Ladies and gentlemen, good day and welcome to the NIIT Limited Q2 FY23 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. Vijay Thadani, Managing Director and Vice Chairman of NIIT Limited. Thank you, and over to you, sir.
Thank you, and good afternoon to each one of you, and good morning or good evening, as the case may be, depending on where you are in the world. First of all, thank you very much for giving us your time to listen to us and the progress of NIIT over the last quarter. We are extremely grateful to you for your interest, and I do know that you have many other meetings to attend, so we will keep our briefing brief and leave more time for your questions. The agenda of today's call is to discuss the business performance for the quarter ending September 13th, 2022 .
The only opening comment that I would like to make is that despite the turbulent macro environment, all our businesses, SNC, Skills & Careers, including RPS Consulting that we had acquired last year, as well as CLG, have achieved double-digit growth on a year-on-year basis. As indicated in the pre-Q2 earnings update, there was steeper than anticipated impact of environment on CLG business, which did impact our QoQ growth. To that extent, Sapnesh would explain that detail. What is important is that the business continued to add new customers and maintain its velocity of customer acquisitions and 100% renewal rates.
There is a great potential for the company in the future in both businesses, and we are committed to deployment of the cash in the balance sheet of further investment in profitable growth and new capabilities on the back of the investment that we made in a company called KNOLSKAPE in last quarter. With this opening comment, I would like to hand you over to Sapnesh to provide details of the operating performance. Then I will give a very brief overview of the reorganization process that the company is going through, and then we'll open it for Q&A. Over to you, Sapnesh.
Thanks, Vijay, and thanks everyone for joining. Like Vijay pointed out, we appreciate your time, and we know how busy you are and therefore really, really appreciate your presence.
To provide you with the highlights, I'll start with NIIT overall and then get into each business respectively. Revenues stood at INR 3,922 million. This was up 24% year-over-year and was down 3% on a QoQ basis, primarily due to a steeper than expected compression in a large customer at CLG. I will cover this detail when I discuss the corporate learning business with you. The EBITDA stood at INR 560 million. The EBITDA margin at 14%. The EBITDA includes impact of wage inflation effective July 1st, a steeper than expected compression in some customers with CLG, product mix changes, as well as a pickup in travel and premises costs this quarter, which we had anticipated earlier.
We have also continued to make some acceleration in the growth investments that we started making earlier this year, specifically with respect to our business in CLG as well as SNC. The net other income was at INR 103 million. This includes treasury income of INR 137 million and exceptional expense of INR 41 million related to various strategic initiatives that we have at play at this time. The tax was at INR 96 million for the quarter. The profit after tax was at INR 396 million, resulting in an EPS of 2.9. In the corporate learning business, the revenue was at INR 3,004 million. It was up 10% year-on-year. As shared and as pointed out by Vijay earlier, the revenue is down 4% QoQ.
In constant currency terms, it was up 5% year-on-year and down 5% QoQ. The EBITDA was at INR 535 million. The EBITDA margin was at 18%. The EBITDA was impacted by, on a quarter-on-quarter basis, on account of the planned wage hike during the quarter, as well as the lower revenue during the quarter, including the steeper than expected compression in one of the large customers. During the second quarter, NIIT hosted its flagship annual customer event, Confluence 2022 in Miami in the United States. NIIT could not hold this event in person over the last two years due to the pandemic.
It was heartening to note that the participation in the event was robust and the feedback very, very encouraging, and it seemed like a strong endorsement of the trust that customers have in NIIT. The investments in sales and marketing continue to drive new logo addition in Q2. NIIT. The CLG business of NIIT signed three new customers as MTS customers, and this includes one global aviation company, one IT/ITES company, and a large multilateral aid agency. In addition, the company renewed three contracts that had come up for renewal, thereby maintaining its 100% renewal record. We see a robust pipeline for conversion in Q3 and Q4, and see strong velocity of customer adds as we look ahead.
The MTS customer tally at the end of this quarter stands at 70, and the revenue visibility at the end of the quarter is at $305 million. We continue to see a healthy pipeline, as I mentioned earlier, as well as opportunity for expansion of wallet share with our existing customers. The sharp increase in volatility in the macro environment last quarter caused a steeper than anticipated compression in customer spends. We expect the pace of consumption to pick up as the uncertainty starts to subside. Despite the near-term volatility in spends, I think it is prudent to continue to invest in long-term growth of the company, given the significant potential in front of us. We hope these investments, or actually we expect these investments would help us increase our wallet share, as well as penetrate new markets and customer segments as we look ahead.
