expand our capabilities and geographic reach. MTS Group, a leading managed learning services provider in the DACH region, serving marquee clients across automotive, industrials, and energy sectors, establishes our presence in Germany, Europe's largest economy, and is a meaningful step in building out our European platform. Strong client profile with long-standing relationships in structurally important sectors undergoing significant workforce transformation. Integration is progressing well. Q4 already delivered a scope expansion with an existing key client and a new logo addition, an early validation of the acquisition thesis and of the cross-sell opportunity between MTS and NIIT. SweetRush completed early in Q4, an award-winning provider of human-centered AI-enabled learning experiences, XR immersive experiences, certifications, and strategic training interventions serving Fortune 1000 corporations and professional associations. Acquisition of SweetRush moves our mix up the value chain into outcome-led performance-critical learning with a high quality and sticky client base. The synergy roadmap centers on converting project work into comprehensive long-term engagement, and we are starting to see early green shoots. Margins will build progressively over approximately six quarters, reflecting the business's meaningful seasonality. EPS accretion expected from FY 2027. Another couple of minutes on market update. As I stated in my opening, the market volatility continues to heighten the emphasis on cost optimization, prompting increased client engagement on large-scale cost takeout and transformation initiatives, although decision-making cycles continue to be prolonged. AI and its profound impact on the practice of L&D is real and starting to become visible. Early adopters are starting to take advantage of AI with our assistance. We think this has the potential to become a multi-year growth opportunity for NLSL. We believe NLSL is very well positioned to capture a disproportionate share of these opportunities, underpinned by continued investments in capabilities including AI, consulting, and advisory services, and in go-to-market with a focused effort on wallet share expansion across our existing client base. A strong brand as a trusted and reliable market leader. Our deal pipeline remains robust with active opportunities across large outsourcing deals spanning technology, automotive, life sciences, BFSI, and other sectors. We continue to see accelerating structural transformation across the industries we serve, driven by digitization, decarbonization, biopharma innovation, and now, more importantly, AI. Many organizations are actively restructuring to improve cost agility, fueling increased demand for outsourcing. This environment is triggering an uptick in outsourcing activity, and NLSL is uniquely positioned to capitalize, especially as select competitors face strategic or operational distractions. However, we would like to point out that due to the significant market uncertainty, the decision-making cycles have been stretched and are likely to stay stretched till the market uncertainty continues. For our guidance, we want to limit the guidance to the fiscal year 2027. We enter the year with greater revenue visibility, which gives us a strong foundation heading into the year. That said, the macroeconomic environment remains uncertain, decision cycles continue to be elongated. We expect this to influence the pace of new ramp-ups, particularly in the near term. For FY 2027, we expect the revenue to grow in higher single digits, subject to the macroeconomic environment. We remain confident in our ability to outperform the market through this cycle. On margins, we expect 18%-20% EBITDA margin for the full year, reflecting continued delivery discipline and phased margin build in SweetRush as the business scales, as well as integrates fully within the NIIT system. Given our investments, we expect 18% margins in the first quarter. Before we open for questions, I wanted to come back to the theme I flagged at the outset, AI and the transformation of the enterprise learning. I wanted to spend a minute on the progress on AI enablement we have witnessed or we have driven. As shared earlier, we've made significant progress in building our AI capability, continue to have a pole position in the L&D market, as acknowledged by our clients and industry analysts. NLSL was independently recognized as a market leader in the Fosway AI market assessment in 2025. Assessment 2025 for digital learning, the first in-depth independent study of AI application in L&D. Market assessments have revealed a significant gap in competitors say:do ratios. That is, majority of the AI features promised across the market, have not yet been, have not yet gone live with clients. In contrast, NLSL have delivered on every capability that we have promised, and our clients are seeing tangible results. We have test-testimonials from multiple clients on measurable impact. One of our clients saw their sales pipeline improve by over INR 1 million on average over six months following our AI-enabled simulations and coaching deployment. Another saw time to proficiency on methodology adoption shrink from 1.5 years to six months. This builds on a recognition as a strategic leader in the Fosway 9-Grid for digital learning for the third consecutive year. NIIT has always been at the cutting edge of technology and learning. Our AI-first strategy in learning has evolved into a considerable point of differentiation for us. We have gone live with a number of enterprise deployments of our AI solutions. Notably, total AI-enabled revenue continues to grow as a share of business this quarter. The share of business, AI-enabled business this quarter was approximately 13%. I wanted to spend a couple of minutes to talk about AI-led transformation for the learning industry and our architecture to address this once in a lifetime opportunity. The L&D industry has always faced a fundamental constraint. Individual coaching, the most effective form of learning, has never been economically viable at scale. AI enables us to remove that constraint. We believe the company that builds the right platform to deliver on this will own a large and durable share of enterprise L&D spending for years to come. That is the opportunity we are going after. To that end, our dedicated AI learning practice is developing a three-component self-improving learning platform. First, an AI coach. This replaces passive content delivery with personalized interactive coaching for every learner, whether they are working on long-term career development or preparing for a critical client meeting tomorrow morning. Second, a simulation manager. This connects the learner to configurable, realistic practice environments. The AI coach identifies the right simulation for each learner in real time and custom configures it to their specific