Ladies and gentlemen, good day, and welcome to the Q3 FY 2022 Earnings Conference Call of NIIT Limited. As a reminder, all participants 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. Vijay Thadani, Managing Director and Vice Chairman of NIIT Limited. Thank you, and over to you, sir.
Thank you, Margaret, and thank you everyone. Good afternoon to all of you. I thank you for joining this briefing on our quarter three results and developments, and also for your continuing interest in NIIT. We have had a very exciting quarter, and we are in exciting times that I will share with you. We will talk about the business performance of third quarter of financial year 2022. After that, I would like to share with you some significant developments which were approved by the board of NIIT Limited today, which I believe have solid potential to pave the way for significant value creation for NIIT's customers, NIITians, as we call our employees, and NIIT shareholders.
This is happening at a very appropriate time, because we also crossed an important milestone in the life of NIIT during the quarter as we completed 40 years of our foundation on December 2nd, 2021. While Sapnesh will talk about quarter three results, I just wanted to give you a highlight of the fact that results continue to show the strong growth opportunity and momentum that both businesses have, which is strongly driven by and led by Sapnesh and his team through agile and decisive actions taken for the company, which have taken the volatility in the environment and use it to our advantage.
The depth and breadth of our experience in learning technologies which have contributed to realizing that opportunity and the strong execution capability where all NIITians, even though from 20th of March 2020, have been operating, working from home, have delivered an exceptional quarter once again. I think each quarter has been better than that. This has definitely helped the company to transform and continue to meet and exceed our customers' expectations. We do see some improvements in the environment as organizations are starting to invest in their growth agenda. Talent becoming the top priority for every corporation is creating a significant multi-year growth opportunity for us. That being the background, I hand you over to Sapnesh, and then we'll get into more details. We keep our brief short and keep more time for question and answer.
Thanks, Vijay, and thanks everyone for joining. I will take you through the results now. NIIT's revenue stood at INR 3,836 million. It was up 51% year-on-year and 22% quarter-on-quarter. Please note that the financials include impact of acquisition of RPS Consulting that got consummated on 1st October , 2021. Excluding RPS Consulting, the revenue was at INR 3,534 million, up 39% year-on-year and up 12% quarter-on-quarter. Both the businesses, CLG and SNC, are on a strong growth path. I will cover each business in my subsequent discussions. The EBITDA stood at INR 827 million, up 75% year-on-year. The EBITDA margin was 22%, up 295 basis points year-on-year.
PAT stood at INR 550 million, and the resulting EPS is at INR 4.1. Going to our corporate business. The corporate business continued its growth strategy. Our investments, disproportionate investments in digital capabilities and sales and marketing are enabling scale and acceleration of this business. These have helped this business outperform our stated guidance, driven by growth in new customers and scope expansions with existing customers. In Q3, the revenue stood at INR 2,961 million, up 36% year-on-year and up 9% quarter-on-quarter. In constant currency terms, the growth was 7.6% quarter-on-quarter. We saw strong sequential growth predominantly driven by accelerated ramp up of new customers and expansion in share of wallet of existing customers.
Some of the higher year-end spending also helped grow the business for quarter three. The EBITDA was at INR 735 million, up 47% year-on-year. The EBITDA margin was 25%, up 181 basis points year-on-year. As guided earlier, margin was down quarter-on-quarter. This was due to the planned ramp up in sales and marketing expenses in order to enter new market segments in United States as well as Europe, and some of the transition expenses experienced due to new customers that got onboarded in the previous quarter. During the quarter, the corporate learning business acquired four new MPS customers, including one aerospace giant, two technology companies and one BFSI major. We expanded three existing contracts and also renewed three contracts that came up for renewal.
That continues our 100% renewal record in terms of renewing all contracts that come up for review. As of December 31st, the revenue visibility stood at $326 million versus $294 million in the previous quarter. The number of active MPS customers now stands at 65. Last quarter, I had indicated that the current year growth target was going to be at about 30+% with margin levels in the mid-20s. Based on the strong performance in Q3, we now expect full year growth to be in the mid-30s, and the margin expectations remain steady at mid-20s. Coming to our Skills and Careers business. The revenue for the quarter was INR 874 million, and that was up 144% year-on-year.
Excluding the revenue due to the acquisition of RPS Consulting, the revenue stood at INR 573 million, up 60% YOY and up 36% quarter-over-quarter. Please note that this is a seasonal business, so YOY comparisons are more appropriate than sequential comparisons. The quarter-over-quarter performance, in addition to the acquisition of RPS Consulting, includes an impact of growth in organic business as well as the seasonality that I just talked about. StackRoute and TPaaS, our key product lines, continue to remain strong and continue to grow both at a significant year-over-year level as well as quarter-over-quarter.
The business is emerging as a strong digital learning platform across domains for both career seekers as well as working professionals, leveraging the strength of our brand, deep expertise in pedagogy, and the use of technology to drive learning outcomes. Addition of RPS Consulting has reinforced and further strengthened the offerings, specifically with respect to the working professional segment. The business provides training in emerging digital technologies to working professionals, a segment that has seen strong demand due to digital transformation across businesses. As shared on the previous call, we have accelerated investments in the business, which has helped to lift our revenue runway. We see a multi-year cycle for growth in demand for digital talent. As businesses increase adoption of digital technologies, we see a great opportunity for our business, for our Skills and Careers business.
