Ladies and gentlemen, good day and welcome to the NIIT Limited Q2 FY 2027 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, Vice Chairman and Managing Director, NIIT Limited. Thank you, and over to you, sir.
Thank you. Good evening and welcome to NIIT Limited's quarter two FY 2027 earnings call. First of all, I thank you for your interest in NIIT and for joining the call today. It's a busy results season, and for you to have joined this call versus many other opportunities you had, we truly appreciate. I'm looking forward to a very active participation from you and also your questions, which as usual, have been extremely educative and help us sharpen our strategy. Before I get into our quarter two financial performance, let me introduce you all to our new CEO, Anish Sarkar, who took over from Pankaj earlier this month. Before joining NIIT, Anish was Managing Director India and Director of India, Philippines, and Indonesia cluster at Pluxee, formerly Sodexo BRS. Before that, he was CEO of Mercer India.
In both roles, he delivered strong revenue growth and portfolio expansion, including through strategic acquisitions. Earlier than that, he spent several years at Capgemini Group in senior leadership roles across management consulting, sales, and technology transformation. Anish is an alumnus of IIT Kharagpur, and IIM Calcutta. Before I get into the results, I'll invite Anish to say a few words. Anish, over to you.
Thank you, Vijay, and good afternoon, good evening to everyone on the call. First, I must say that I'm both delighted and privileged to be here with you all and to have joined NIIT at this very pivotal point in the journey of this great organization. It's been just about a couple of weeks, actually, slightly less for me so far. And I have during this time, spent time with our leadership team, our sales and delivery teams to understand more about our business, our market, our right to win and differentiators, et cetera, and a few clients already so far. Now a few things are quite clear to me. Firstly, the strength of the brand, of the NIIT brand. It is, of course, an institution. Clients trust us, and I'm quite amazed to see that many have worked with us for years, if not decades.
And that depth of relationship is actually rare, and it's a great asset for us. Secondly, the quality of our people. Our deep skilling methodology, which has consistently been delivering outcomes for learners and clients for several decades. Third, the size of the opportunity in front of us. I think AI is reshaping how every enterprise works, and that is driving demand for new skills at every level. In fact, it is driving a degree of talent transformation, which is probably unprecedented in a very long while. We are already seeing this in the rapid growth of our AI programs and the early traction of our GenAI sales programs as well.
Over the coming weeks, I will be working further with our leadership team and the larger teams to work on a more detailed review of our portfolio, our market segments that we operate in, our go-to-market strategy, and our cost and operation structure as well, with a specific focus also on where AI can create the most value for our clients and for NIIT. We are, by the way, at the beginning of our planning cycle for the year, so it's a good time for me to also reflect on the future and our plan and see how this can dovetail into the overall planning exercise for the organization. With that, I will stop. Thank you, and I look forward to engaging with all of you today and in the quarters to come. Back to you.
Thanks, Anish. Just to mention here that I'm joined here today by the whole management team at the corporate headquarters. I have the chairman, Mr. Pawar. I also have Sapnesh Lalla, the former CEO, as well as now a non-executive director on the board. As well as the CFO, Sanjeev Bansal. I also have Bimaljeet Singh Bhasin, who's recently joined us as Chief Growth Officer, for which we had sent out a separate communication. Then Kapil Saurabh from M&A and Investor Relations, and Unmesh, who is the Business Finance Head. We will all seek to answer all the questions that you have. What I would start is by taking you through the performance in quarter two.
I also want to talk about the fact that Anish has come in at a very interesting time as we will go through the results, and maybe I'll cover that in the end as to how his past experience will be extremely useful in shaping our future strategy. It's a timely intervention or timely joining that he has. I think we are looking for exciting times together. So let's dive into our quarter two numbers. Revenue in quarter two of FY 2027 was INR 982 million, which was down 6% year-on-year, but up 3% quarter-on-quarter. For H1 FY 2027, revenue was up to INR 1.939 billion, which is up 3% YoY. This is lower than the projections that we had shared with you. In quarter one, we were on the projection, in fact, slightly ahead.
