CL Educate Ltd

NSE:CLEDUCATE

Earnings Call Transcript 2023-Q1

[Arjun Wadhwa, executive]

Gentlemen, and welcome to CL Educate Limited Q1 FY '23 Earnings Conference Call. My name is Arjun Wadhwa. I'm the CFO of CL Educate, and I'll be your host this afternoon.

Like last time, we are hosting this call on our Keystone platform. Sorry, we've had a few glitches over the last couple of minutes, but we're all ready in and ready to go now.

Joining me on this conference call today is the senior leadership team of CL, Mr. Satya Narayanan R., Chairman of CL Educate and CEO of our Test Prep business; and Mr. Nikhil Mahajan, Executive Director and Group CEO of our Enterprise business.

This call, as always, will be recorded, transcribed and made available on the investor zone on our website in the next 48 hours. I'd like to start today by inviting Satya to take you through the early part of the presentation, following which Nikhil will run you through to the end. Please post your queries in the chat box, and we'll take them up after we run through our presentation.

Satya, over to you.

[R. Narayanan, executive]

Thank you, Arjun. Kindly do confirm that I'm audible.

[Arjun Wadhwa, executive]

Absolutely, loud and clear.

[R. Narayanan, executive]

Yes. Thank you. Thanks, Arjun. Welcome, everyone. I'm delighted to be hosting you here today at the investor presentation and the Q1 earnings call. As mentioned by Arjun, I'll take all of us through the first 3 or 4 slides, following which I'll hand it over to Nikhil to take us through the rest of it, and all 3 of us will be available for the questions at the end of the presentation.

Yes, Arjun, you could move into the first slide, okay? This is how our flow is going to be today. I'm going to cover the first part, which is the journey in short, in summary. And as all of us, and especially all of you, who have a very, very insightful ring-fenced view of various businesses and across various sectors, and I just provide you with one perspective from the EdTech and MarTech areas domains.

But the last 36 months has been a journey from one of very acute disruption to one of growth or disruption going to a very inappropriate or unfortunate challenges for various players. I'll take us through that briefly, and then we move to business and financial updates and ending with corporate updates.

Let's move forward. One of the things that I wanted to start today was to share that the journey of our entity, CL Educate, has not been without its -- without her share of challenges and especially even right after becoming a listed entity. However, one of the things we have always held as a bunch of entrepreneurs and an entrepreneurial team over the last 27 years is that challenges come and challenges go, and the match is not lost when we have a fall. The match would actually be lost when we decide to give up, and this is the place where I always would like to say and share with all humility that CL has seen 4 phases or 4 waves since 1995.

This wave of COVID was an exceptional disruption, and EdTech has seen action like no other sector. And all of you are aware in the private equity space, no space got more money invested than in EdTech. But at the end of it, when we're coming out of it, we think that boys will be separated from men. And CL will stand very, very solid with -- and will come out very well in the litmus test, which is always applied and which should always be applied for a listed entity from a financial investor's perspective.

I'll move forward. And the way we are seeing it is that when an environmental disruption that was caused, how did we respond to it? What was the transformational steps that we took? And how is it leading to growth? That's what in essence I want to cover very briefly on the slide, and it's going to be a very short commentary across EdTech and MarTech separately.

To begin with, as you are aware, overnight, the physical contact or face-to-face sessions came to a standstill. And physical centers had to be shut when our honorable Prime Minister, Modi Ji, went up on television and said that we are announcing lockdown. The thing that stood us in great stead at that point in time was our mindset and our thinking that even prior to COVID, there wasn't ever in the -- at least in the previous 7 to 10 years, there wasn't ever a strict partition or a separator between off-line and online. It was a blended model even earlier.

Let me give you an example. Even prior to that, over 15% of the students never wanted to come to a physical center. Their discovery, their enrollment, their learning and experience, their testing and assessment, and they're going away as an alarm giving your testimonial. All of those were online, which means, quite literally, we never shook hands with the students, and we will run into them at an airport. And they would come and say, "Sir, you never taught me. We have never met physically, but you have taught me. And my name is such and such, and I'm right now at this IIT that IIM."