Between StackRoute, RPS and our enterprise business, we have strong coverage of GSIs that are the key enablers of digital transformation globally, as well as GCCs who are key early adopters of digital technologies. We also see a lot of opportunity in Indian enterprises adopting digital technologies to pave the way for digital transformation in their enterprises. We now have a range of offerings of digital skills, including programs for 5G, cloud technologies, cybersecurity, game development, data science and full stack product engineering, as well as programs in digital marketing, business development and virtual relationship management for the digital enterprise. In terms of balance sheet, our metrics continued to get stronger.
The cash position improved quarter-on-quarter by INR 250 million to INR 12,180 million versus INR 11,930 million last quarter. Please note that this is despite the payout for the acquisition of RPS Consulting during Q3. DSO was at 57 days as of December 31st. At the same time last year, the DSO was 63 days, so a six-day improvement in DSOs. Operating cash flow in Q3 was INR 1,067 million, and free cash flow was INR 1,023 million. The operating ROCE has seen significant improvement over the last several quarters. Our operating ROCE has improved to 78.5% at the end of this quarter versus 73.5% previous quarter.
Overall, both businesses have tremendous opportunity in front of them. The corporate learning business that sees a market of $350 billion-$400 billion annually. We rank among the top five managed training services corporations worldwide. One of the only two specialist learning companies in the top five. It enjoys differentiated positioning, market-leading growth, profitability, and cash generation capability, and a track record of creating successful outcomes for customers in helping them transform their L&D organizations, as well as helping transform their talent, improving their efficiency and effectiveness and helping them run training like a business. The CLG focus continues to remain on North America and European markets. The Skills and Careers business represents a $15 billion-$20 billion training opportunity. Acceleration of digital transformation leading to a war for talent has created strong headwinds for this business.
The young population in India and the improving enrollment ratio into higher education shows that this opportunity is going to be a multi-year opportunity for us. Strong demand and continuing skills upgrade for working professionals due to digital transformation is going to add tailwinds to the opportunity that SNC faces. Overall, I feel that both the corporate business as well as the Skills and Careers business have a very significant opportunity for growth expansion. Corporate business could become a $400 million business in the next 4-5 years, and the Skills and Careers business could become 5x of what it is today in the next five years. As you can tell, both have ambitious trajectories. Both leadership teams are very driven.
In the Corporate Learning Group, our ambition is to be the global leader in managed training services. In the Skills and Careers business, our goal is to be a dominant player and a top education brand in the markets we serve, including India and many emerging markets. In five years, like I mentioned, I expect the CLG business to be upwards of $500 million and the Skills and Careers business, as I mentioned, to be 5x its size today. We will continue to pursue investment opportunities, both organically and inorganically, drive growth across the CLG as well as the SNC business. In CLG, we will continue to focus on expansion in improving geographic coverage, specifically around continental Europe and Latin America.
Addition of new capabilities so that we can service new segments and new opportunities across our customers and improve share of wallet. Obviously, penetration of new market segments, as I talked about a little bit earlier. In SNC, we will continue to invest to achieve leadership and a dominant position in the markets that we serve, including India and some of the emerging markets. With that, I'm gonna hand you over to Vijay to take you through some of the more exciting news that the board approved today.
Thank you, Sapnesh. That I am sure you would agree was an exceptional performance in the quarter, and I think over the year. Keeping these changing market conditions and the rapid digital transformation taking place as well as the preference of various stakeholders evolving over a period of time, the board had formed a special committee to get into details and of this and build a strategic plan, which involved working closely with the senior management of the company on one hand, and on the other hand, to engage with relevant industry experts and advisors, and then present the proposed plan. Earlier today, the special committee's plans for CLG and SNC businesses after engagement with external experts and feedback were shared.
What emerged was, as Sapnesh rightly pointed out, the talent is the top priority for every organization. In that scenario, there is a multi-year growth opportunity for each of the two businesses that we are involved in, which is CLG and SNC. The company has a strong balance sheet and market-leading offerings, and we are therefore very uniquely positioned to take advantage of the current environment. This was the overall positive. The committee also felt, based on the advice that we received, that in a certain way, the businesses are also becoming increasingly different, with unique market dynamics in the markets that they operate in. CLG operates in North America and Europe. The SNC business is predominant in India and the emerging economies. Customer sets are different.
The customer sets for CLG business are Fortune 1000 companies, global companies. On the other hand, for SNC, the customer set is learners, individual learners, career seekers, as well as working professionals. The offerings also automatically are different. One is focused on outsourcing services, which is CLG. SNC, which is predominantly focused on delivering learning across multiple domains through a digital learning platform. Given these differences and the positive momentum that each of the businesses has shown, as well as the great opportunity that lies for both these businesses, the committee felt that the targeted customers need undivided attention, a differentiation focus, and a clear positioning. We also need to provide the management teams with agility and independent decision-making, as well as capital to support the value creation for our customers.
NIIT has the requisite capital and a strong balance sheet, and therefore creating two independently run businesses with significant growth capital will propel both CLG and SNC to realize their true potential and the aspirations that they have built. Based on this, the special committee recommended creating two independent entities which will help CLG and SNC to realize this aspiration that we talked about. The board approved the composite scheme, which is essentially consisting of three things. One is reorganization of Corporate Learning Business as an independent company, separately listed on the exchanges. All assets, resources, contracts, and investments, including the subsidiary companies of CLG, which service the CLG business, will form part of the CLG business and will be transferred and vested into NIIT wholly owned subsidiary, NIIT Learning Systems Limited.