In our Skills and Careers business, the revenue for the quarter was INR 918 million. It was up 19% on a YoY basis. On an organic basis, the growth was 29% year-on-year, driven by growth in the flagship StackRoute and TPaaS products. The StackRoute and TPaaS products grew 35% year-on-year and contributed 40% to the SNC revenue in the second quarter. The EBITDA was INR 25 million, as compared to a loss of INR 47 million in the previous quarter. The business has emerged as a leading digital learning business 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 in learning.
This business provides training in emerging digital technologies, a segment that is continuing to see a significant war for talent, as well as high attrition levels. We continue to see a multi-year cycle for growth and demand for skilled talent in across our customers, which include global system integrators, global capability centers, and leading enterprises in India. Our B2C go-to-market is ramping up and helping our learners achieve strong career outcomes. Learners who join us have been getting offers that are almost twice the average starting salary for on-campus hires, with recent starting offers as high as INR 10.5 lakhs per year. In terms of balance sheet, our balance sheet metrics continue to be strong. DSOs continue to improve and are now at 46 days, versus 49 days as of last quarter and 57 days a year ago.
The net cash position improved marginally to 12,597 million INR, versus 12,593 million INR previous quarter. This includes the impact of annual variable compensation that gets paid in the second quarter. As of September 30, 2022, we have 3,299 NIITians within NIIT, and this was up 59% on a quarter-over-quarter basis. During the quarter, NIIT entered into a definitive agreement with KNOLSKAPE Solutions Pte. Ltd. for an investment of $2 million. This investment enables NIIT to bring more value to customers in the area of leadership, professional, and digital skills. In an increasingly hybrid work environment, KNOLSKAPE platform and portfolio of AI-driven immersive simulations, coupled with NIIT managed services approach, will help organizations prepare for a digital-first future-ready workforce. The investment is expected to close post completion of certain CPs.
While the environment remains dynamic, the company expects its CLG business to get back to quarter-on-quarter growth starting Q3, and achieve high single digits year-on-year growth for FY 2023. Margins are expected to stay at the Q2 levels in the second half of the year. For the full year, we expect the margins to be a shade below 20% for the year. On the other hand, for the SNC business, it remains on track, and we retain our expectation of growth of 50% on a year-on-year basis for FY 2023. During the quarter, NIIT continued to win new customers in line with expectations, along with maintaining a 100% track record. This points to the strong competitive positioning and the trust that the company enjoys with its customers, as well as strengthening of the business for the medium to long term.
Despite the near-term volatility in training consumption, the strategy and long-term opportunity of its business remains intact. NIIT continues to see a large market opportunity in both its businesses and is committed to deployment of cash, as Vijay pointed out, use the strength of its balance sheet to make further investments, profitable growth and new capabilities. Summarizing, we continue to see large opportunity and a strong multiyear growth potential for both our businesses. A strong competitive position and the right to win in markets we operate in. A near-term uncertainty has had a short term impact on our financials. We expect growth in CLG to pick up in H2. The growth in SNC business remains on track.
We expect to remain on track to deliver approximate or a margin of a shade below 20% for CLG and a small EBITDA profit for the SNC business for the whole year. Thank you. Vijay, back to you for a brief on the reorganization.
Sure. Okay, thanks, Sapnesh. Very quick brief on the reorganization. As mentioned in the last time, we had filed an application with NCLT, and NCLT also had the first motion hearing. Based on that, the shareholder and creditors meeting is scheduled for November fifteenth, for which I think the invites were sent in October. The e-voting will open from November 11 to 14 .
The project is on schedule, and we do hope that based on this, the second motion hearing will be filed and therefore in one of the quarters next year, in the next financial year, we hope to complete the reorganization exercise, which is a demerger of NIIT Limited into NIIT Limited and NIIT Learning Systems Limited. I'll stop here. If there are further questions, we'll be very happy to answer.
Thank you very much.
Other than that, we have covered all the ground. Now we will open it for Q&A.
Thank you very much.
Operator.