In quarter two, there have been setbacks, and I will be talking to you about that. The quarter two performance was driven by a quarter-on-quarter compression of consumption by GSI clients, specifically in a quarter where spending is traditionally higher. If you see the pattern over the last many quarters, and especially the quarter one and quarter two of every financial year, we have a significant spend and consumption of training by GSIs. Specifically, consumption from four of our largest clients, GSI clients, alone was down by as high as INR 100 million YoY in quarter two. This was contrary to a significant growth that we had seen in quarter one.
This compression in spend, in a certain sense, was secular across some of these large clients, and there are many theories to it, but one of them could be that they, A, had lower numbers of people onboarding, but more significantly, they had significant resources in-house, and under the cost-cutting pressures, they felt that it may be easier to insource than to spend this extra money outside. However, all this is a consideration and cannot be considered as the only contributor. This is a moving and dynamic situation, and I think we will see how it plays out. But if you exclude the impact of these GSIs, the rest of the business actually grew meaningfully in quarter two. Now if we look at the revenue mix by go-to-market. Enterprise revenue was INR 625 million, down 11% year-on-year.
While GSIs were impacted, the silver lining is the performance by our enterprise BFSI and other programs, which is BIPS, the BFSI and Industry Performance Program. In quarter two, BIPS achieved an all-time high revenue of INR 200 million and a strong growth of 17% YoY at 66% quarter-on-quarter. Frankly, we should have seen, going by the past quarters' performance of Enterprise Tech, a similar growth in that, but that was not to happen. In the past, we have spoken about the investments we have been making in our sales team and our focused efforts to expand our client base beyond the top four private banks to cover a broader set of financial services and agencies like wealth management, NBFCs, and insurance. These efforts are now bearing fruit, as was visible in the BIPS results.
During the quarter, NIIT partnered with two of the largest banks to establish dedicated wealth and sales academies aimed at upskilling wealth relationship managers and sales associates. The initiative focus on strengthening role-specific capabilities and enhancing frontline effectiveness using immersive AI simulations and AI coaches. Consumer revenue, on the other hand, was INR 357 million, up 3% year-on-year. Growth was uniform across technology and BFSI portfolio. Our direct-to-college strategy has created a pipeline of job-ready talent, which university clients are increasingly valuing. Enterprise versus consumer revenue mix was 64: 36 in quarter two, which was 67: 33, which obviously means that the enterprise part has increased in value. From a product lens, revenue from technology programs was INR 661 million, down 13% YoY, reflecting compression in GSIs. On the other hand, revenue from BIPS was INR 321 million, up 11% YoY, driven by strong enterprise demand.
Order intake in Q2 was INR 1.301 billion. We acquired 10 new logos in quarter two. This comprised six in technology sector, three new higher education institutions, and four new BIPS clients and logos. I am also happy to share with you that we have been selected as the learning transformation partner by one of the top banks in India, which is exploring new ways of talent onboarding and development. However, the impact of this will only be felt in future quarters as we get a sense of the size of that engagement, which is likely to be large, as well as the scope and the business model that will be followed. Just to give you a little more color on the financials, I will invite our CFO, Sanjeev Bansal, to give you an update on that. Sanjeev, over to you.
Thanks, Vijay. I will just take you through the financials. Despite impact of revenue decline, we were able to achieve an EBITDA ahead of our breakeven guidance. While revenue declined 6% YoY, our operating expenses declined 8%. That is driven by strong cost optimization measures, simplification, and productivity initiatives. While we continue to invest in GTM and new AI offerings. EBITDA for Q2 was INR 27 million, a margin of 2.7%, which is up from INR 13.5 million, which was reported in Q2 last year. Though it was- INR 14 million in Q1 of this year. For H1, EBITDA was INR 12.5 million compared with - INR 49 million in H1 of last year. Below EBITDA, depreciation was INR 103 million in Q2. Net other income was INR 65 million. That was comprising of treasury income of which INR 41 million.
Treasury income is down from INR 175 million, which we reported in Q1, and that is due to the mark-to-market impact of the rise in interest rates. Other miscellaneous income is at INR 30 million. So this other income has been offset by net finance cost of INR 3 million, an exceptional expense of INR 3.5 million because of the legal costs linked to a legacy tax matter that has now been concluded in favor of NIIT. This has resulted in a net loss of INR 22 million for the quarter, compared with the PAT of INR 14 million in Q2 of last year. EPS was negative at INR 0.16 for the quarter versus INR 0.10 in Q2 FY 2026. For H1, PAT was INR 59 million, and EPS was INR 0.43 . Now coming to balance sheet and cash flows.