After that, this vertical split will result in NIIT will continue to run the SNC business and the CLG business, which is now housed in NLSL. Where in lieu of NIIT shares, NLSL will issue one share each to every shareholder of NIIT, and thus get listed. The shareholders at the end of this exercise will hold one share of NIIT Limited and one share of NLSL, both these companies being listed on the stock exchange. This reorganization will involve regulatory approvals and, under Sections 230 to 232 of the Companies Act, and this will be subject to shareholders, creditors, customary approvals, as well as NCLT and SEBI. This exercise can take between 12-18 months to complete.
Our endeavor will be to complete it as fast as possible. Given the fact that the appointed date is 1st April , 2022, while the CLG business would continue to be held in trust by NIIT Limited, the accounts for both these entities will be available individually from that time onwards. We believe that this move will significantly help the leadership team to give undivided attention to the respective customers. It will simplify decision-making, and more important than not, give them capital at the time and the way that they would require it, and thus result in unlocking of value for each of these two businesses. We'll be happy to answer more questions on this. I'm sure there would be.
Along with the approval of this scheme, the board also said that the important milestone of 40 years of existence on December second deserves to be recognized, along with the exceptional performance and the landmark moment when I think both these companies are poised at an exciting growth journey. The board has approved an interim dividend of INR 3 per share, which will be 150% of the face value. The board also deliberated that in lieu of the pending scheme of reorganization that is underway, it would be prudent for the respective boards to consider any further recommendation of dividend only after the scheme gets approved and effective.
In other words, we have the exciting news of CLG and SNC getting listed as two independent, separately listed companies, as well as a dividend to start that process, of INR 3 per share that I wanted to share with you. With that, I suggest that we open it up for Q&A. Margaret?
Thank you very much. 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 handset while asking a question. Anyone who would like to ask a question, please press star and one at this time. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.
Okay, thanks.
Go ahead. My first question is on SNC-
Your voice is breaking up. We cannot hear you very well.
Is that better now?
No, sir. It is breaking up. Can you please move to a better reception area?
I am already there. Am I audible now?
We can hear you better now.
I'm sorry. Yes.
Separately, Mr. Bari, I would request you to rejoin the queue. In the meanwhile, we'll take the next question. The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah. Hi. Am I audible?
You are, sir, but the volume is a bit low. If you can speak a bit louder.
Yeah. Okay. Let me move to the handset. Is it better?
Yes, sir. Thank you.
Yes, this is okay.
Yeah, yeah. Hi. Thanks, and congratulations on very strong numbers. Couple of questions here. Firstly, you know, do you think the size of the two businesses were ideal to do the transaction? What else consideration went into this kind of a thought process? Because I believe the cash and the assets will also be divided in such a way that they have to chart their own trajectory individually post the merger. Did you see any reason of co-existence, given that RPS is also not very different kind of business from what CLG is doing? Any reason why we would not have considered that element as well? This is related to structuring. If you want to answer this, I can ask another question.
No, certainly. You want to ask your questions first, and then we'll just have-
Okay. You can possibly answer this and I'll ask.
Happy to. Okay. All right. First of all, the consideration. I think the consideration is both businesses have achieved adequate size and scale and are poised for accelerated growth. That is, I think, the strongest reason. The strongest reason is our ability to meet our customers' needs. I think it has not happened overnight, but it has been happening over the last five or six quarters. The SNC business, which had to pivot, from a brick and mortar to the digital transformation or a fully digital model, and now kind of a hybrid digital-hybrid model, I have to admit, got aided by COVID.
Nevertheless, I think it has happened at a rapid pace, and which is because of some very resolute decision-making by the leadership team led by Sapnesh, which has brought the business to this level where it has achieved the size and scale and has now earned the right to regain its dominant position in as a most trusted brand in the country in education and training. This was one. I think CLG has a very, very strong run, has had a very strong run with even if you see the new contracts which have been added this quarter, actually positions it extremely well to look after, to go after its aspirations. That was a strong point.
We have a strong balance sheet, and that balance sheet, obviously the capital had to be allocated accordingly based on the needs of the two businesses. Both have need for organic investment as well as inorganic investment. These investments would need to be directed for the benefit of those customers that are there. I think this segregation or making it into two independent companies will give both management teams an opportunity to serve their customers well, which will also result in both employees getting the benefit. Of course, the value unlocking which will emerge out of the two businesses discovering their own value and being compared with their own peers in the marketplace. I think those are the driving forces.
I'm sure I can answer follow-up questions or if you would like to understand this little more, I can ask Sapnesh Lalla to explain few examples.
Yeah, just one bit on this and I'll ask my next set of questions. First is that will that need to set up a different leadership to run this business? Because I think aspiration that we have highlighted just now in this call of getting 5x on this business over coming years is a daunting task in itself. Will that mean getting a new set of people to run the show or do we have people run with the existing set of people? Secondly, this is more broader, which is anything incremental that we are witnessing in the market that has added to our confidence of having this $400 million CLG in five years, which is mechanically 27% CAGR and 5x in SNC.
Any reason for, you know, this newfound confidence?
First, let me answer your question on people. We have strong operating teams on both sides of the business. Very strong operating leaders we have on both sides of the business. Sapnesh has had and has displayed exceptional leadership and has grown the business to this level. He would continue to be involved in the governance of both the businesses. Of course, he would put his personal time more on driving the larger entity, which is CLG entity, and that is the base in North America, but he would be involved in the governance. We are strengthening our operating teams further, and as time passes by, we will add more names as they develop. That I think is the point. We have a strong team.
B, we will strengthen it further. Second part, where is the confidence coming from? Let me hand you over to Sapnesh to talk about.