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. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Baidik Sarkar from Unifi Capital. Please go ahead.
Sapnesh, hi. You did allude to this in your opening remarks, with regard to the rundown of the CLG business. The understanding was that, this ought to come back in Q3. You know, if you just flesh out the answer a little bit more. Are we on full track for recovery? Secondly, we've been given to understand in the past that, H2 sees impact of a budget flush and, you know, in terms of the client end. Keeping that flush in perspective as well, how are we treating H2?
There was a part of your question which I couldn't completely figure out. Let me try to restate what you said and see if that's what you were looking for. I think what you wanted to know was how is H2 looking? In light of the budget flush that we've had in the past, specifically in Q3 most years, is H2 looking any better than H1? Is that?
That's right.
the question?
Yes, please. Go ahead.
Okay. While there is a budget flush at the end of December with most of our customers, specifically most customers in North America. This year, given the uncertainty in the environment, we are not sure whether organizations will be allowed to spend their budgets or will they be asked to return their budgets. From an overall perspective, I do think we will see growth on a quarter-on-quarter basis as compared to where we ended in Q2, both for Q3 as well as QoQ growth as we get into Q4. I'm not sure if the impact of the typical budget flush will be as significant as we have seen in the past.
Sure. Secondly, you know, our order book has now been flat for two quarters. Is there visibility of acceleration here? Importantly, is this impact of the steep run-up in order book that we witnessed in H2 of last year, is that already reflected in our reported revenues or is there a possibility of some amount of scale-up from last year's order books scale-up?
You are right, our visibility has been a little flat over the last couple of quarters. Part of it is because a lot of our renewals are pegged in our Q3, which is October, November, December, and sometimes some of them slip into January. That's one. Given that we have a number of renewals on deck, and we expect to close those renewals in Q3. You'll see that adding to the visibility. The second is, like I pointed out, we have a very healthy and strong pipeline, and we expect to close a number of contracts in our Q3, which should also add to the visibility.
Sure. On the domestic Skills & Careers business, SNC, you know, when placements and sectors have grown YoY, what explains the flat trajectory in Q3? Because the domestic hiring environment in India is still very robust, right? If you could just throw some color at that. Importantly, we had a certain expectation of acceleration here in the years to come, precisely 2024, 2025. Is there reason to believe that that revenue acceleration is still on track, or has there been a change in trajectory there? Should that acceleration happen, if so, I do expect the beginning of, you know, mid-level kind of margin starting FY 2024 in the domestic SNC business.
The India business specifically is a seasonal business, so the best way to look at it is on a YoY basis rather than a QoQ basis. We expect that the India business will return to growth of upwards of 40%-50% for the year and continue to be robust in the coming years. From a hiring trend perspective, it is seasonal and therefore the onboarding part of our business continues to be seasonal, and it reflects the growth or the QoQ growth reflects that. I think you had a second question about the likely profitability of this business as we go into the next year.
As well as acceleration in revenues in 2024, 2025.
We expect the revenues to be on a strong trajectory going forward. We think that the India business has long-term strength, and we are well-positioned to capture a lot of that optimism, specifically as we look at the shortage of skills, the high attrition rates and so on and so forth. The fact that we are well-positioned not just in the career seeker space but also in the working professional space. We are continuing to make significant investments in our digital B2C go-to-market, which should also start to add to the growth potential.
In terms of profitability, like I pointed out, this year is likely to be close to breakeven or a little bit of profit for the SNC business, but we expect that is likely to grow in the next year and from there on. Eventually, this business should become a mid-teens to 20% profit business.
Are we close to hiring, you know, the requisite leadership for this business, or is that a call you'll take later on closer to the?
Like I pointed out, we have a very strong operating management team, and we are considering all options from a leadership perspective, both internal and external.
Thanks, Sapnesh Lalla. My best wishes.
Thank you.
Thank you. Participants, to ask a question you may press star then one. The next question is from the line of Shraddha from Amsec. Please go ahead.
Yeah, hi. Sapnesh, one question. You're talking about Q3 margins in CLG being flattish, and this is despite the fact that the salary hike impact is already factored into Q2 numbers. We also saw good decline. We were just expecting growth in Q3.
Ma'am, the audio is slightly muffled. Please use the handset mode.
Yeah. Is this better?
A little better.
Yes.