Cash and cash equivalents remain strong at INR 6,889 million, underpinning our ability to invest through the cycle. CapEx was INR 44 million for the quarter versus INR 69 million in Q1 last year. DSO days is 63 days in Q2 FY 2027, which is up from 53 days in Q1. That is driven by a delay in certain collections which have been subsequently collected in Q1. Employee count at the end of Q2 was 816. This is down by 50 on Q-on-Q basis and 124 on YoY basis. This is an outcome of unregretted attrition and ongoing cost and resource optimization measures which have been taken across the organization. Back to Vijay.
I think from an understanding of financials, we have had a reduction in our cash balance to a small extent, and that in a certain sense is also deployed partly in working capital and partly in CapEx that got incurred. I would now like to provide an update on our AI initiatives. AI represents one of the most significant demand opportunities in front of us, and it is happening now and not in the future. AI is embedded in a large part of our portfolio. However, we have separated out the revenue which AI is directly contributing to, and that has grown from 9% last quarter to 12.4% this quarter, which is a significant investment or return on the investment that we have made in AI. There are many elements in which AI have been deployed, both for internal efficiencies as well as improving effectiveness of our customers.
I would like to just talk about one part, which is very significant, which is of AI coaches. We have now built a number of AI coaches, and two specifically that I want to mention are coaches that let salespeople practice real customer conversations with an AI and get coached in the moment. As an example, the wealth management sales coach serves bank relationship managers and wealth advisors. Whereas DILOS, our day in the life of a salesperson coach, serves sales teams in auto and consumer goods. Both these tools are now or both these coaches are now live at not one, but more than one customers and have contributed to a significant part of our customers' businesses as well as obviously a part to our revenues. In some of these cases, there are new business models which are emerging.
Therefore, amongst other things, it enables us to grow learner engagement beyond the classroom to their place of work and add non-linearity to our revenue. The AI coaches run as a subscription on top of the training fee, and they bring delivery content and LMS businesses along with them. So it is not only a one-time revenue, but it's a continuing revenue. It's very small in comparison to the overall thing, but that's a very positive trend that should help us in future. There are a number of other AI offerings that one could talk about. We did mention some of them in the recent conferences, so I will not touch upon them unless somebody wants to know more about them in the Q&A session.
Talking about future, one thing which is visible is GSIs are returning with more advanced requirements, but overall volumes are likely to remain under pressure for the next couple of quarters. The reason is all GSIs have a huge task of talent transformation. But what we see as a first step, what they have done, is control their expense, which they were spending outside, taking a stock of the situation, figuring out their talent transformation strategy, and then deciding to do what they would like to do in-house and what they would like to get done from others. This is a continuing task, but I think in the next two quarters, we don't think this will bear fruit to the extent that it should.
There are some green shoots where some of the GSIs have got back to us with their revised talent transformation strategy, and we've been able to contribute a bit to that. GSIs continue to represent a significant long-term opportunity. Many are still defining, as I mentioned, their strategy for their transformation. We are expecting that some will move faster than others, and we will see orders as we go along. I do not see an impact of that coming up in the next two quarters in a significant manner. Outside the GSI segment, new logos and new initiatives, and some of which I shared, have been gaining momentum. We did experience a growth even in the last quarter, and we do see that that growth will perhaps accelerate as we go forward in the coming quarters.
This is not to say that there is a great amount of turbulence in the market. AI is just one of the disrupting forces. There is economic uncertainty, there are rising interest rates, and there are many other moving parts, and the way strategies are changing. There is also the major cybersecurity threat, which is of late becoming visible in more ways than one. All these forces have to be considered. Amongst that, talent transformation remains a common theme. How and when will companies find it very important and urgent to spend that money will come on an individual company strategy point of view. Not having to depend on that, we are, at this point of time, looking at the rest of the year and going by the experience of this quarter, assuming that the revenue is likely to be broadly flat.