needs. Finally, a third, a signal engine. This continuously scans organization-wide performance data to identify skill gaps, measures whether the training was actually moved, whether the training has actually moved business outcomes, feeds those results back to sharpen the system over time. This is what turns the platform from a learning tool to a continuously improving performance system. There's a second structural driver of demand that we believe is underappreciated. Historically, junior employees build their judgment by doing routine tasks. The repetition and exposure of entry-level work was how people developed their experience, the experience needed to take on senior responsibilities. AI is now automating much of the entry-level work. Enterprises are consequently grappling with a new problem. How do they develop judgment and senior-level capability in their people without that traditional on-the-job exposure? Simulation engines, which use AI to generate large numbers of realistic dynamic scenarios are precisely the answer to that question. They create a synthetic workload that accelerates judgment formation in a fraction of the time it used to take in traditional work environment or traditional training. This is proprietary intellectual property owned by NIIT Learning Systems, and it positions us to capture a significant share of the incremental opportunity that AI displacement is creating. Commercially, we are using a component-level pricing model with natural expansion economics built in. We're validating the model and the measurement story through lighthouse deployments and engaging a client advisory board to stress test both the evidence and the commercial framing. The organizational build is underway alongside new AI native practices covering performance consulting, simulation design and deployment, coaching configuration, and the build-out of our sensing and signaling engine. Today, we have over 100 senior AI learning and science experts engaged in building AI solutions and products, a depth of investment that very few, if any, peers can match. Like I pointed out earlier, AI-enabled revenue now makes up more than 13% of our total revenue. We have no doubt that this percentage will keep growing as AI becomes the default mode of delivery across the industry. This investment will enable us to compete more effectively and support internal L&D teams who are overwhelmed by the pace of change and the expectation to move the needle on enterprise capability and performance. Over time, we expect the internal L&D organization to shift from an operator role to an orchestrator role. That transition represents an enormous and still largely untapped opportunity for an NLSL. With the investments we are making, we believe we are uniquely positioned to capture this opportunity. Thanks for your time, and now, I'll open up the floor for any questions. Thank you very much. Operator. Yes, sir. Ladies and gentlemen, If you can, go ahead with the questions. Yes. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 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. We'll take our first question from the line of Bharat Gulati from Dalal & Broacha. Please go ahead. Hi. Thank you for the opportunity. My first question was regarding a bookkeeping question. I just wanted to understand the INR 100 crores of EBITDA that we've achieved and the 19% margin that we are showing. I'm not able to tally that up with my numbers because the only thing that we add back is the ForEx. If we exclude that, our EBITDA stands at around INR 786 million. I just wanted to understand what that mismatch was, if you can help me out. Our finance team will work it out for you. Meanwhile, maybe Do you have another question we can get an answer to that? Sure. No worry. Just trying to understand the shoot up that we've seen in, you know, employee cost and outsourcing cost, which as a percentage of our sales has also gone up. Is that what range is going to continue to be in? Or should we see that taper down as more leverage comes in? I can respond on the outsourcing cost. As I've mentioned in the past on these calls, we have tried to limit the overall headcount in the company and relied more on contractors to deliver on growth, given the significant uncertainty in the market. To reconcile the EBITDA, there are a couple of other for the whole year heads which are there, which are to do with the CSR component and also some indirect tax related provision which we have made. Okay. That's one-off again, that would be fair to assume? Yeah. That's correct. Got it. Got it. Yeah, just on the employee cost again. You know, we've seen a spike in this quarter of about 46% of sales as now on employee cost. Just trying to understand, is this the trajectory? Is this because of the acquisition that we've made that is much lower margin than our overall business? You know, just trying to understand how will this margin trend going forward on a reported basis, more to speak, you know, because on an adjusted basis, surely we can achieve that 18%. The delta between our adjusted and reported is always of 120, 130 basis points, which is pretty significant, you know. Just trying to understand when can we see that delta also converge. First of all, I don't know. We are finding it hard to reconcile the numbers that you are referring to. Is it okay if we do it offline with you, and then we'll, of course, inform everybody else, who are known? Sure, sure, sir. I'm just trying to understand on future guidance. We normally don't have I don't recollect ever having to reconcile the numbers we have declared with ever. Nevertheless, there's always a first time. I will Kapil and Mr. Sanjay Mal, our CFO, they'll be in touch with you and they will clarify the whole situation. No, that's completely fine, sir. Just trying to understand going forward on future EBITDA. Just trying to understand what kind of margins I mean, I understand you guided for 18%-20%, but, how do we, you know, how can we expect that upper band being hit? You know, just trying to understand how will cost be going forward. Is the employees? Got it. If you're wanting to understand how upper end of the margin will be achieved, that I think, Sapnesh will be happy to explain. Like I said in my opening comments that we are starting to integrate SweetRush within NIIT. Given their size and scale currently and the fact that this past quarter is among their weakest quarters, we think that over the next few quarters their margin will start ramping up as their accounting system starts to integrate with our accounting system and methodology. I think, to some extent, it is a question of seasonality and to some extent it's a question of integration. We should have these sorted over the next couple of quarters. Got it. Got it. You know traditionally we have been a 20% margin plus company, and I don't see that changing in near future. Got it, sir. Fair