Yeah, I think, in really simple terms, the confidence comes from the point where today, like Vijay pointed out, we have established a right to win, whether you look at the corporate business which has had one of the best years in terms of customer acquisition, as well as expansion of existing contracts at a time when consumption of training has gone down given the uncertainty. To be able to demonstrate growth, not just in new customer acquisition, but also share of wallet for existing customers who have choked on their consumption of training is something that's phenomenal that the Corporate Learning Group has achieved.
In similar vein, the SNC business, which had to reinvent itself just about two years ago, has shown remarkable resiliency as well as innovation to transform itself into a digital business, and now boasts a large number of GSIs, GCCs, and key Indian enterprises as their customers. The business, as you know, has traditionally focused on career seekers. Now with the addition of RPS Consulting as part of NIIT, we are able to expand the audience to working professionals in India as well. Across the board, there is significant confidence given the resiliency, given the innovation, given the ability to pivot to digital, given the ability to create offers in time to take on opportunity, has given us the confidence that this might be the right inflection point where such a decision would result into value creation.
Appreciating the color. Lastly, if I can squeeze in a quick one, which is revenue from RPS looks muted on a QOQ basis. Any reason for this, given that environment is very conducive from hiring ability, scaling or retaining point of view?
RPS has done exceptionally well this quarter. It was their first quarter of operation with us. They have actually done fairly well and in fact, very well. Again, I am saying the opportunity is primarily driven from one basic premise around which the whole IT industry is also evolving, as well as the rest of the industries are transforming, which is the emergence of digital technologies which are affecting every single element of management and decision making and servicing customers. Add to that the new input of working from home. Therefore it is also a changing future of workplace in addition to future of work.
I think this creates a huge talent transformation opportunity and NIIT through its worldwide operation, I think is poised to do that. They need to be addressed differently in each geography based on the requirement. I think that's where we are coming from. Sapnesh, you wanted to add something more to this question?
No, I think, like, Vijay pointed out, I think timing is good, the confidence is there. Both the teams have established the right to win. I think, from an overall perspective, lot of confidence in this action.
Yeah, just a small clarification, because I think we gave INR 105 crore number for TTM at the time of acquisition. Now it's INR 30 crore in this quarter, so is it more like a flat QoQ or anything you want to share on that?
It was INR 105 crore LTM, last twelve months. Thirty crore this quarter means if we were to extend that, we are at a run rate of INR 128+ crore already.
Right. Okay.
We can share these numbers with you much more in detail. Just to let you know that RPS Consulting is ahead of its numbers.
Okay. Appreciate it. I'll join the dots. Thank you.
By the way, so is StackRoute and TPaaS. I would say all three are ahead of their numbers.
Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.
Yes, yes. Am I audible this time?
Yes, sir.
Yeah.
There's a little disturbance, but we can hear you broadly. Yeah.
My first question is broadly in line with what the previous participant asked, but slightly different. What is it that we couldn't have probably achieved in the current setup that we intend to do in the,
In the new setup of two different companies, because the two different businesses were anyways being handled by different teams and they had their own P&Ls and all, right, earlier as well. What is it that you would achieve by separating both into different companies now?
Okay. I think, let me attempt my bit to it. We saw there were multiple benefits, some of them you already talked about. One is a focused attention to customers. Second is independent management focus. Now this part was already happening because we have so strong operating leadership available in both the companies. I think the agility, accountability and responsibility to these teams and allocation of capital, which was in optimization stage will now be maximization stage, which means what is valid for each business will get its value. Last but not the least, I think there is an opportunity to unlock value for each of the shareholders, which perhaps you would have to think about or you would have talked about. Sorry.
Are you able to hear us?
Yeah, I was able to hear you, sir. The second question was on the cash that we had on the balance sheet, around 1,200+ crores, which is roughly slightly less than 25% of the market cap at present. After this INR 3 dividend, there won't be any dividend till the businesses are separated. How will this cash be divided between the two? Or, is it that Corporate Learning Group will be separated and this cash will remain in the parent company?
Okay. As I said, first let's understand the principles behind and then I can tell you the way it is being approved by the board. The first is both businesses need capital, both for organic as well as inorganic activity. That's the second thing. The third is one business is cash generating business, and the second is cash consuming business, little bit in the near term or would not generate as much cash. Therefore, keeping these consideration in mind and making sure that the growth appetite for both the businesses fulfilled, fortunately, this cash comes in handy in making sure that both aspirations are met.
Taking your INR 1,200 crores number, it is proposed that about INR 700 crores will go to SNC side of the business and INR 500 crores to CLG side of the business. CLG, while it is generating adequate cash on its own, requires a strong balance sheet for it to participate in global RFPs which require a strong balance sheet, number one. Number two, it also has an appetite for inorganic activity, and we do not want that to be delayed or for that matter, to be questioned or looking for other sources of finance. Idea was to give both businesses adequate money in consonance with their needs, and that is what I think has been done.
On an organic-
Sorry.
Yeah. On an organic basis. Am I audible?
I'm sorry, your voice breaks. I heard on an organic basis. After that.
Yeah, what was the EBITDA for SNC business for Q3?
What was EBITDA? What was the EBITDA for SNC business? Is that your question?
Yeah. Organic basis, excluding RPS Consulting.
It was just above zero. It was 3% at 17 million. Excluding RPS business, SNC grew by 60% year-on-year, 36% quarter-on-quarter.
Thank you. I would request Mr. Bari to rejoin the queue for follow-up questions. The next question is from the line of Dhirendra.