Yeah. Yeah, it is.
I was talking about expectations of margins in Q3 for CLG business. Why are we expecting flattish margins despite the fact that salary hike impact is already baked into Q2 numbers? We are also talking of QoQ growth. Shouldn't margins look upward in Q3?
I don't get paid salaries in Q2 alone. I get paid salaries in Q3 also. That having been said, the softness in the macro environment and the investments that we have to create growth in spite of the softness in the macro environment will keep the margins a little flat for the next couple of quarters. After that, we should start seeing growth in margins as well.
Right. Can you highlight the kind of investments of close to INR 41 million that we did? What are those strategic initiatives that we undertook? What are the kind of results you are looking at from these initiatives?
Like we pointed out, we have a mandate to make inorganic investments. You saw some of those come through. We have a basket of such initiatives going on, and some of those initiatives are requiring external help against which we are asking.
Right. Sir, in your Skills and Careers segment, if I look at.
Let you know, upon maturity, of these initiatives.
Sorry, I didn't get you.
I was saying that, as soon as some of these initiatives come close to maturity, of course, you will get to know.
Sure. Sir, on your Skills & Careers business segment, if I look at the revenue excluding RPS, that number shows decline both from a QoQ and a YoY perspective. Any comments there?
I think it showed a growth of 29% from an SNC organic business perspective. That is on a higher base. I think that business continues to have strong potential. Like I had pointed out, we are investing, continuing to invest in NIIT digital go-to-market, and we expect these investments to start creating growth as we look ahead.
Right. Sure. That's it from my side. Thanks.
Thank you.
Thank you. The next question is from the line of Siddharth Basi, an individual investor. Please go ahead.
Hi. Good afternoon. Firstly, congratulations on the numbers. One was a little worried when one read the mid-quarter update. I think in a tough business environment, we've done a good job, and I'm rather pleased with our management that, you know, we're able to wade through such difficult times with such finesse. Firstly, congratulations on that. My first-
Well, thank you. I appreciate your kind words.
Sure. My first question would be with regard to your. There's a slight dichotomy that I'm not able to understand. Whenever the Federal Reserve chairman speaks, he talks about a tight labor market. He talks about the fact that there are enough people still employed in the labor force. The hiring is still strong. In such an environment then, shouldn't our growth actually be higher because while more people are being onboarded in the U.S. economy in jobs, therefore they would still need training. Why is it that we are feeling a sort of lack of growth in the CLG side of things? Because the U.S., for all intents and purposes, the labor market in the U.S. is very tight and there are more and more job rotations happening on a week-on-week, Q-on-Q basis.
I understand RECO is the one-off event which will impact its margins. I'm talking generically in terms of the U.S., job market. Then I'll just ask a few questions after this one, please.
Thanks. I think it's a very good question. I think there are two forces that are at play, but each is playing off of other. While the labor market is very tight, but that specifically the tightness in the labor market means wages are higher and therefore inflation is higher, and therefore the Federal Reserve is trying to pull the economy back by raising the interest rates. What that is doing is telling most large organizations that recession is just around the corner. Now, for recession to hit, the unemployment rate will have to move from the current unemployment rate of about 3.5-3.6% to about 5%.
Powell has said that he would continue to tighten the supply of money till there is control on inflation, because inflation going out of control could mean much worse for the economy as compared to a recession. Most corporations are expecting a recession. When they are expecting a recession, that's creating uncertainty, and therefore they are curtailing expenses which are discretionary in nature as well as capital expenses. That's what causing the expense on training to be compressed. I know I tried to connect a number of economic factors, but I hope I made some sense.
Right. Right. My next question is, like yesterday, everyone saw the numbers of Meta, Google, Microsoft, Amazon, their prices collapsing as well in the markets in the U.S. If these companies are already planning for recession, would there be a certain sanctity to the guidance that you're providing now that even if recession hits, we at NIIT should be able to hold these margins and these revenue growth, even if there is a recession in the U.S.? Because as you said, we're already feeling the impact of the recession because it's already there in the company's mind. Once the news comes out, it almost becomes like a buy the rumor, sell the news sort of a thing.
Is there sanctity to our guidance then that, you know, even if the US does go into recession, we should be able to maintain the EBITDA and CLG right now and our SNC growth? Then would they be subject to downward revision again?