enough. I'm just trying to understand, sir, on the growth front, you know, X of acquisitions, if you just look at organic growth for this quarter, in dollar terms, what would have that been on a Y-o-Y basis, if that could be quantifiable? X of acquisitions our growth for this quarter would have been about 3% in dollar terms. That would be on a Y-o-Y basis? No, on a Q-o-Q basis. One second. No, no. It's on a Y-o-Y basis. On a year-over-year basis, about 2% in constant currency and 3% in dollar terms. Got it. Got it. Just the last question regarding our tech and telecom vertical has seen a sharp drop quarter-on-quarter in terms of growth. Is there something specific? Is there a ramp down with some customer? We were seeing a good run-up in growth in that vertical for the past four, five quarters. Like I pointed out, one of our clients, given the uncertainty and the fact that their fiscal year-end coincides with ours, pulled back temporarily but materially the budget allocated towards L&D. We think that from a long-term perspective, this is not a reflection of reduced overall spend, but they needed to pull back the expense towards training this past quarter. Got it. Got it. I'm just trying to understand directionally the acquisitions that we've made. You know, historically, the St. Charles business didn't pan out like we wanted to. Just trying to understand what gives us the confidence that these acquisitions of two years down the line, three years down the line is gonna, you know, grow at the same 20% kind of pace that we initially intended the business to grow at. First of all, I wanted to mention that the St. Charles acquisition has actually worked out quite well for us. We've been able to establish a consulting practice, which enables us to be more consultative and provide advisory services to our clients. We also have been able to create a significant vertical in professional services. As far as market volatility is concerned, the events of the last three years have been unprecedented, and this volatility will probably continue over the next few quarters. That, I don't think anyone can do a hell of a lot about. Overall, St. Charles joining NIIT has been a good thing, and we are very satisfied with their performance. You may just say a word about MTS Group and the new breakthroughs you have. I mean, like I pointed out, while MTS and through MTS penetration in the DACH region, we made the acquisition sometime in July, and we are already starting to see addition of new logos as well as logo expansion and cross-sell opportunities. Likewise, as I pointed out, we saw a significant expansion in a top 20 pharma client with SweetRush. I do expect the amount of time and diligence we do for these, you know, acquisitions, will come in and make us more successful. Got it. Thank you, sir. That's it from my side. Thank you. Thank you. Thank you. We'll take our next question from the line of Rahul Jain from Dolat Capital. Please go ahead. Hello. Thanks for the opportunity. Just wanted to have one clarification. This high single-digit growth that we guided, is this on organic basis? If yes, can you clarify what the overall growth guidance is? This is overall growth guidance. Okay. High single digit includes the SweetRush. That's correct. consolidation. Yeah. Okay. The other way the question should be then, what is the implied organic growth in this assumption? Yeah, marginal. Look, at this point of time, whatever numbers we are talking about, they are at best our best judgment and can swing wildly given the uncertainty in the market. I want to remind you that you only pointed out that in the quarters when everything is skewed up, nowadays there are changes which are taking place. Sapnesh talked about our technology client who suddenly pulled back his expenses. It's beginning to happen quite often. We have a very good order intake. We have a very good contract intake. We have very strong clientele. We have Net Revenue Retention, which is very significant. I think that is what the confidence is coming from. How this year will pan out, I think this is our conservative business estimate. We will have to see and guide you better quarter- on- quarter. Quarter-on-quarter, yeah. Coming quarters, double-digit is looking fairly significant and achievable. Would that be right? Coming quarters, year-on-year, double-digit growth? High single. Close to that. Sorry? Yeah. High single digit, but close to it. Yeah. Yeah. Okay. Okay. I mean, I understand where you're coming from, you know, some of these data points when we highlight that our ex of RE/MAX growth is so high and this visibility and everything, I think, if you could reconsider at a different point of time a more wider band of guidance to probably explain what could be the possible outcomes. This number, if I include SweetRush probably reflects a significant deceleration. It does not matches with the confidence generally that we are talking in our commentary. Sapnesh, you may want to respond to that. What he's talking about, he's talking about in the coming quarter, the growth that you are seeking or you are guiding it, and compare that with how if you add SweetRush. SweetRush is still in ramp-up state. You can just explain without SweetRush, how life is. Like I pointed out, there is significant volatility, so it's hard to be definitive about our guidance. We think that our guidance will be in the high single-digit range from an overall perspective. Okay. Let me ask in a different way. I mean, I think we mentioned about Confluence 2026 happening and another event around our client advisory board. Generally, what sense you're getting from it? I understand this happened in February and world has changed after that. In general, from Confluence 2026 or any other conversation, how you think the thought process are evolving with this macro inputs that we have? Like I pointed out, there is uncertainty in the market. We were not expecting the pullback that we saw in a couple of large clients till early February or actually till mid-February. But it happened. It's hard to tell where things might settle. In our conversations with our clients, they seem very confident in our abilities. They are open to trying out new things. They are being pushed to take cost out, given the uncertainty that their own businesses are seeing. There is a cost layering because of uncertainty in their, in our clients' overall business. There is caution on discretionary spend. How long will that caution last? It's hard to tell. But at this time, given the uncertainty, there is a cautious approach. Therefore, we've been very conservative in giving an outlook. Sure. Sure. Just last one from my side. If you could share what was the visibility or MTS client addition that has come from SweetRush, or have we not included that in our operating metrics yet? We've included a conservative estimate of visibility from SweetRush. Okay. The current