Nirmal, if you have difficulty in getting through, Kapil, Sanjay, myself, Sapnesh, all of us are available to answer your question separately. Or you would like to write to us, we would then respond, and we are available to everybody.
Thank you. The next question is from the line of Dhirendra Kumar Gupta, an individual investor. Please go ahead. Dhirendra Kumar Gupta, your line has been unmuted. Please go ahead with your question. Request you to kindly unmute yourself from your mobile and go ahead with your question. Due to no response, we'll move to the next question, which is from the line of Kaushik Poddar from KB Capital Markets. Please go ahead.
Yeah, Mr. Lalla spoke about the kind of growth numbers for both the divisions. I missed it. Can he repeat both the numbers as to what is the kind of growth he sees in 4-5 years or something he quoted?
Hello.
From a skills and career business perspective, we expect it to become 5x of what it is today.
In how many years?
INR 240-250 crores today. We expect that business should be greater than INR 1,200 crores in five years. The corporate business is at approximately annualized $150 million today, and we expect that to be in the $400-$500 million ballpark in the next five years.
Okay. Thanks. I just wanted that only. The margins also can you give any ballpark, say, at the five years down the line or, I mean, do you have any numbers? I mean.
The corporate business, we have reasonably established growth and margin pattern, and we expect the growth, like I pointed out, to be in the 20% or a little bit higher than that range from an organic perspective, and the margins to be in the 20% range. The skills and career business is going to improve its margins from where it is today to reach closer to the 20% mark towards the fifth year.
In fifth year. Okay. Thank you. Thank you. That's it. Thank you.
Thank you.
Thank you.
The next question is from the line of Shradha Agrawal from Amsec. Please go ahead.
Yeah. Hi. Thanks for taking my question, and congratulations to the management team on another strong quarter. Just to, you know, take the first question further, I mean, on the timing of the scheme merger, it was during the first quarter of consolidation of RPS, and we were, you know, should have waited for one or two quarters before going in for the scheme merger. Do you think that would have made more sense rather than doing it right away when you were actually on a strong growth trajectory? We would have probably explored more opportunities in a consolidated way and then would have taken different directions for both the businesses.
First of all, I don't think the discussion is on whether we should have waited for the timing of a certain activity or a certain action. It is an overall strategic call, and the call was taken. In fact, the discussion on the strategic plan happened much before. Over a period of time, we added RPS into the system. RPS is a perfect fit to realize the dream that SNC has, and I think it is a perfect fit also from the point of view of leverage which the CLG business may want to do in future. I do not think the issue is whether we should have waited or not.
The important question to answer is this the right moment for us to take on the strategic paths that we have defined for each business? To that, I think all of us would agree, including you, that the timing is right. I think how to realize that this is the time to make sure that that happens. That's the belief our team has had, and that's the belief our board has had. That's the belief our advisors who advised us on this action had. I think there is a consistency in that thought process. At the same time, you seem to indicate that maybe it will create some kind of a confusion. Definitely, we would love to have a discussion and debate on that.
I'm sure you would have a point of view since you are so familiar with the company, and we would definitely like to take that into consideration. I think at this point of time, this decision stands very well validated by all the parameters that we have seen.
Sure, sir. Appreciate this. One thing, you also indicated that, you know, both these businesses require core growth capital for both organic and inorganic activities. Inorganic in SNC would be more biased towards B2B business or more towards B2C, because consolidation of RPS further enhances our proposition on the B2B side. Any further acquisition would be to beef up our stance in B2B, or would it be to increase our target market share in the B2C segment in SNC particularly?
Okay. I think, first of all, at least we would like to believe that the definition of B2B and B2C is a pre-digital era definition. Over a period of time, I think especially in emerging markets such as India and China, I think there is a gray area between what is B2B or B2C. For example, you take our TPAS. Now, a TPAS offering starts from the fact that a corporate defines the requirement. It is a B2B. To that extent, you can call it a B2B opportunity. It's a B2C opportunity because it's an individual who actually joins the course, pays for it, and has a job guarantee.
I think failing to remain in the two silos perhaps would deny us the opportunity of being able to take advantage of places which are evolving, the spaces, the marketplaces which are evolving. I think we should try to see what is the opportunity for career seekers. What is the opportunity for career seekers and working professionals to build a long-term value for themselves by being associated with NIIT? Now, once you start looking at that, then in the early part of the journey, the person is paying for it. Slightly later part of the journey, the organization may be paying for it, and over a period of time, both may be paying for it, or organizations may switch to a model where they ask individuals to invest in their reskilling because they are the long-term beneficiaries of that.
All these business models are evolving, and I think we have to be at the right place. In mature markets, such as the global markets, where outsourcing is the issue, here, the individual takes the decision to be with a particular entity or not, or with a particular institution or not. In case of a CLG kind of a business, his employer actually takes the call as to which entity the person would be associated with because the whole business gets outsourced to CLG. There, I think the call is that of the employer. Here, primarily the call is that of an individual. If you were to look at it that way, the two businesses are very different. There can.
There are many more colors to it, and we can talk about it, and I'm sure Sapnesh can give you many examples.
Got it. That's right. Just one last bookkeeping question. The CLG business saw an impact of close to 400 basis points, and Sapnesh did indicate the margin headwinds. Is it possible for you to quantify what was the impact of each of these things on margins?
The CLG margin that bit. We are not able to hear today, Margaret. I don't think the problem is with the callers' phones. Maybe there is some issue with our own line. Just to say, I heard you correctly, it's Shradha, and that is that, what caused the margin and can we quantify?