No, I don't think anyone can guarantee anything. What we are seeing, like I pointed out, we just had our annual customer event. We are seeing a very strong endorsement from all of our customers and their desire to continue to work with us. Nobody can guarantee how much training they will consume, but what they are saying is they will continue to work with us. That's one. Second, and currently, their training consumption, which had gone up a little bit in the previous fiscal year, has gone back down to COVID levels. We expect that the uncertainty ahead of us is not a hell of a lot more than the uncertainty that was there during COVID. We expect that the consumption would be approximately what it was during the COVID time.
It will take a little bit of time to get back to pre-COVID levels, but it should not drop below the COVID levels. That's one. Second, during these last two years, we've had a high velocity in customer acquisition, and we are expecting to continue to increase that, velocity of customer acquisition. That should create a growth momentum for us, that while the customers are going to spend less than we had expected them to spend, but they will still spend at, say, COVID levels and therefore, will result in the step function growth. That's the reasons that we have used to, come up with our numbers. Again, like I pointed out, these are projections, and, the fact that they are projections means that they are based on a reasonably robust set of criteria.
Of course, in an uncertain market, the criteria can change.
Mm-hmm. My third question would now be towards the India business, since the Indian economy is doing decently well. Are we seeing further acceleration even, say, with respect to our acquisitions? Like, for example, we had the EdTech summit at the NIIT University, and we had some great speakers speak. There were two things I wanted to ask. Mr. Pawar there mentioned the 80/20 rule, where he was talking about 80% gross margin and 20% cost on advertising and other expenses. Are acquisitions gonna be like that, or are we even willing to do some companies which are loss-making at the moment, but we are still looking at them from the point of view of acquisition? Secondly, Mr. Sanjeev Bikhchandani was also there, and he's been known to acquire a lot of things. Now, I'm assuming there's a close relationship with management.
Are we therefore also looking at just, you know, putting in money like a sort of a private equity EdTech firm where we, you know, using our network, can accelerate these companies which we invest in, thereby getting higher valuations and selling them off? Having a double play of our core business plus maybe some EdTech acquisitions using this sort of a mindset in mind where we're looking to accelerate using our network and thereby making shareholder value.
I think you said many things that could formulate a reasonably complex strategy for acquisitions for a company our size. What I would say to you is that our inorganic strategy is focused around profitable growth. We will invest in organizations that are and have potential for profitable growth, both in the United States as well as in India.
Sir, is there any acquisition which is, like, at the moment, which we're looking to close within, say, this quarter or the next? Or that would be hard to comment on. Secondly, sir, what is the impact of dollar appreciation on our EBITDA? Because, see, dollar's gone up to 82. In this quarter, are we seeing tailwinds to our EBITDA margins? Because it's already one month, so this quarter is also over. How are you seeing that impact?
I think you had two questions. One was for me to comment on acquisitions that might happen with respect to timing. I certainly want to stay out of jail, so I will let you know about it once it's happened.
Great.
You had a second question with respect to impact of foreign exchange. We've had some impact of foreign exchange on our revenues. We had an impact of 4% of foreign exchange on our revenues. However, given that euro and GBP have been down, the impact on profitability has not been very high.
Thank you so much, sir. Thank you so much. All the best for the future, and hopefully we'll be again having a conversation in globally better times. Thank you so much.
Sounds good. Thank you. Again, thanks for your kind words.
Thank you. The next question is from the line of Darshil Jhaveri from Crown Capital. Please go ahead.
Hello. Thank you for taking my question. Most of my questions have been answered, and the management has a wonderful job at answering all the detailed questions. My question was a bit more about our long-term approach. As I see that in these uncertain times, we are investing and, you know, making a very good foundational base. What do we see? What is our aim for maybe in the next three years, FY 2025 or something that, you know, we can share so that, you know, we can get a good flavor of our long-term? Because I think we'll be able to accelerate a lot of good growth when the economic environment is in our favor.
You're very right. I think two quarters ago, we created a goal for ourselves for the CLG business to reach $450 million by FY 2027. A five-year plan for the SNC business to hit INR 1,200 crores. We are staying true to that plan. While I know that the soft macroeconomic situation is not going to allow us to achieve as much organically as we had expected, but the strong balance sheet that we have, we will use that balance sheet strength to be able to achieve that.