number, have those inclusion as well? Yes. Sure. Sure. Thank you. That's it from my side, and I'll fall back in the queue. Thank you. Thank you. Next question is from the line of Kunal Tokas from Fair Value Capital. Please go ahead. Hello, am I audible? Yes, Kunal. Please go ahead. Yes. Okay. Okay. Thank you, sir. My first question is, right now the environment, as you have been saying constantly for the last few earnings call as well, is very uncertain and people are still finding new use cases, new ways to use AI. My question is that when AI, the technology, becomes more widespread and its users have become established, maybe saying in a few years, do you think this technology will reduce or will it widen the gap between you and your competitors, between the competitors in the MTS space? As I pointed out, in my earlier comments, our AI-enabled revenue has gone up quarter-on-quarter. It was at about 11% in the previous quarter, and now it's more than 13%. We are seeing more adoption of AI-enabled services with our clients, specifically as they create value for our clients. Our clients are quite discerning, and they don't want AI-enabled solutions for the heck of it. They want AI-enabled solutions that will move the needle on performance. We think that our investments in AI, both in terms of people as well as build-out of technology, will enable us to create distance between ourselves and our competitors. In what ways would you say the variables that matter, the competitive advantage that mattered before AI, in what ways has that changed? I mean, what variables mattered before the onset of AI, and what variables do you think will matter more now that AI is here in from the client perspective when they want to select a vendor? The biggest variable that will start changing is the movement from training to capability building and performance improvement. I think that's the most significant variable that's likely to change. In the past, most measurement of L&D was focused on how much training can you build and how much can you deliver. I think as we move forward, the measurement would be on how much can you improve capability, how much can you improve performance. That's going to become the measure, and I think AI enables us to create that connection between L&D investment and performance improvement. Okay, sir. Can you also please talk about the, if I understood it correctly, the proprietary simulation engine that you are building? The best way to learn something is to practice it and as you're practicing, if you make mistakes, to get feedback or coaching on. I don't know if you've played a sport, but to learn how to play a sport well, you often have to practice a lot, and it helps if you have a coach who could give you feedback on what you're doing right versus what you're doing wrong, and if you're doing something wrong, how to fix it. I think the investments in simulation engine as well as coaching enable us to allow a student to practice in a safe environment, and then with coaching, enable them to get feedback on what worked and what didn't work, and then have them try it over and over again till they get it right. Will this be sold as a separate product or will this be incorporated into the whole spectrum of services that you provide? We think our clients would like both the product and the services because while there is value in just buying the product, but for a simulation to be really good, not only do you need a good simulation builder, but also expert learning and development professionals who could understand the situation that a client is in and build the right simulations for them that it will be both the simulation builder as well as because the clients are looking for performance improvement, and for that they would need the right simulations, which would need the right simulation builder, but also the expertise to build them. Okay, sir. The last question will be given the nature of the technology, how revolutionary it is, it can become, people will have different views about the future of this technology. Is there anything that your competitors are doing that you have consciously stayed away from, that you studied, but you thought that it was not the right path to pursue in terms of AI, in terms of your future strategy? I actually could not quite get your question. Can you say it again? Is it that your competitors are doing but you decided not to do? What our competitors are doing, but we've decided not to do. Yes. Something that Yes. Something that was big. Yes, please. Go ahead. I wanted to emphasize some conscious decision that your competitors think is the right thing to do for the future and an important thing, but that you thought was maybe not the wise decision and you took a different path. Some choices that we have evaluated in great depth have been: Should we just become a platform company or should we retain our service ethos while investing in platforms? We deliberated a lot on that choice, and we decided to stay the course on being a service company, but deeply enabled with investments in platforms and technologies so that our services can be built on top of technologies to ensure an efficient build-up. All right, sir. Got it. Thank you very much, and have a good day. Thank you. Thank you. We'll take our next question from the line of Sankara narayanan from ithoughtpms. Please go ahead. Good evening, sir. Am I audible? Yes. Please go ahead. Yes. Yes, sir. Thanks for the opportunity. My first question is on our contract tenure. Earlier, it used to be in the range of threeto five years. Because of AI, do you see any shrinkage in the contract tenure? We haven't seen any shrinkage in terms of contract tenures. Okay. We don't expect that to happen either. Got it. Got it. Regarding our, content creation business, what kind of productivity are you seeing, because of the implementation of AI, and whether if the productivity is being reinvested back to you or it is taken back by your client? Yeah. I think what we are starting to see is a departure from creating content the way content was created in the past. Our clients who are starting to take advantage of AI are starting to look at investments in content which are more immersive and more simulation-oriented. That's where we are seeing the move. We are not seeing clients looking for creating the same thing for less. Yeah, some of them, for lower-level training or compliance-related training would sometime look at a build-out of a larger amount of content for the same cost. More of our clients are looking at improving the immersive nature of content as compared to creating training that actually does not provide great outcomes. Does that mean the legacy portion or the legacy mix of content creation is being slowly moving away towards immersive learning so that the price stability that we are seeing in the content creation business, will it remain same in the