And at the same time, there is another set of the customer group, which perhaps is almost, if I may, put a figure to it, it would be at least 2/3 going up to 80%. As a parent, you and I would do this, saying that if I have an option between a pure online and a blended, I would go for a blended with 20%, 30%, 40%, 50% of it is available on demand, remotely from home, but there is a lot of face to face that is available, which results in great doubt solving, inspiration, conversations with peers and all of that.

So this blended model or omnichannel was our model prior to COVID. But because we had 15% to 17% of our students doing distinctly from homes, we overnight moved into an pure online model. And when the COVID has gone away, our omni model is back. All our centers are back in action, and the growth is going to be reasonably exciting in our view.

One of the beautiful things that I would want to always reiterate about Career Launcher is that our expansion is CapEx-negative because of our magic sauce that we talk about is our franchisee or business partners model. More details of it, I can cover it at some other point in time.

But moving for a brief commentary on the market part. This one, I must admit, was looking more threatening because of the onslaught of COVID because most of our Keystone businesses weren't -- hadn't discovered the online world prior to COVID, and it's a great opportunity for me to acknowledge the good work by the team. The current platform that we are working upon was built by the team in a matter of 20 to 22 weeks during COVID.

Helped on focusing the large customers who were not happy enough with a generic product, online conferences or seminars or webinar representations, and they've taken it to the market. And as COVID has gone away and off-line also has come back, the transformation in terms of organization structure, design, team, roles, et cetera, Keystone has done a very admirable job. The jury is still out there, but I think this looks like an exceptionally exciting journey for Keystone 2 post-COVID in the realm of marketing technology. I will reserve the more detailed commentary about the metaverse, which Keystone has embarked upon and enabling their clients. Nikhil will cover it a few slides down this presentation.

At this stage, I also want to pause and express our gratitude and appreciation to our shareholders, investors, who showed -- many of them who were not panicking when COVID hit. And some of them, when we meet in the investor conversations or when they reach out to us, they -- the conversation is extremely heartwarming in the sense that they're extremely supportive, and not just supportive, but I had a great conviction that this is a challenging time, at the end of which, CL would emerge much stronger. CL Educate will emerge much stronger both on the EdTech and the MarTech side.

In that context, as a listed entity, I want to specifically express my gratitude to HDFC as an institution which was on our cap table for 10 years. They came much before we went public. And just a week or 2 ago, HDFC eventually finally has exited, and we've got a couple of good marquee investors who have come in and relieved or the baton passing has happened and in a journey of a listed company for a variety of reasons. And as you know, HDFC had to do some of these things because of the merger between HDFC Bank and HDFC. Otherwise, we would have loved to have them on our cap table. [ Ms. Madhumita Bhattacharya ] even today continues to be on our board. We are extremely grateful to them for the support we have got for almost a decade.

I'll move forward. This is something -- Nikhil will pick it up from here. I will only make one specific comment here and hand it over to him, which is that we are, at this point in time, focused upon driving the business with the good old -- those 7 to 8 important financial health parameters being on our dashboard on a monthly basis. However, without compromising on either the academic fidelity that is needed for a company like ours, where we continue to improve our result share, when a family meets you and then they say that the kid went to an IIM or an IIT or a law school from Career Launcher, that's the wealth of brand that we are focused upon on this side. And on the other side, in Keystone, it is about the CXOs and the heads of marketing vouching for the kind of services that Keystone brings to improve their marketing efficacy.

I'll pause there and hand over to Nikhil to take us forward. Nikhil, over to you.

[Nikhil Mahajan, executive]

Thanks, Satya. And good afternoon, everybody. I hope I'm clearly audible. Last 4 quarters, we have been very steadfast and focused on 2 critical aspects. One was enhanced shareholder value creation, and the second point was the underlying tenets which will drive enhanced shareholder value creation.

So on enhanced financial performance, efficacy, efficiency, et cetera, we work steadfastly overcoming the challenges of COVID, posting better margins, faster earnings growth and a significantly lighter balance sheet after having done away and cleaned up a significant part of old receivables and doubtful investments from the core of the face of our balance sheet.

In the last 4 quarters, as the business earnings began to reflect, we also focused on the tangible outcome of greater shareholder value and some of the steps we have initiated, including a stock split when a INR 10 share become a INR 5 share happening in Q3 of FY '22 about 3 quarters ago. Last 4 quarters, we have liquidated 4 significant large parcels of real estate and released close to INR 60 crores of investment or cash, which is available for us not to be deployed into business to accelerate the revenue and earnings growth.