Yeah. Okay. Thank you so much. That answers my question. All the best for the future. Looking forward to great results.
Thank you.
Thank you.
In the interest of time, we are at 4:10 P.M., and I think there are a number of people asking questions. Just if you can request everybody to keep their questions brief and maybe ask them two questions at a time, and we can have another round.
Thank you. Ladies and gentlemen, please limit your questions to two per participant. Should you have a follow-up question, we would request you to rejoin the question queue. We'll take the next question from the line of Nemish Shah from Emkay Investment Managers. Please go ahead.
Thanks for the opportunity. I just want to understand the sequential dip in the CLG business that we have seen. Will that be primarily attributable to the large client that you called out in your opening remarks or?
Mostly, right. That's exactly how we are guided. There is some compression with our existing customers also. It's a combination of a significant compression in a large customer and some compression with our existing customers owing to the current economic situation.
X of that large customer also there would have been some decline on a sequential basis. Is that understanding correct?
No, I think like I pointed out, we saw compression in some of our existing customers. We saw significant compression in one customer, as we had pointed out. That's really the core to the QoQ decline.
Okay. I just wanted to understand the guidance that the sequential QoQ growth that you guided for in the coming two quarters. Does that include any inorganic acquisition as well, or is it from the current business?
No, this is organic.
Okay. Yeah, that's it from my side. Thank you.
Thank you.
Thank you.
The next question is from the line of Sameer Dosani from ICICI Prudential AMC. Please go ahead.
Thanks for the opportunity. Just one thing. The client addition has been really strong for us. Is there some metrics or, you know, if you can share extent of the ramp down of the large account, how the growth has been and, I mean, the majority of last 12 months addition in the customers. If you can share something about how these clients will ramp up and if there is some slowness in the ramp up of this account given the macroeconomic situation. Thanks.
I think like we pointed out, we've had strong new contract additions. The velocity is good. We've been adding about 3 new customers each quarter. Like I pointed out, answering the question of a previous caller, while we had significant compression with one of our customers, we did see a number of our other customers hitting COVID levels, which had improved in the previous year. A number of customers had increased their consumption in FY 2022, but they are trending towards COVID levels of training consumption given the uncertainty and deferment and avoidance with respect to discretionary expenses. The new customers that we have added are starting to contribute. It often takes about five to six months for a new customer to get to a material level.
For example, currently we have three customers who are in transition, and we expect to see those customers to start contributing to our top line and bottom line starting Q3.
Understood. Two follow-ups here. One is there some slowness in the ramp up of the new customers? That's one, and second, I think for now that's it. Thanks.
I won't say there is a slowness in ramping up. Like I pointed out, it often takes three-six months for a customer to transition their work to a NIIT, and I think we are seeing that cycle.
The other follow-up was, I mean, obviously we are confident that a ramp down from the COVID levels won't happen, right? That's our understanding, right? Is there some risk to that assumption of ours? How do you see that?
It's hard to tell. COVID was unprecedented and what at least I'm able to see doesn't seem to be unprecedented. COVID saw unemployment levels become very significant. We are not seeing that. I think while there is uncertainty we don't see the environment anywhere close to being as similar to COVID levels.
There can be some more pressure now, given I mean, the situation is evolving, right? Do we expect this to happen? We already have seen volumes going down for some of the customers.
I didn't follow your question.
I'm saying, FY 2022 has seen some recovery in terms of volume from COVID. Now all these customers are again heading back to the COVID levels. They are reducing volumes, right? Do you think there's more to come in terms of, you know, decrease of volume aspect?
No, like I pointed out, see, when people see uncertainty, they pull back, but when they see continued similar situation, they'll start releasing because they have to run their business as well. We are seeing a little bit of jerkiness in response, which is human. As organizations start looking at the future and say, "Okay, this is reality, what are we gonna do?" They will start increasing their spend on training.
Okay. That's it from my side. All the best. Thanks.
Thank you.
Thank you. Participants, to ask a question, you may press star then one. The next question is from the line of Aman Shah from GTA Investments. Please go ahead.
Hi, sir. Since this pertains to our acquisition of KNOLSKAPE that we did, it appears like we will be acquiring 5.88% in there. What is our nature of investment in this company? It does not look to be strategic given the small stake that will help post-conversion. One is it more of a financial investment or how are we going to use this as a synergistic way to our growth? Second is on the consideration that we gave for this company. Based on trailing revenue, it appears like 4x or 7x of sales multiple that we would have paid.