upcoming years? I think it'll progressively move towards immersive content. It'll take time. It's not a switch that you can throw, but the content creation will move towards immersive content creation and simulation build-outs and deployment. Got it. Finally, recently one of our large tech client who is into infrastructure management, they have planned to announce layoffs for this financial year. Have you accounted that into our revenue growth estimates in FY 2027? These dynamics are very interesting. While there is headcount movement going on across a very large number of our clients, what they are also realizing is that the skills needed for their employees are changing at a very rapid pace. While there is change in number of employees that exist at an enterprise, there is very significant increase in the need for deeper skills, different skills. There is this movement where there may be fewer employees, but their need for training is increasing. We are seeing that balancing scenario. The reduction in revenue in the top segment, tech and telecom, it is not tied to the layoffs or the AI productivity. It's just the budget cuts by the client. Yes. It's a temporary budget pullback. I'll give you an example. You know, I'm assuming you're familiar with Indian IT. The reason why I'm asking this question is because L&D budgets, it's attained number of headcount into investment per headcount. That budget is getting. Yeah, that's exactly what I wanted to answer. Yeah. Yeah. That's exactly what I wanted to address. While you are right, on an average across many years, the thesis that you said is right. When there is significant change, for example, I'm sure you're familiar with IT services companies. I'm sure you see headlines that the role of programmers is changing dramatically. You also see that programmers should gain 60%, 70% in terms of efficiency and won't need programming skills over time. I think what you would also start seeing is that new roles such as forward deployed engineers are starting to become very important for the growth of most IT services companies. Now, till recently, that role did not exist. As enterprise and enterprises have to build out these new roles, and these are roles which you can't hire for, these roles will then start being created by employees who are getting displaced through training, and that starts to become our opportunity. Got it, sir. Thank you. We wish you best of luck. Thank you. Next question is from the line of Ganesh Shetty, an individual investor. Please go ahead Sir, congratulations for good set of number in tough macro. I just have one question regarding our business model. Previously, we used to get severely impacted by macro dynamic, but over a period of time, what I'm observing is we are quite resilient with our business model and our revenue visibility, maintaining our margin trajectory. Do you think that there is a sharp shift in the mind thought process of clients and they are ready to spend on L&D outsourcing in spite of discretionary spending limits? Can you please explain, sir? First of all, thank you for your kind words. Yes, we have been resilient over these past several years across COVID and then more recently the wars and the tariffs and other macroeconomic uncertainties that we see. Also, over these years, we've been able to take advantage of technology and innovation to improve the resilience as well as growth in our business. To answer your question on how you see outsourcing going forward. See, as I mentioned in our discussions earlier, we have been fortunate to have a strong balance sheet that allows us to invest in new technologies such as AI, and we've been doing that over the last four years. Most L&D departments neither have the wherewithal nor the skills to invest in innovation as we have been able to. Consequently, as they are called upon to deliver against new expectations, they are likely to feel overwhelmed. I think that creates opportunity for them to work with an expert who has been investing in the latest technologies, who has been able to build a strong point of view, who has been able to show evidence of performance improvement with the application of new technologies. I think as we look ahead, these investments will enable us to create distinctive distinctiveness and enable higher levels of outsourcing to us. That's all from me, sir. Thank you very much and all the best. Thank you. Thank you. We will take our next question from the line of Dishant Jain from Quasar Capital. Please go ahead. Yeah. Hello. Thanks for the opportunity. Just one question on the forex, account. How do we account the forex gain or forex loss in our financials? Hi, this is Sanjay. We basically have a, you know, a policy where there are hedges which are taken, and these are basically taken for, you know, transfer pricing, which we have in India from the overseas entities. The overall, whatever are the matured hedges, they are accounted for on a quarterly basis. Whatever are near term, not yet distinct, will go through the currency translation reserve. One thing. The second is the balances which are coming through. Those balances, if they are outstanding, if there is a change in that gets reflected again in the quarterly results as at the end of the period change, which is the true-up of the currency rates. Okay. Sir, in spite of the fact that the currency INR/USD has been rising, but we have been showing forex losses for the last, like, few months. Any specific reason? Yeah. Essentially they are rising, but what happens is that there is a the hedges are taken standalone. They are not taking overseas. The overall impact which is there on the unhedged is higher than the hedges effect. Part of it is hedged, part of it is not hedged. Based on the hedge ratio, the overall impact in the near term, or rather the longer-term hedges, which are 12 months, is higher than the quarterly change. If you look at the depreciation which would have happened over a year, where the hedges would have been taken is anywhere between 5%-19%. In the quarter, it is about 2% or so. The gain which you would have got in the 2% change is limited, but on the hedges it would have been a higher loss or MTM change. The net effect is negative. Just to give an example, if I take a hedge when it was, say, INR 88 and I got a premium of INR 2, I got INR 90. That INR 95, if today it is INR 95 or INR 96, that INR 6 actually will be a loss on the hedge, right? Correct. last quarter I would have already- Yeah, sure. Yeah, go ahead. Yeah. Basically, when these contracts will get ended, you will see a reversal of this process, right? No, we will rectify the whole thing. When the contract ends, basically, we rectify because we receive the cash against it. Exactly. Basically you will see the receipt, the difference of cash, with to you, right? That will not come to me if I've sold it for INR 90 and today it is INR 95. The INR 