Right.
Can we quantify it before?
I think I won't go into quantification, which is very specific, given that this is public, this becomes public information. Suffice it to say that the predominant part was investment in organic initiatives, which we have to expense given the accounting principles we follow. Significant investment in sales and marketing to enter new market segments in the United States as well as investments in NIIT Digital, including sales and marketing and platform-related work for the India business. That was the predominant part, maybe close to three-fourths. The second part, like I mentioned earlier, was the onboarding of the expansion-related work for an existing customer for whom we had very significant expansion over the last quarter.
Exactly, Sapnesh, my point was, I mean, how much was this impact? Because probably this would be non-recurring in nature, and maybe we might get the benefit on this account next quarter.
Well, I think we will see continued disproportionate investment in sales and marketing. This is something that we have done in the past, and it has paid handsome returns, as well as continued investment in opening the market segment that I talked to you about, as well as NIIT Digital, given where it is in its trajectory. I would agree on the transitioning of or onboarding the expansion of the customer. That's a one-time expense. Given the number of new customers that we have onboarded this quarter, it's possible that some of those will require additional expenses to onboard as well.
Great. That answers my question. Thanks a lot. Thanks for your time.
Thank you. The next question is from the line of Vimal Gohil from Union AMC. Please go ahead.
Yeah. Thank you for the opportunity, sir. I'll just confirm one data point that you gave earlier. The 1,200-odd crore of cash that we have on books, or rather INR 1,100 crore of cash that we have on books, will be distributed as INR 700 crore in CLG and INR 400 crore in SNC. Would that understanding be correct? Have I heard it correct?
No, I think the understanding you got was slightly incorrect. INR 1,200 crores of cash, of which INR 700 will go to SNC and INR 500 to CLG.
500. Okay. Fair enough. Just wanted to understand, in terms of the working capital of both these businesses, if you just make us understand what is the intensity, how would that be divided? Which of the business is more working capital intensive as compared to others? If you could just give us some sense there.
I would tend to feel that the business which is on the outsourcing side, the corporates have fixed payment cycles and fixed payment terms, and that is the one which would contribute to. Individuals on the other hand, as we move in this side of the market, there is some part which individuals pay, and there is some part which the corporates pay for that individual. The individuals typically pay in advance so the working capital is negative, but corporates work on the same credit cycle. Overall working capital requirement of this side of the business, our SNC side of the business, is lower than that of CLG. However, the investments required to accelerate that business and bring it to the cruising altitude, if I may say, are higher.
To that extent, it will burn relatively more cash or release relatively less cash in the ensuing years.
Right, sir. Would it be fair to assume that the business is currently cash negative, the SNC business that is, and the networks currently would it be positive as of December, the SNC network?
Yes. The SNC network is positive. You are right, at this point of time that business is consuming cash.
Okay. When we say consuming cash, obviously it will be making PAT losses. Our working capital is negative, so basically it is PAT negative at this point in time. Higher than our working capital.
I will defer this question to the CFO, who will give you the intricate details of that. Yes, Sanjay.
As Vijay mentioned, we have a lower working capital, but you are right that it might be just making or eating up the cash at this point in time, more from the investment perspective rather than the working capital perspective. At the same point in time, the treasury, which it is carrying, that allocation will have a return, and the PAT should not be negative.
Got it.
Having said that, it is in an investment phase in business development. Therefore, based on the response that we see, we may accelerate business development expenditure. That goes out to operating expenses.
Got your point, sir. Got it. Sir, Sapnesh, this one is for you. When you say that, you know, there was some impact in this particular quarter given the fact that we've invested in sales and marketing. When we say sales and marketing, generally this will be, we would have added to our hunting salespeople on the ground. Right? That's where most of the investment would have gone into. Are there any other areas that you sort of focused on or try to sort of strengthen?
Sure. What you pointed out is very true for our corporate business. We added salespeople and did some marketing related expenses. However, as it pertains to the B2C India business or the NIIT Digital business, while we added more headcount, but we also spent on both BTL as well as ATL marketing.
Could you just elaborate on BTL and ATL?
Actually, I would say.
Sorry, go ahead.
Just elaborate on BTL and ATL. What exactly would that be?
newsprint as well as radio ads.
Got it. Okay. Fair enough.
BTL is brand.
Local ad. BTL is more local and below the line ad marketing.
Got your point. Okay. Fair enough, sir. All the very best. Thank you.
Thank you.
Thank you. The next question is from the line of Nilesh Tithani from DOI ASCOM. Please go ahead.
Hi, sir. Good evening. Thanks for the opportunity. My first question is on our investment. We were considering or we were actually in the process of investing into B2C digital platform. It's not exactly equal to some platforms like upGrad or Byju's, similar lines. Wanted to understand this business will post the division of the businesses, where it will find its place. Today, as on today, what are the investments we have done into it, and what do we envisage as far as investments are concerned? Any thoughts, sir, on this?
Again, sorry, we were having difficulty in listening to you, so I'll repeat your question to demonstrate my understanding. Your question is, there is a digital platform around which the SNC business is running, as well as I think there is a digital platform around which the CLG business also services its customers. Your question was, where will it lie? And the second question was, what is the level of investment we have made so far and are likely to make? Is that all? Likely to make, I don't think you asked, but you asked how much investment we have made so far. Have I heard you right?
Yes, sir. Perfectly right.
Okay. Thank you.