Is there like a fast growth rate that we are seeing on sales that that's why we have this consideration paid up?
I would want to point out first that it's not an acquisition. It is a strategic investment. Second, it is a fast growth company. Third, their products have synergy with the way our customers consume training. They are simulation-oriented. It gives us the ability to bring their portfolio of products and combine that portfolio with our managed services way of offering training in a managed training services form. It is synergistic, and that's the reason for the investment.
Okay. Yeah. Sir, the second was on this MTS customer. Last year that we had 16 customer addition to our MTS 10. H1 we already have around seven customer addition. Is there some visibility of the we will have a growth in the total addition of MTS customers in FY 2023? Would you think of some visibility is there?
Yeah. We have a very strong pipeline, and I think, we will be ahead of the numbers that we did in the previous year.
Okay. Sure, sir. Thank you.
Thank you.
Thank you. Participants, to ask a question, you may press star then one. Reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Jay Daniel from Entropy Advisors. Please go ahead.
Yeah. This is more of a bookkeeping question. You have 3,300 staff. What would be the approximate breakup of the staff, I mean, in terms of what kind of work they're doing?
We are a training company, so our staff includes people who create training materials, people who deliver training, which is instructors, and people who administer and manage training programs. That's really a large majority of our staff.
Sales and marketing would be?
Yeah. I mean, sales and marketing is a much smaller percentage, but the large bulk of our staff are around creation of training materials, delivering of training, and management of large-scale training.
Okay. Maybe because I had, your physical infrastructure has closed down. I was just wondering why, I mean, why do you require so much, so many people then, sir?
Because we create and deliver a lot of trainings. We are among the top five provider of managed training services in the world.
Okay. This project retainers, if I were to look at your books, professional and technical outsourcing expenses are around INR 75 crores, and they've gone up quite substantially on a year-on-year basis. Is this completely variable in nature or how do we look at these costs?
Yeah, these are variable in nature.
Because it's gone up more than revenue. That's why, I mean, your revenue growth has not been to the extent of increase in this cost.
Yeah. We have increased variability.
Okay, thanks.
Thank you. The next question is from the line of Sameer Dosani from ICICI Prudential AMC. Please go ahead.
Yeah, thanks for the follow-up. Just one clarification. We have already pointed out that our CLG business is more towards the regulatory side of the thing. Hiring or hiring freeze by a lot of these companies globally, is that impacting us? Will that impact us or how should we look at it?
Here's how I would say it. About 35% of our business comes from technology and telecom companies. The hiring freezes are predominantly, or at least what we have heard so far, are predominantly from the tech sector in the United States. A lot of what we do is to teach technical skills to employees of tech companies or telecom companies. If they hire less, then it does impact consumption of training.
Okay. I mean, I don't know whether you can do it or not, but can you discuss I mean, if you can just break down what part would be the reskilling part and what would be the hiring part. Is there something that we should look or is it like overall it will impact on an overall level?
I think it impacts on an overall level. Whenever someone joins a company, they get onboarded. So that's the first training that they get. Then, I mean, the more employees you have, the more training you will consume.
Right. Thanks, sir. Overall, I think there's a trend of moving from customized training to off-the-shelf training. If you can speak about how that trend is playing out, and will that trend actually accelerate or decelerate during uncertain macro? If you can just throw some light around that. Thanks.
Actually, I would say the trend in high-performing organizations is the reverse of what you just said. The large high-performance companies try to consume training that is designed for them because that's significantly more efficient and effective for them. Most of our customers are of the size that they can afford to go to customized training programs given their size and scale. We are seeing a trend amongst high-performing organizations who are consuming more customized training programs. We think that that trend is likely to accelerate and become adopted more widely.
Understood. Great to hear that. Sir, lastly, if you can just throw some light on competition, because the number of clients that we are acquiring, and I assume these are big clients, right? 14,000 clients, 15,000 clients. For a company of our size, how is the competition faring? Is there some struggle? Are they struggling with the volatility in the business? How are we winning businesses? Because the number of client addition that you've done is very good.
At least my read of competition is that we are ahead of the pack.