5 would be lost. If I have done it for which is going to mature nine months later, that will carry. That I can recover. Okay. Sir, the last one would be on, like, do we keep the currency benefit with us or should we pass on to the customers? I'm sorry, I couldn't get your question. Yeah. Do we see the currency benefit with us or should we pass on to the customers? It varies from various customers where there could be fixed price. There can be a little bit of a, you know, range in which plus/minus if it is there, then it is passed on. Normally we do not have this change which is there in the contracts to be passed on to the customers. Basically we keep it. Yeah. Okay, sir. Take care. Thank you. Thank you. Next question is from- I have a feeling. May I just comment? Sanjay, the currency loss recorded in P&L is in many ways notional also, no? Yeah, Mark to market issue. Mark to market on certain portions and realized also on certain-. Only further realized portions will be, this. Actual- This is technical accounting. I don't know whether you should surmise from there. I'll tell you the policy. I'm saying it from a board capital allocation and foreign currency management. What is our thinking? Our thinking is we think we understand our business the best. When we quote to our customer, we know what realization we want from that customer. We would like to protect that. If after that there is volatility, if the volatility is going to hurt us, then we at least want our profit protected because I think we understand our business well. I don't think we are experts on Forex, neither do we claim to be. Neither I'm not sure whether there are other companies who are in this business would also have such capability. General principle followed is protect your cost on the basis of the Forex that you see in front of you. On that basis, if you make better, very good. If you don't make better, at least you are protected. That's the approach which we take. Because of that, there will be technical corrections from time to time. Last thing I want to say is our customers get served across the globe. Our customers get served across the globe from across the globe. It is very difficult for anybody to go and protect Forex, and least of all, in a learning and training contract or services contract. I'll just pause here if it adds any more value. We'll take the next question from the line of Lakshmi Narayanan from Tunga Investments. Please go ahead. Yeah. Thank you. I just want to understand what is. Sorry to interrupt. Can you use your handset mode, please? Your audio is not clear. My first, I'm sorry, you're sounding muffled. Is it better now? Yes, little better. Please go ahead. Yeah. I just want to understand what is the ESOP dilution one can factor in because, as, when I look at the BSE table it shows almost, INR 1.02 crores of shares as in the ESOP pool. Just want to understand that. Say your question again. We couldn't quite understand. INR 1.02 crores, what's the dilution? That's about 7%. It will happen over a period of time. Over a period of time. If we add no. Sorry. There is a vesting schedule for the granted options. Typically, we have a three-year vesting schedule and four years. Five years. Five years. five years, eight years. Obviously have an exercise period for those grants. On an average for each tranche it could vary between four to eight years in total. It could take six years. A little bit. I mean, if all of them were to get exercised, it'd probably be about 1% each year. Got it. Okay. Okay. The next question is that what percentage of our revenues are in the cost side and what percentage is the revenue side? When you talk about AI related disturbance or opportunities, which side it is? It is on the cost side or on the revenue side of the clients you're working with? When you say cost side or revenue side of the client, what does that mean? Yeah. For, I mean, let me be clear, right? For certain clients, I understand that we work on the revenue side where, the service which you offer is counted as a revenue for the client. In certain cases you do the pure L&D things, which could be on the cost side, right? As a percentage of our revenue, what is the what comes from the revenue side enhancement and what comes from the cost side for us? Where do you see AI playing a role here? Off the top of my head, I won't be able to tell you how much of our revenue. Assists our clients on to gain revenue versus on the cost side. Though, I would say majority of our revenue would be on the cost side as far as our clients are concerned. What was your follow-up question on that? No, in terms of AI, you said AI can be an opportunity. At the same time, you said that AI is also making people delay their budgets or I just want to understand which side, I mean, whether the revenue side or the cost side, where you think AI being, you know, having an impact? AI is affecting L&D positively. Whether we are on the revenue side of the client or on the cost side, it really doesn't matter. AI is making L&D more impactful. As far as our clients are concerned, they are not seeing or they are not differentiating between AI for revenue-generating projects versus cost projects. As far as they are concerned, they're using or they're wanting to use our solutions that are AI-enabled to improve the effectiveness of learning and development. That's okay. Second thing I would say is the uncertainty that I mentioned is not induced by AI. The uncertainty is more macroeconomic in nature. Got it. Okay, okay. What percentage of the revenues come from managed training, and what percentage of revenue comes from mandatory training? Say that again. Managed training- What percentage of- Versus- Operator, can you reduce the volume? How much and how much is? Yes, sir. Now reduce. So I am- Hold on. Your volume is Sorry. I request him to use the handset mode, please. Your audio is not clear. Yeah, I'm using the handset only. I just want to understand what percentage of revenue comes from managed training, where we actually manage the entire life cycle of training. Second, what percentage of revenue comes from mandatory training. You mean the mandatory training? Okay. Yeah, mandatory training. Okay. I would say about 40%-50% of the training that we do for clients who operate in the regulatory businesses is mandatory training. I would say with the exception of clients in technology and telecom, the rest of the sectors we serve tend to be regulated sectors. I would guess that of the total revenue, about 30% or 35% would be mandatory training. Okay. What percentage of revenue coming from managed training, where you actually manage the entire cycle of training end to end? I mean, we All of our business is training outsourcing, so I'm not able to discern what you're looking for. I'm looking at something like you deliver a point solution. Let's say, you know, a new employee joins, so you actually