And part of it has been deployed in form of a buyback at INR 170 to enhance shareholder value. We completed the buyback about a week ago, and the process ran for over 2 months. And some of the existing investors work part and parcel who chose to exit with tandem for being shareholders of CL.

Our endeavor for the coming 4 to 8 quarters is enhancing shareholder value, shareholder wealth or by consistently improving business performance, accelerated revenue growth. And there are certain remaining parcels of real estate, which we ever endeavor to sell over the remaining 2 to 3 quarters of this current fiscal year.

I come to the quick snapshot of financial update. Many of you would have seen that once we have uploaded our business performance, the investor PPT on our Investor zone in the morning. So the quick snapshot is our revenues year-on-year increased by about 36% and our EBITDA increased by about 30% in the comparable period. The PAT or the total comprehensive income and EPS increased by a much larger multiple because that also included onetime net exceptional gain as a consequence of the sale of the real estate at Greater Noida. However, independent of the net exceptional gain, our profitability at PAT level has improved by about 75% on a year-to-year basis of Q1 FY '23 versus Q1 FY '22.

In the last 4 quarters of the critical changes, which you would see on the face of the balance sheet, is a dramatic reduction in our borrowing. Our borrowings have come down from close to INR 40 crores as on June 30, '21 to about INR 10 crores June 30, '22. And these figures have further gone down in the month of July post the realization of money from the sale of the real estate.

Our net cash position has shown an increase of close to INR 60 crores, and this is post accounting for about INR 7 crores to INR 8 crores of cash outflow on account of buyback until June 30.

As I shared, our EPS, though, showed a 4x growth on a year-to-year basis but that includes onetime exceptional income. However, the ROCE and the ROE on an annualized basis have also shown a significant improvement with ROCE increasing from 6.1% to close to 9.8% and return on equity increasing from 4.4% to about 9.7%. Yes, we are still both on ROE and ROCE benchmarks below a certain current expected threshold, but I just wanted to reassure that we are well on our path to reach those threshold levels over the next 4 to 6 quarters.

The reopening of the world post-COVID has made some of the things which should have happened a couple of years ago only delayed by something like 8 to 10 quarters, but the business environment stays extremely positive, and we would hope things to improve going forward.

A brief update on how business is -- the 2 core businesses, EdTech and the MarTech, business performed in Q1. On a year-to-year basis, both the businesses more or less performed similarly with revenue growth of close to 34% -- 33% to 34% and an EBITDA growing at around 26%.

One of the reasons of EBITDA growing slightly lower in Q1 as compared to the revenue growth is because of 2 reasons. Physical centers reopened in the first quarter, and that had initial some kind of expenses, which were loaded, which will get normalized over the remaining 3 quarters. And also in the MarTech business, we saw coming back of physical event and rebalancing of split between virtual event and the physical events. And as you know, the physical events generate larger revenue but a lower EBITDA margin.

So that thing will -- the EBITDA margin will probably see a dip over the next couple of quarters until things stabilize as physical world reopens. But since that will be more than compensated by a much accelerated revenue growth, our absolute numbers of both EBITDA and profitability would look much better and superior over the previous quarters.

Okay. A brief update on some of the key aspects of our business on Test Prep on the EdTech side. One of the key things, as I said, as the centers reopened, our average ARPU of the products increased by about 30% plus on a year-to-year basis. The volumes have also shown increase between 5% to 7% across most products.

CUET has been a new addition to our product portfolio in the last 4 to 5 months. That has shown a reasonably attractive performance by us in the first quarter. And as the exams gets more accepted by a wider gamut of universities and institutions, we see this opportunity panning out over the next 3 to 5 years in a significantly large way. Our endeavor to maximize our footprint in that market in that first year to establish ourselves as the market leader in that segment.

We continue to focus in the undergraduate segment of students from grade 10 to 12 without over focus -- too much focus in the engineering, medical segment. So we are focusing on CUET, law, IPM, study abroad. And between these 4 or 5 segments, we see somewhere around 6 crores student market.