We will revisit this outlook next quarter because this is a dynamic situation. I think Anish, as he also gets his arms around the business and gets better sense, I think we will be able to get a better sense of situation when we meet one quarter later. Meanwhile, cost optimization measures are in place, and we expect a low single-digit EBITDA margin to continue for the year. Working on a positive EBITDA margin was a very important requirement which many of you stated as a going forward strategy, and we took a full note of that and had very aggressive cost optimization measures put in place. Given the turbulent times, we said we should conserve our capital and spend on only those strategic initiatives which are likely to deliver us good results.
Accordingly, I think our cost optimization efforts have borne fruit, and you can see them in the increased EBITDA. There are many green shoots in this business. AI revenue is growing. BIPS revenue is growing. However, if there are newer recruitment patterns which emerge, we should be wary of that and be ready with alternate solutions, which we are. Therefore, being in close touch with our customers is an important issue. As I mentioned, cost initiatives are in place and delivering results. GSIs continue to represent a large opportunity. They are reconfiguring their talent transformation, so their volumes are likely to be muted under pressure in the near term. We believe that we have a large opportunity because they all have a very strong growth agenda in terms of talent. GCCs are also battling cost pressure but present an unpenetrated opportunity.
University segment is growing because graduates need deep skilling, and iamneo solutions are very clearly differentiated and preferred by discerning universities. Lastly, Anish Sarkar, who has joined us as CEO, brings extensive experience across global GSIs. Understanding how a GSI works and how various levers work, I think his more than 15 years of experience in the technology sector or technology services sector, specifically with GSIs, will be extremely useful and will bring very clear insights. His significant experience as CEO of Mercer India will give us a very good understanding of what kind of talent transformation strategies have been used by companies in the past and how this might play out in the future. Lastly, his deep relationships with HR leaders through his last assignment, Pluxee, should give us inroads into how organizations are thinking about talent transformation at an individual level.
From there, derive our strategy set over the next 60 days, 90 days. I will pause right now and open the house for questions. After that, if there is a need, then we will summarize this session again. Over to you, operator. Please open it for questions.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, if you wish to ask a question, you may press star and one. Our first question comes from the line of Kashish Mehta with Dolat Capital. Please go ahead.
Hi. Thank you for taking my question. I have a couple of questions. I just wanted to start off with the trimming of headcount. We have been trimming our headcount for a couple of quarters now, and as the team mentioned, there has been some pressure from the clients regarding discretionary or the spending side. I just wanted to understand, is the trimming of headcounts more a visibility reflection of the demand scenario or it is the AI efficiency that the company itself is working on and then finding productivity benefits? On one side, they are sort of cutting down on the headcounts, but at the same time, they are compensating it by the AI efficiencies. I just wanted your color on that thing.
Okay. I am sure others would like to contribute to this, but my answer will be all of above. There are definitely AI efficiencies at work. Our whole development effort, we have seen significant gains to the tune of 50%+ in terms of working efficiencies. Given the fact that we are working at lower volumes right now, I think that efficiency benefit, we would have taken advantage of. Having said that, there are strategic resources that we would continue to invest in on strategic initiatives, where we would have actually increased headcount as well. The second was many of the initiatives that we had, which are very significantly impacted and positively impacted by using AI. For example, our own sales efficiencies. Our own sales efficiencies would increase substantially using the AI coach that we use internally as well as bots that we may have deployed.
Some of that will also be visible in the way the situation would have unfolded. Third is our back-office headcount, and that back-office headcount, which is on all the services functions, also would have gone through trimming and efficiencies. The overall G&A or expense that we had built was for a larger volume. What we are trying to do is variabilize to the extent possible, so that both indirect and G&A, we are able to work at better efficiencies. At the same time, not sacrificing on the future where significant investments are required. So impact of all that is visible in the headcount reductions that you have seen. This headcount reduction, will this continue at this level? I do not think so. Will there be trimming as we go forward? There will be as and when it is required.
At the same time, new investments will be made wherever they are required. Anybody else wants to contribute to this?
[inaudible], you come on in.