provide the course content versus, where you actually run the program, you actually evaluate. Manage the entire thing. Point solutions as a percentage of our revenue is negligible. Okay. Okay. Okay. Okay. When you talk to your top 20 clients, you mentioned that they are actually tightening their purses. Can you just double-click and just help me understand what do you actually hear from your top 20 clients? I mean, why are they pulling back their spends? Any specific, you know, use case would be helpful to understand what's actually going on, like particularly among your top 20 clients. Yeah. Like I pointed out at the top of the call, they see uncertainty in the market. It's hard for them to get budgets for discretionary spend. That's what's causing them to, I mean, they're just going through higher levels of scrutiny for discretionary spend given the market uncertainty. Got it. There's another thing which I understand is that, sir, some training goes under the CHRO, which is the Chief HR Officer, and some amount of training is directly handled by the CFO's office, right? In our case, you know, just as a thumb rule or just overall, what percentage of our revenues would actually come under the CHRO and what would be under the CFO's discretion? I don't think we do much, if anything, under the CFO. I would say, close to 100% of our revenue, which is internal in nature, would be with the CHRO. Got it. Got it. Thank you. Thank you, sir. Thank you. Ladies and gentlemen, we request you to restrict to one question at a time, please. Next question is from the line of Vinay Nadkarni from Hathaway Investments. Please go ahead. Yeah. Thank you for the opportunity. I just have a few questions. One is, when you look at your. You are saying you have added 21 new annuity clients during the year. You have expanded scope with four clients. You have acquired MTS and SweetRush this year, AI is driving 15% of your revenue, almost 13% of your revenue. Rupee is depreciating. You forget this year, but generally 2%-3% depreciation in rupee. With all this, your growth of 9%, or rather, even if I take the highest of highest single digit, how does it match? I mean, I can't understand. Hold on. Your 21 new clients would deliver more business this year, it being annuity? Are you losing out some more business which is compensated by this? I couldn't actually quite understand- No. Let me explain. What he's saying is AI contributed 12% of your revenue. 13%. 13%. 13%. You have added 21 clients. You're doing everything right. Why do you have only a single-digit growth? Did I say it in simple words? Yes, absolutely... 3% depreciation in Indian rupee also. In constant currency terms, just so that we are measuring Fine. Fine. We're taking out the depreciation of rupee picture. In constant currency terms. our business grew about 11% on a year-on-year basis. Second- All clients that we acquired did not start in January in April of 2025. They have been acquired over the period of one year. It would not be right to assume that each one ramped up to their maximum potential the day they started. Over a period of a year or so, they typically ramp up. In a typical year, most of our growth would come from growth in existing clients because new clients take time to grow. In this specific year, we've seen growth because MTS and SweetRush became part of an NIIT, and we've seen existing client growth. If you were to look at organic growth, we did about 7% growth for the year organically in constant currency, and a large percentage of that growth. Our existing clients did I mean, 4%. We had 4% growth. Out of the 7%, 4% growth came from existing clients, 3% came from new clients, and approximately 3% or 4% came from inorganic activity, which included SweetRush and MTS. Last year, you had RECO, which has- And, uh- That impact is the one which is actually making you wonder. Yeah. Also, you know, several million dollars of revenue from RECO did not come in, this year. If you were to net out, the real estate contract, then, the growth in constant currency terms would, for organic business, would be about 14%. I'm looking at the FY 2027. Oh, sorry to interrupt you. Guidance that you have given. Sir, may we request that you return to the question queue? No, no, no. No, no. I'm just following up on the same question because my question was for FY 2027 guidance of 9% or rather the higher single digit. With all these new clients, expanded scope with four clients and acquisitions which you have made last year, wouldn't your sales be higher in the FY2027 than just 9%? That's what my question was. It would be, it would be higher if there was no impact of macro, macroeconomics on our clients. Yeah, you're right. If the same client keeps spending the same amount of money in the coming year, you're absolutely right. We would be seeing significant growth because the 21 clients that we acquired this year would produce more revenues. That is not rocket science. That is straightforward. So, so- Obviously- There would be wallet share loss. No, not wallet share loss. Actually, it'll be wallet share gain, the total pie would go down. Like I pointed out earlier, an organization would cut down on their discretionary spend. If they were spending $ 100, they might spend only $ 80. Out of that $80, our wallet share may actually increase rather than reduce. But- The fact is that they may spend only $80. Sorry. Say that again. I'm saying with U.S. economy supposed to be doing better, and your clients are more based in U.S. No. I mean, if you want to joke on this call, engage in joking and talking about macroeconomics. I think you are as aware of macroeconomics as I am. Maybe more Fine. Okay. Thank you. Thank you very much. How are we doing on time? I think we are over. We have four more questions. Four. We can take one from each. Okay. Frank Lee. Yeah. Let's take one quick question from each. I just wanted to say we will be in Mumbai, like customary, at the end of quarter on Friday. Those of you Coming Friday. Those of you who would have some follow-up things, please be in touch with Kapil, and Kapil will be very happy to organize a meeting, call, or whatever is required. At this point of time, since you've taken the trouble to be with us, we'll take one question each, if that's okay with everyone. Thank you. Thank you. The next question is from the line of Bharat Gulati from Dalal & Broacha. Please go ahead. Hi. Thank you for the follow-up. Just a very quick question, sir. You had earlier reiterated in the start of the call to an analyst question that, you know, you're seeing the net retention rate being strong with customers. Would there be a quantifiable number you can put to that you know what has been our historical NRR and what do we see it going into FY 2027? You know, just some kind of, I think, with the questions that you've gotten today, I think we're just trying to understand, you know, what is