CUET itself will probably in 3 years become one of the largest, is already one of the largest exams in India and with about 15 lakh students registering for the first addition. We expect this number to go to somewhere between 70 lakhs to 80 lakhs in 3 to 5 years, and that will open up a much larger frontier for expansion in the coming quarters for us.

Last quarter also saw significantly increased marketing and advertising spend from our side to reinforce CL brand and also to capture the market opportunity, not only in CUET, but also in MBA and the law segment, as the physical centers reopen and the students began coming back to schools, colleges and the coaching institutions. You will continue to see higher marketing and advertising spend in the remaining course of the year also. And we remain confident that this would translate into an accelerated revenue outcome and growth in the remaining 3 quarters for the year.

In the publishing business, one of the dampener has been a significant increase in paper costs in the last 2 quarters with the paper prices having increased between 40% to 45%. But we have been able to reprice our offerings appropriately, which has enabled us to more or less stay margin neutral, and we have been able to pass between 90% to 100% of the paper cost increase to our customers, at least in the previous quarter. And we are hopeful that this trend, we would be able to sustain in the coming quarters as well.

I think we covered CUET opportunities significantly in our last investor call in the month of May also. At that stage, it was still evolving. Now it has become a reality. We have had about close to [ 15 ] lakh registrations for the first CUET exam. Half of which is already done, and the remaining half will get over in the next 10 days.

This opportunity of [ 15 ] lakh applicants in the first year, we clearly see multiplying it by 5x, if not more, in the next 3 to 5 years. And this can help CL grow 3x on an overall basis in the coming 5 years.

We have a partner network covering about 150 cities. We have 220-odd partners. And gradually, our partners are beginning to pick up this product. While in the first quarter, we saw only 7 sign-ups, the partner sign-up has also got accelerated in the last 60 days. And the number of sign-ups, which will be reflected in Q2 in the coming quarters, will be significantly higher and would be shared in the subsequent quarters with you.

We have also launched a long-term classroom products targeting grade 10, 11 and 12 for CUET and have begun to see initial positive traction coming in that as the schools have reopened only recently after the 10th and the 12th Board exacts.

Again, a reinforcement, we -- the CUET 14 subjects, and we have all variants with student having the ability to study at its own pace in a totally cam manner or a combination of cam plus classroom or pure classroom as per his choice. You can see the list of the subjects. And probably, CL is probably the only player offering such a wind variety of subjects for this exam. Most people are either focused just on the sciences, other commerce segment, other humanities, and we are currently straggling all the 3 streams. And our student enrollments are also more or less evenly divided across the 3 streams, giving us a reasonably solid foundation as we move into the core business season for the current academic year.

As we said, the last 24 months, everybody has been talking about digital, digital and only digital. And we were always on the belief that there will be a healthy mix of physical and digital in some ratio, whether that ratio is 50-50, 70-30 or 30-70 would probably be decided by the consumer. And now everybody has come around and veered around to the fact that omnichannel is the way to go forward. Every so-called EdTech player is now clamoring to open physical centers across multiple geographies and follow a path which we have already been doing for the last 15 years.

I think the critical success factors in this omnichannel game will be a robust technology, digital backbone accompanied by the large footprint spread across the country covering as many students as possible in a physical manner. The philosophical -- theoretically, a CL center can exist in every district, every district headquarter in the next 36 months. And our goal -- stated goal is to have 500 new centers in the next 12 quarters. I think we are relentlessly and aggressively pushing down that path to maximize our footprint, and I think some of those outcomes will be visible in Q2 and Q3 as the plan gets rolled out.

We are also experimenting and doing a pilot of having 100 distribution point in Delhi NCR region. Currently, we have [ 50 or 17 ] footprints. We want to increase that number by 5x. That has not started. I think a much clearer picture will evolve over the next 2 to 3 quarters.

Another positive development has been that we have successfully migrated one of our pilot centers into the metaverse. The testing and the student interaction feedback process for this is going on. And our endeavor is that over the next 3 to 4 quarters, each of the CL's physical center will have a avatar in the metaverse giving significant traffic flow in the metaverse environment and also enabling the overall metaverse game with reasonably solid traffic volumes, consumer, other set of services, which are getting attractive, other brands, getting attracted into the metaverse environment besides the educational plans.