Right. I will just carry forward again. Sir, regarding our product mix, we see it has been modulating more towards BFSI side, the spread between tech and BFSI. Again, right now it is 67% and 33%, the mix. Where do we see this mix stabilizing, and what is the sort of demand action that is naturally obvious? You are seeing more demand from the BFSI side, but where do we see this thing stabilizing over maybe next few quarters, or this is the run rate that one should be looking forward to?
Well, if you see last year same time, we were at nearly 75:25. I think 77:23. No, sorry, 66:34. I think we have been typically about 2/3 in technology and 1/3 in It is not only BFSI, it is BFSI, other industry performances. The larger enterprises, industrial enterprises that we service. We do see a great growth potential there because they are all very eager to adopt AI. They are also finding AI and basic AI training is becoming commoditized. Just about everybody has an AI coach. The question is not whether you have a coach or not. It is a coach which actually delivers results. I think we are amongst the very few who have actually shown results and outcomes. I think to that extent, that part will obviously carry momentum. The technology segment is in terms of taking a step back in redefining their talent transformation strategies.
Over a period of time, my feeling is when they stabilize, obviously that growth will come back. Overall, my feeling is we will remain in this 2/3, 1/3 scenario, approximately a few percentage points here or there. That is my belief. Anybody else wants to add? All right.
Right. It is fine. Just last question, just to round it up. What would be the enrollment number for this quarter? I am sorry if I missed this at the beginning.
220,000. How much?
It's 200,000+
220,000. It's about 220,000.
Okay. That's pretty much it. I'll again join back in the queue for any further questions. Thank you so much. Good luck.
Thank you very much.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. The next question comes from the line of Ganesh Shetty, an individual investor. Please go ahead.
Good evening, sir. One question regarding our investment phase. We have been in investment phase for a very long time now, and it has been, I think, more than two years that we are continuously investing in our capabilities and AI-related initiatives. I just want to ask you whether most of the investments are already done with, and can we expect moderately better EBITDA margins going forward? That is number one. Second question, with the high rate of AI disruptions, whether the investments, what we have been doing for quite a long time is still relevant and still is playing a role in our growth strategy and revenue upgradation. Can you please explain this, sir?
Thank you very much, Ganesh. Your question is always a very nice one. Thank you for asking that question. Yes, our investments in AI as well as other automation initiatives and digital transformation initiatives have been significant. You would notice that our CapEx this quarter has actually got moderated. In coming quarters, I think it will remain a little moderated because the original projects that we had, many of them are now getting capitalized as well as delivering results, some of which are visible in the fact that 9%-12.4% of the revenue we got from AI-led initiatives. Having said that, AI is a moving target. We don't know how AI is shaping up. If you see, there is a need for continuous investment, and we will continue to do that.
I have maintained that we have a pole position, and I would reiterate that we have a pole position in an effective use of AI in improving the productivity and effectiveness of an organization. We would like to maintain that, and therefore would like to be one step ahead in some of these initiatives. Our partnerships with many of the technology OEMs is also giving us a vantage point by which we can actually remain ahead of the curve. So that part will remain. Our investment levels are lower this quarter, and we think they are likely to be so unless there is a big initiative which comes in, which obviously we will share with you. The second is the impact of these. I said the best way to measure that is in the internal efficiencies we got, which are visible in the EBITDA.
At a lower revenue level, we are able to demonstrate a higher operating level profitability. The second is the percentage of revenue that we are getting from AI-led activities. Generic AI training is becoming commoditized. Many companies are now insourcing that because they believe that they can learn it from anywhere. So specific AI training, which is, for example, for leadership teams, is something that we specialize in and some of our contracts have delivered exceptional value there, as well as specific, which enable the effectiveness and productivity of the organization, and we demonstrate that through performance, are the ones which customers are seeking to use from NIIT. As they finalize their plans, I think we have traction in that. So this remains an integral part of our strategy going forward. AI remains and will remain for some time to come, at least.
Thank you, sir, for the explanation. Sir, my second question is regarding our integration of RPS Consulting, StackRoute and NIIT Enterprise Solutions business. Has this changed our go-to-market strategy, and can we address a larger consumer base for the consumption of these services? Can you please explain this, sir? Will it be resulting into more EBITDA or more margin accretive in the future days to come?