the customer outlook for FY 2027 and how do we, you know, see existing customers grow because high single-digit guidance is somewhat proving to be a flattish to even a degrowth scenario in our organic business. Just trying to get a sense of that. Like I pointed out, if I had the crystal ball, I would give you all the details available, but unfortunately I don't have one. Your guess on macroeconomics is quite like my guess. At this time, we believe that we should, on a conservative basis, we should be able to do high single-digit growth for the year. Just in terms of NRR, is there some number you can, you know? Not at this time. kind of Got it. See, we can- And historically, any- We can ask the same question five different ways, but, like I said, that we think that on a conservative basis, we should be able to achieve some high single-digit growth. Fair, fair enough. I think what we are talking about, just, I'll just add to what Sapnesh said. While we have mentioned high single-digit growth for the year, I'm not sure whether you can predict that for any business anywhere in the world at this time. The question is, we are putting our best foot forward based on our understanding and some assumptions that we are making. I think it'll get titrated as we go forward. That's one thing which we can say. I think every quarter we would be able to talk to you, give you a better color on how the rest of the year is likely to look like. Got it. Got it. Just I had asked another question. Sorry to interrupt, Mr. Gulati. Fair enough. Maybe we'll go to the next one. I'll get back in the queue. Thank you. Thank you. The next question is on the line of Gaurav Nigam from Tunga Investments. Please go ahead. Just one question on this, the difference between the Q4 performance of one we emphasized versus what we delivered? Just want to understand, was it a single client and very specific case or was it broad-based deceleration? Can you provide some color on where exactly this deceleration happened? Was it part of the managed services part of the business or was it discretionary part of the business? Did we lose share to somebody or was there a case of insourcing? If you can provide the color on this budget versus actual for Q4 or for our organic business, that would be great. It was a couple of clients and significant clients, and it wasn't loss of share to anyone else. They just decided, like I pointed out, to pull back the budgets, which means they did not spend the planned amount of money, what we expected them to spend at the beginning of the quarter. We think that if you want, they'll bounce back. Thank you. The next question is from the line of Pranaya Jain from Banyan Tree Advisors Private Limited. Please go ahead. Yeah, hi. Thank you for the opportunity. I'll just, you know, continue with the previous participant's question. When we look at, say your technology, and telecom segment, your industrial segment, your management consulting and professional segment, all three have de-grown on a Q-o-Q basis. Just wanted to understand, you know, and get more color on, are you facing, deflationary pressure from other clients as well apart from the two big clients that you spoke about? Yeah. Just one small question, can you provide a Q-o-Q organic revenue growth? Let me try to answer your first question first. The fact that one segment goes down is also because another segment went up. The sum of all is 100. One of the segments went up significantly, which resulted into a number of other segments shrinking because the sum of the total is 100. I would say like I pointed out, a couple of our clients had material but transient pullbacks in their budget, which should be restored in Q1. Right. I am looking at an absolute basis, like when we just use those percentages and multiply it with our overall revenue. Then when we compare the absolute numbers, we still see degrowth in these three segments that I talked about. Hence the question. I get that, but, that's why I said a couple of our clients had material pullbacks because of our budgets. What I did want to point out, however, was that we did have significant growth in s ome other a couple of segments as well. The nature of the budget pullback is temporary. Sure. It results in lower cost share. Sorry to interrupt. Your question was on Q-o-Q growth quarter-over-organic, which is in reported terms minus 1% Q-o-Q organic. In constant currency it was. Minus, constant currency. -4%. -4% organic. Yeah. Okay. Thank you. Thank you. Ladies and gentlemen, we'll be taking the last question. That is on the line of Shradha Agrawal from Asian Markets Securities. Please go ahead. Yeah, hi. Just one clarification on the guidance for next quarter. You're indicating double-digit year-over-year growth, but what is the implied sequential growth, given the fact that you're talking of bounce back in spending in the top clients in which you saw pressure in this quarter? See, like I pointed out, we are likely to do high single-digit Y-o-Y growth for the year. In Q1 we have an opportunity to do double-digit growth. What she's saying is what does it imply as Q-o-Q? Just work that out. Shradha, you know us well. I think you should keep a track of us, given the seasonality and now the multiple businesses that have got added, to keep a track of us on a year-on-year basis will be the best way to keep. The reason I'm asking that. It's a mathematical number. We'll just give it to you. Kapil, what should I? Sure. Low single digit number. Low single digit. Low single digit. Okay, thank you. Yeah, got it. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. I think we've had a pretty involved discussion. First of all, I want to thank each one of you for having joined the call. I know it's a very precious time of yours and in this very volatile, very interesting and very energizing time, at the same time sapping because of the multiple stresses at work. Thank you for giving us the time. Bigger thanks for asking us the very important questions, many of which tell us to keep track of a few numbers that we normally in our normal course of business don't. I don't know whether any one of you noticed that there are some new metrics that we have started sharing, net revenue retention being one of them. I think going forward you will see that as a common thread. This all we learn from the questions that you asked. We'll be in touch with you on any other clarifications that you would need. As well as I mentioned before on Friday we will be in Mumbai to start with and of course even after that for in the coming months. Feel free to set up a meeting or a call or any detail that you would like to have from us. Thank you once again for joining us. Truly appreciate your time. Thank you, members of the management. With that we can close. Thank you. Ladies and gentlemen, on behalf of NIIT Learning Systems Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.