I'll now spend some time on the market update. On the metaverse front Cosmos, which is the metaverse platform for Keystone, got formally launched towards end of June. We have signed up 7 brands across different segments, including art galleries, luxury brand, we have beauty brand. We are currently executing a pilot for a leading hotel chain. And once that is successfully executed, we hope to extend it to the entire hotel chain hotels in India.

The revenue grew roughly around 33%. Margins were more or less static. The operating expenses did increase as physical events came back. In physical events, the costing structure is slightly higher. Dell and AWS are some of the key clients, which did significant business in Q1. The pipeline for Q2 is currently reasonably healthy and solid, and we expect to maintain the revenue run rate at least in the coming quarters. Singapore operations also had a very solid start to Q1, and the pipeline looks good.

Some of the virtual events and interactions, some of the customers and the clients who used in the previous quarter include Microsoft, Sun Pharma, Nutanix, Dell, AMC. We did a Doctor's Conference, Women Leadership Conference, [indiscernible]. So now this platform is widely accepted, and we are now able to do physical events and a virtual event in a hybrid form, successfully. We have done that in Singapore for a couple of events and a couple of events in India in the previous quarter.

Just a small bit. Keystone got certified as a Great Place to Work in the previous quarter for the rolling 12 months. CL Educate got an appreciation towards compliance on the GST during the previous year. So these are just some applause, which I wanted to share.

On the corporate updates, not significant, just a couple of things. The Greater Noida Property sale concluded, and we realized INR 48 crores. The cash is in the bank. Panelly buyback also has got completed, started on 27th May, and we completed around 29th of July. Roughly around 11.8 crores has been the total shareholder payout, including the buyback taxes.

One interesting anecdote or feature which I would want to say, that during the buyback period, we saw a larger interest from retail shareholders and the number of retail shareholders who were in the shear captive have actually increase by close to 10% between -- during the buyback window. So I think a healthy churn is happening and new shareholders are coming on board. And as people come in, we hope over the next 4 to 8 quarters, we have extremely good news and good shareholder value creation happening.

I think that's what on the presentation and the update side, and we are happy to take any further questions as you may have.

[Arjun Wadhwa, executive]

Thanks, Satya. Thanks, Nikhil. As Nikhil said, we are now open for questions. If you have any queries or anything you'd like to discuss with us right now, you can post it in the chat box, and we'll respond.

Satya, while we wait for some questions to come in, would you like to spend a couple of minutes more to talk about the CUET experience and what it means going forward?

[R. Narayanan, executive]

Yes. Sure, Arjun. I think the right way, in my view, to look at this 9th, 10th, 11th, 12th segment and the largeness of opportunity that India provides and the coming of age of the Indian undergrad programs across these 800 universities and many new universities, which are coming up with great entrepreneurial teams behind it.

I think that is how I would look at it. And in a way, I would call it as the gaokao movement of India. And Arjun can share that the note or appropriate links on that to all the people who are invested in it, which is the, what should I call it, the counterpart of India CUET in China is Gaokao, or globally, which is SAT. And I think over the next 5 to 10 years, CUET has the potential to become the #1 or #2 globally for undergrad admissions for not just Indian students getting to Indian universities, but Indian students going to overseas universities.

For example, today, over 25 business schools across the globe accept CAT scores. Similarly, global universities will start accepting CUET scores, and the students coming into India for undergrad program is poised to grow from 40,000 to 400,000 in the next 5 to 7 years.

So the way to look into this opportunity is it's a new landscape. It's a fresh canvas, and there are going to be exceptionally exciting stories built in a profitable way, tailed way over the next 3 to 5 years. And CL would want to participate there, and we are building our foundation in that space in a very hopefully focused and telling manner over the next 4 to 8 quarters. I'll pause there, Arjun.

[Arjun Wadhwa, executive]

Thanks, Satya. I'm getting a few questions on my phone on WhatsApp. I believe there's a little bit of a glitch with the chat box. Some of our participants can't access it. So if, for some reason, you're not able to see the chat box, I'm just re-putting my phone number on the screen right there. It's 981-161-7289. You can WhatsApp me your questions, and we'll take them up.

Satya, the next -- the first question I've got is from [ Manan Gill ]. He's asking about our partner model. What are the responsibilities of CL versus our partners? And where are we in terms of our journey to reach 5x distribution on the partner front?