Thank you. I should have talked about RPS and NIIT StackRoute solutions into a common ETLS, the Enterprise Technology Learning Solutions. I had talked about it in the last quarter as something which is happening. I have to say that integrating two teams does bring some new learnings for us. I think while both of them were servicing similar types of customers, they were going to the customers with different offerings. Part of their offerings were different, some of them were overlap. I think by combining the sales teams, we are able to give a more concentrated attention to our customers and be able to service them with a larger array of solutions that we have. It is also helping us build newer solutions. At the same time, there are two sales forces who are working together.
One of them has been very strongly transaction-driven, and one of them has been very strongly solutions-driven. How the two teams work together, obviously, is not a trivial task, and we are working on that and have been successful, though it's a journey, and we will continue to see the benefits of that journey. Whenever you start with integration, your cost structure actually does not reduce immediately. It takes a couple of quarters for it to settle. I think the benefits of that integration, we will realize over the next few quarters. You're right in your assumption, that as we make these two teams leaner and much more effective working together, there should be an upside in reducing cost structures or fixed cost structures. We will work towards that.
Thank you, sir, for the answer. Sir, my third question is regarding continued macroeconomic problems, continued disruption in technology, and continued hiring freeze. All these things are creating unprecedented pressure on our revenue growth and our strategy as a whole. Are we expecting anything in new sectors to step in, like manufacturing or EV, where the training requirement may soon start, or training requirement may be developing? At least we can have a different stream of learning business for revenue, which can actually compensate for the lull in the present market. As we have got now a new CEO in the form of Mr. Anish Sarkar, can we spearhead this inorganic initiative to get into newer sectors, sir? Can you please explain this? Thanks a lot, and all the best.
Yeah, I think you are absolutely right. Manufacturing, and manufacturing is a very big initiative within the country. It's a big strategy and priority for the country. Modern manufacturing requires much more transformation of the workforce than traditional manufacturing does. I think in the modern manufacturing domains, we are playing a role. We have a team which has been working on it. But I think as and when the revenue becomes significant for us to share, we would be happy to do that, but these are work-in-progress initiatives. So is the case with EV. EV presents a great opportunity, and there is work in progress, but I think the results of that will take time. The reason is, at this point of time, the economic pressures which organizations are going through, especially who are investment-intensive, capital-intensive organization. Manufacturing is a capital-intensive activity.
The higher interest rates, and this morning news also of some more higher interest rates coming, then the fuel costs going, the energy costs going through the roof, I think are substantial things that they are grappling with. But definitely, there is work in progress, and I think it will gather momentum as we discover things going forward.
Thank you very much, sir. All the best.
AI is a great opportunity across the board.
Thanks a lot, sir, and all the best.
Thank you.
Thank you. Participants who wish to ask a question, may press star and one. A reminder to all participants that you may press star and one to ask a question.
Prateek, there are no more questions, then we can just summarize and close the call.
Yes, sir. There are no further questions at this time. I would like to hand the conference over to the management for closing comments.
Thank you very much for being here on this call. I just want to summarize. Our quarter two performance was impacted by unexpected pullbacks by GSIs. But that apart, we have a path to profitable growth in the coming quarters, especially from other sectors, as well as the initiatives that we have taken, specifically AI. Our investments in broadening the client base, especially in our BIPS, have started showing results, and we achieved our highest-ever revenue in this segment and 17% YoY growth. Our AI offerings are gaining traction, seeing strong growth sequentially. AI revenues crossed 12.4%. We remain confident of the longer-term structural growth opportunity and are committed to continue making the investments needed to capture that opportunity.
In addition to investing in a stronger sales team and AI offerings, we continue to evaluate inorganic opportunities that enhance capabilities, channels, or IP, which offer a clear path to returns and cash back. Of course, we share the results of these as and when they materialize. In this new environment, our new leader, Anish, comes with specific strengths that we talked about, and we are banking on the new team to take us to our growth trajectory as we envision together. Thank you once again for your continuous support and your very insightful question. These definitely help us in shaping our strategy set in more sharper words. Thank you very much and wishing you a great day and a very happy Diwali.
Thank you, sir. On behalf of NIIT Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.