Okay. Okay.
Of the other competition we know, we are ahead of the pack. Our win rates also, number of times we bid and number of times we win, I think that has increased.
Great to hear that, sir. Thanks. Thank you, [much].
Thank you.
Thank you.
The next question is from the line of Rahul Jain from Dolat Capital. Please go ahead.
Yeah. Is my line audible?
Yes, sir.
Yes. Yeah. Thank you for the opportunity. Just wanted to understand, you know, the way our guidance and performance has played out over last several quarters. We were kind of very conservative, you know, in the previous fiscal while we continued to do better both on growth and margin. Now it's kind of with worsening macro moving the other direction where we are cutting back to back in terms of guidance for growth and margin. Now when we read your, you know, outlook at this point, it's kind of becoming a little confusion in the sense that we were very conservative and now it seems like we were underestimating the pain. In that light, you know, what should we understand?
Is it like now we are far more conservative now in our thought process given that macros are very, very uncertain? Or this is just simple plain vanilla, what is the best visibility you have right now is what you are saying?
Look, our goal is to be as transparent as we can be with you. Our goal is not to misguide you. You should look at it as a projection that we see is viable.
Right. In terms of the growth and profitability of the CLG business, is there any way that you could say that, okay, now with the kind of a business growth and the kind of a cost base, and also the mix of virtual versus on-site delivery of the training, what are the ideal growth rate or profitability that one should anticipate in this business on a more structural basis, even if you give a band, I think that will also help.
See, I think from a midterm, long-term perspective, this business is a 20/20 business, like I've said. Of course there is uncertainty in the market, and that's creating uncertainty in our forecast and a little bit of choppiness. I think from an overall perspective, this is a 20/20 business. I've said this many times. Even when we were growing at 35%, I said the same thing. From a long-term perspective, it is a 20/20 business.
Okay. Basically a three-five-year view here, this is 20/20, is an achievable number for this kind of a business. Just quickly, if I could squeeze in one more. In terms of the new customer acquisition, which has been quite consistent for us while we are seeing some churn rate in existing customers in terms of the consumption of the training. Is there any way you are reading that in terms of your net new and existing new deal and also some net like what is the behavior reading that you can take?
Is it like people want to outsource, and those are the customers that are giving you this new opportunity, while existing customers, they may have pressure at their own business level is where we are seeing the pain? Is there any clear readout out of the customer behavior based on their interaction and also in terms of what kind of business they are asking you for?
Look, I've been in this business for the last three recessions, and every time there is a recession, the outsourcing trend improves. We've seen it the last three times, and we expect to see the same thing. Now, this time around our velocity of customer acquisition actually has been high through the recession, and I expect it to continue to be high because we have continuously made accelerating investments or disproportionate investments in sales and marketing, which we will continue to make. Second, our position in the market has improved successively as well. We expect to continue to increase the velocity of customer acquisition. Like you pointed out, I would echo what you said, that as organizations start seeing a recessionary trend, they pull out.
They go towards outsourcing as a method of transforming themselves.
Right. We can potentially see a pent-up like we just saw just after the COVID, that is a possibility given the situation we are seeing.
Yeah. We see clear outsourcing activity.
Sure. Thank you so much, and best of luck for the rest of the year.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.
Okay. If there are no more questions, thank you very much for your time and also all the questions that you asked. As I mentioned before, each of your questions give us an opportunity to think. These are very educative sessions for us. Certainly we take your suggestions as well as comments very seriously. Sapnesh Lalla alluded to that, said it clearly, I'm repeating it. Our purpose is to give you a lay of the land as we see it. There are uncertainties in the environment. It is that uncertainty for us to be able to say what we want to say based on facts and figures that are available to us. Can these facts and figures change over a period of time? They can. Nothing. We will keep you informed.
We do have the benefit of getting to understand it a little bit faster than you get to know. To that extent, we will remain very transparent with you. At this point of time, we do believe that quarter-over-quarter growth will be possible in CLG as we go forward, and SNC is on a strong track. Of course, we continue to look for inorganic opportunities. We have put some substantially more effort in recent times as well, and hopefully those will yield some results. On that note, I thank you once again, and we look forward to speaking to you either one-on-one or on other fora. Thank you.
Thank you. Ladies and gentlemen, on behalf of NIIT Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.