[R. Narayanan, executive]

Okay. Thanks, Arjun. Anything that involves common work such as R&D, content, technology, curriculum, material, training certification, all of those is anchored. And that is the responsibility of the central office, Career Launcher, the head office or the back-end team that sits in Delhi. And that releases a huge amount of stress, and the business partner focuses on customer acquisition and customer delivery locally. That's in short. More details, if needed, can be shared for supplementary questions later.

The other important thing is that with the coming in of newer segments, the potential for building, like Nikhil was mentioning, 100 hyper-local distribution points in a place like Delhi or a place like Bombay is possible. And every single district headquarters, every single town that has 10 to 12 schools now can have a profitable CL center run by an entrepreneur, who keeps 75% of the revenue and pays 25% of it to us as a royalty. Or we take INR 100, we retain INR 25 and INR 75 is given forward to the local entrepreneur business partner. That's the core of the model.

And I would want to sign off my response to that question by saying that. This is -- if you ask me, this is the magic sauce in our business. This is the magic sauce, and there are products that get when something gets announced by the government, our response to the market at times is [ higher than ] as little as 24 hours. And in the worst case, we could be ready and be alive in the market in anywhere between 4 weeks to 12 weeks even if it's a brand-new initiative like CUET.

[Arjun Wadhwa, executive]

Yes. Thanks, Satya. And the chat box is now fully operational, and we see a slew of questions coming in. I'm also getting a few questions on my phone, so I'm just going to combine a few and throw them out there. There are questions regarding, when will we return to pre-COVID levels in terms of revenue? And what kind of margins can we expect going forward?

[R. Narayanan, executive]

I think one of the things that we do refrain from doing is being extremely prophetic about future. We don't put numbers out as a matter of internal clarity and discipline. However, what I can say is that we hope to get there soonest.

A lot of centers have begun to fire only now. And the margins, like Nikhil mentioned, margins at an overall level will continue to improve in absolute numbers, but we are also consciously not holding back in brand and people and technology investments. Those will be in the realm of extremely controllable. But percentage margins might, by design, be given in, in order to accelerate the growth.

Because we believe that the CUET leadership vacuum, new opportunity has to be filled, in, in the next 4 to 8 quarters. But it suffices for me to say that we look reasonably solid without promising anything, which 12 quarters go in a blink. But we're looking at extremely robust path for ourselves for the next 12 quarters.

[Arjun Wadhwa, executive]

Okay. Satya, there are also a few questions from Vivek and Vikram on CUET since I have you on that. Vivek said, can you elaborate on the CUET market in terms of competition? And Vikram is asking, what is the seasonality in that business? And what kind of market shares are we targeting?

[R. Narayanan, executive]

Okay. In essence, for those of you who are kind of hearing it for the first time, this is the Common Universities' Entrance Exam. It started off as a Central Universities' Entrance Exam. But even before the first MVP pilot was done by the government, it has gathered a huge amount of momentum to the point where the acronym has remained the same, but the name has changed.

The central universities, which are only 54 in our country, it becomes -- instead of it being a Central Universities' Entrance Test, it has become a Common University Entrance Test. Over 90 universities have already enrolled. And informally, over 150 universities are likely to seek and simply put on their website that CUET scores will be accepted by us.

What does it do? It dramatically alters and creates a level playing field for the aspirants to apply for one exam. So costs are reduced for a family. Transparency goes up from a so-called social perspective. And universities, which have enrolled into CUET, have seen their applications jump by a factor of 5 to 15.

And what it is going to do is practically no university in the country is going to go and now invent their own entrance exam. The way CAT is used now for tactically every business school and CAT is used by most of the law schools, CUET is going to be used by 800-plus universities and maybe a few thousand colleges very, very, very soon. That's the landscape.

Numbers thumb rule, India has 1.5 crore kids in Class 12th. Take -- multiply that by 4, so 9th, 10th, 11th, 12th is 6 crore children compare to 200,000 in CAT. Even if you take only 11th and 12th, it is 3 crore children. About 10% of them if you want to know. We can share more detailed notes, et cetera, for you. They're all published by us through our blogs and editorials and so on. Happy to share those analysts working to get into it.