Our digital platform is a platform that we use across NIIT, across all of the CLG business as well as across the SNC business. Whether the go-to-market is a B2C go-to-market or a B2B2C go-to-market or a B2B go-to-market, we use the same platform. This is a platform that we have invested in over the last several years, more intensely over the last five years, to power CLG's growth initially, and then more recently to power both CLG as well as NIIT Digital's growth or SNC's growth. It would be hard for me to quantify how much we have invested in this platform over the last 10 years.
Suffice it to say that it is a platform that's used by Fortune 500 companies and large corporations to deliver high-stakes training to both their employees as well as extended employees. I would also point out that this is the same platform that's delivering high-stakes real estate education in Canada, the project that we started about three years ago. It is a platform on which we've made significant investments, not just from the point of view of technology, but product engineering, product management, as well as pedagogy, so that when a student gets onto the platform, they are able to achieve outcomes in a purely digital service delivery model. This platform, as the reorganization takes place, will be available to both the organizations.
I think the opportunity would be for each organization to customize it to achieve specific results for their audiences. Rather than continuing to invest in one platform which hopes to achieve outcomes for both the audiences, the opportunity we have is to create a fork in the development process and let each organization or each publicly listed company chart their own course on the digital platform that's available to them as very strong foundation. Now, this is different from somebody like you mentioned, where they've been dabbling with their platform over the last 2 or 3 years. The platform that we have has had the experience of over 10 years.
Got it. Just wanted some clarifications. Are we also in the process to have a B2C, pure B2C platform, like the current startup businesses? Or, what's your thought process on that? Or we would like to deviate away from that and focus on corporate learning group and not go on to B2C business in that fashion.
I think your question also justifies the reason why we are looking at the two businesses very differently. The requirements of the two markets, in terms of what they expect from the platform, are different as well. Given that we have a strong foundation on which you can actually build two independent entities which service different cultures and different marketplaces. That's what I think Sagnik alluded to. This will provide that opportunity by looking at these two businesses differently.
Okay. Got it. Those are my questions. Thank you so much for replying to each of them.
Thank you very much.
Thank you. The next question is from the line of Satish, an individual investor. Please go ahead.
Margaret, I also wanted us to be mindful of time, so we are already seven minutes over. How many do we have? two or three more questions? Should we just restrict it to three questions?
All right. Yeah.
Oh, everybody can ask? Okay. Four questions.
Yeah.
Three or four questions. I'm sure you would have three or four people waiting.
Okay, sir.
We don't want-
Hello. Can I ask a question?
opportunity to ask.
Hello. Am I audible?
Satish. Please go ahead, Satish.
Yes, you are.
Congratulations on the fantastic performance from NIIT as a whole. What attracted me very well is the receivables, okay? The what do you call it, outstanding days have come down by five days. That is an excellent indicator of a growing company. Your narratives are looking fantastic, and I hope the things going ahead will be much rosy and better in the coming days. One question I want to just ask you is, by splitting the business into two entities, whether it will be what do you call it, beneficial to the shareholder? Only the market will tell. You will be showing the right path and right guidance for those businesses to perform separately and strongly. This is my question regarding the split of the business.
Otherwise, I'm very happy you have delivered fantastic figures, and all the explanations given until now, it's completely fine with me. Hope I'm clear.
Thank you very much. These are very, very encouraging remarks. I think we are absolutely honored and feeling very flattered with the words that you had to say. I think both businesses will discover their independent value. Today, both the businesses actually together do not belong to any category. I am sure in this independent value discovery, both businesses with their projections and their unique differentiation features would be able to discover their independent value. As I said
One share of NIIT Limited will entitle shareholders for one share of NLSL. Both will get listed and both will have their own projections and future, much of which Sapnesh already alluded to and explained. I'm sure more clarity will emerge as we go through this process. Based on that, we do believe, and that's how our advisors also believe, and so have others who we have spoken to, that there is an opportunity for value unlocking for each of the two businesses. I hope we have answered your question.
Yes.
If not, we would be very happy to have an individual conversation with you whenever you would like or provide you with more details.
No, no. Perfectly.
Thank you for your very kind remarks.
Yeah.
It is. Okay. Thank you.
Thank you.
It's very encouraging for our teams to hear comments like this. It propels us into moving into faster or higher gear. Thank you.
Sure, sir. Thank you.
Operator, can we take the next question?
Thank you. The next question is from the line of Ashish Agarwal from Pareto Capital. Please go ahead.
Hi. Good evening. Thanks for taking my question, and congratulations on a fantastic quarter. I have two, three questions on the growth aspect of the business. First, you mentioned about 2.5x growth for the CLG business and the 5x growth for the SNC business over the next 5 years. Is this purely organic, or have you also assumed some inorganic growth as part of this growth targets?
Ashish, can you know, Sapnesh has asked you, Ashish, can you repeat it and maybe a little slower? We are having, there is some-
Sure, I'm-
-audio on the line.
Sorry, just a minute, please. My question is with respect to the growth within CLG business. You said about 2.5x for this CLG bus-
I'm sorry. Your audio is unclear to me. If you can come on the handset mode, please. If you're on speaker, please come on the handset mode and ask your question.
Yeah. Just a brief second. One minute.
There's an echo from your line.
Yeah. Is this okay now?
I think after we all got bits of what you said, so I'm putting it together. I heard you say that this $400 million-$500 million dream for CLG and 5x for SNC, is it based after inorganic activity or it's only organic? It is extending it from where we are right now, and right now we have included one acquisition which is already in and is consummated. If there are any more, those will be additional. We can't anticipate the value of an acquisition before it happens.
Thank you. We've lost this line. We'll move to the next question, which is from the line of Kunal Zakharia from Kunal Zakharia and Company. Please go ahead.
Hello. Good afternoon, sir. Sir, I want to ask one question. Whether we are planning to tie up with any of the e-learning apps like Byju's or anything in the future for strategic synergies and all?
Did you say if we are to launch apps? I'm sorry. Go ahead, Sapnesh, if you understood.
No. Can you repeat it? Did you say, are we planning to launch similar apps?
Similar apps or any tie-up with Byju's or any of the e-learning digital platforms for a better reach and synergy.
Okay. I think we have a very significant digital learning platform, and we would like to grow that platform. Having said that, we are looking at acquisition targets and alliances there which can help us invest in ventures who can leverage from our learning platform and grow on their path. Those are some of the acquisition targets that we would be looking at.
Okay. Thanks a lot.
Thank you. We'll take one last question from the line of Saurabh Shah from AUM Fund Advisors. Please go ahead.
Thank you. Congratulations on an outstanding quarter again, to the whole management teams.
It's not clear. Saurabh, please come on the handset mode. You are on speaker, and it's unclear.
Hello. Is this clear?
Yes, this is better. Please go ahead.
Thank you. I just want to congratulate the management team for an outstanding quarter. Question for Sapnesh first. Sapnesh, on the corporate learning business, I think you mentioned somewhere about the value proposition for NIIT Life Sciences, post-Eagle, and also the revenue visibility of $326 million. Could you just give us some idea about how the life sciences opportunity you expect it to pan out? And over what time, you know, the overall visibility of $326 million you think would kind of, you know, wind over revenues?
Let me first answer the life sciences related question. When we acquired our Eagle Productivity Solutions, which was almost 3.5-4 years ago, our revenue from life sciences was very close to zero. I think we had one life sciences customer at that time. Today, we have 12 managed training services customers in life sciences, and they contribute 14% of our overall business. Obviously, over these 4-5 years, our business has grown quite significantly. From an overall perspective, the life sciences value proposition has become more significant and richer. We could spend more time separately on exactly what it is.
Suffice it to say that in addition to the typical outsourcing value proposition that we offer a non-life sciences customers, there are a number of specific life sciences related point solutions that we are also able to bring to life sciences customers. These include, but are not limited to, implementation and training around the CRM packages they use, implementation of new product rollout related training, and so on and so forth. A number of point solutions in addition to the typical outsourcing solutions that we offer to a non-life sciences customer. A very rich product set for our life sciences customers. I think you had a second question which I think I forgot.
Sure. No, before that, you know, what, in dollar terms, does life sciences mean? You think in 2025 this could become, you know, like a $100 million opportunity from the current levels that you mentioned? Or you think, I mean, can you just give us a sense of how large or significant this is for us?
Like I said, today it's about 14%. Let's say, just from a round numbers perspective, we were at about $500 million five years down the road. It is possible for life sciences business to get to $100 million and 20% of the overall business. Lot of key opportunities, predominantly because training is so important in life sciences. It's a regulatory and compliance related segment where there is a lot of mandatory training that life sciences folks have to go through. Also a lot of change, constant change in life sciences. It's quite possible that it could be close to $100 million in the next five years or so.
Thanks. The other question, Sapnesh, was, you know, on this $326 million revenue visibility that you have. What kind of life should we assume for this in terms of, you know, the current revenue and then what is the new revenue that you should continue getting? Is there a, you know, kind of broad timeline around which this will run out?
This visibility is across the period of contracts that we currently have. I think we would be able to exhaust most of this in the next 2 to 2.5 years.
Sorry, next 2-2.5 years.
Approximately.
Okay, my last question, Sapnesh, was on this outsourcing costs, professional outsourcing costs. They've increased 33% YOY. Just wanted to check, is this because of you needing outside resources which you don't have, or in the older period of time, should we expect this to come down?
Yeah, I think, given the expansion we've had both quarter-over-quarter and year-over-year, as well as the product mix that we see, there are times when we have to resort to contingent staffing to ramp up rapidly and then over time we reach a balance of contingent staff versus own staff. At times of steeper growth, we rely on contingent staff and then normalize it as things stabilize.
You would expect this to come up as a percentage of revenue. You'd expect this to kind of be at these levels given that you continue, you know, you will be growing or should we expect this to taper off in the next two or three years?
I would say.
Because it's an expensive cost, right? I mean
Say that again.
No, I'm just saying this is expensive relative to your own people generally, right? I'm just wondering, you know, from a margin standpoint, do we have any-
Not necessarily. I think these are carefully made choices. We bring on people on our roles very carefully when we have significant long-term visibility of those roles. Also, a lot of times, when we have a lot of training delivery to do on diverse subject areas, we use our contingent staff.
Okay. Thank you very much and all the best.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you, Margaret. Thank you very much for being here with us and sharing this exciting day with us today. We do know that this is the results season and at this time you have many other priorities as well, but thank you for giving your time. I think you made some very encouraging comments and some very interesting questions. Your questions always lead us to looking at ourselves further and even the corporate action that we have given today is based on your past feedback over periods of time. I am sure we will have your support in making that happen. Your encouragement will definitely help our teams to rise to the occasion even better and faster.
Hopefully we will be able to fulfill all the expectations that you have from your NIIT. I would like to close this call now by thanking you and wishing you a healthy and happy new year.
Thank you. On behalf of NIIT Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.