But it's a massive opportunity. It is going to be working very closely with the board exams because they have already said, CUET has said, NTA, National Testing Agency has said, universities have said that if there is a tie, they will also take the board exams performance of the students. So whenever you think of CUET, I would want you to look at it as CUET plus boards. Okay? That's the figure.

And like Nikhil mentioned, 14 lakh applications, 14.9 lakh applications in the inaugural addition that ends at the end of this week, but it is likely to go up by 4x to 8x in the next 3 to 5 years.

And leadership question that you asked, if you ask me, and it's not easy, even if we do 1/5 of it, it's great. But in an MBA, in a law, in an IPM, there are 2 things that we look at, typically, the test prep takers, thumb-rule is 50% of the applicants, which means if this figure goes to 50 lakhs, 25 lakh people will be taking preparation for CUET. And in CAT, 200,000 takers, 100,000 take preparation, CL has between 35,000 to 40,000, so which is about a 15%, 17% of the universe and 30%, 33% of the active preparers.

Now you can do the arithmetic. The numbers are mind-boggling. But it's a long, very solid game, and we have to come good in both areas. Academic outcomes is the litmus test in our business. It's not advertising on television. Word of mouth gets 90% of our enrollments. So we'll focus on that, but by being smart in marketing and brand investments, which we have already begun, if you have noticed in some cities and locations on radio for the last 8 weeks or so.

Back to you, Arjun.

[Arjun Wadhwa, executive]

Thanks, Satya. There's a question, Nikhil, from Krishna Kumar Srinivasan. What's the way forward in terms of use of cash on the balance sheet? Any acquisitions contemplated? Nikhil, you're on mute. Good to go.

[Nikhil Mahajan, executive]

Okay. To the specific question on that, we don't have -- we have not clearly set out what we are going to do right now. We are currently investing to sustain accelerated growth rate in both the EdTech and the MarTech business in terms of accelerated marketing spend and accelerated people hiring, which are the 2 core drivers to reach the designated goal over the next 3 to 4 quarters.

On the acquisition front, we continue to explore the market. We continue to scan the market. And if and when we find a rightsized opportunity, which is profitable, cash-generating, sustainable and comes at the right price, we will explore it seriously. At this very moment, I just want to say that nothing specific in particular is being explored or changed. We will keep a very cautious outlook for opportunities. And as and when something is serious and sustainable business at the right cost, we'll get more details and share it at an appropriate forum.

[R. Narayanan, executive]

If okay, I'll just add one sentence to it, Arjun.

[Arjun Wadhwa, executive]

Sure.

[R. Narayanan, executive]

Arjun, am I audible?

[Arjun Wadhwa, executive]

Yes, please go ahead.

[R. Narayanan, executive]

Yes. So just to add one sentence to what Nikhil's sharing was [ KK ]. One, as we've mentioned, we've spoken for the last 5, 10 minutes, I think there's an unprecedented opportunity, which is organic and which is likely to be extremely disruptive from a return on equity, return on capital employed point of view, which is the organic opportunity through for the 11th, 12th board plus CUET. I think that is something that calls for our undivided attention and focus.

Also in MBA, there are certain events that have happened. So we are not wanting to be in a position -- no, we don't want to take MBA or law or IPM for granted. We have work to do there because of the -- there are some mergers and acquisitions and challenges that are happening in the competitive market space even in the -- even in MBA.

And like Nikhil mentioned, however, when this investment winter sets in, when this focus of private equity investors is going to move in, funding is going to stop. There are going to be assets that are going to be available at 100th, the cost, maybe more. But that will happen, in my view, only 6 months or 9 months from now. And that has to be so good and has to have -- it has to pass our test, which is, it has to be profitable, and it has to be capital-light. We don't want to be going after expensive acquisitions that spoil a lot of hard work that we had to do coming out of a couple of businesses which are capital-heavy. So we're not going to repeat any mistake and throw capital to gain growth, and that's what our focus will be for the next 3 years. Over to you, Arjun.

[Arjun Wadhwa, executive]

Thanks, Satya. Nikhil, there are some questions on the MarTech business. What are the revenues from the VEP segment? And how is our platform different from the likes of Airmeet, Hopin, 6Connex, et cetera? And who are our major competitors in this space?

[Nikhil Mahajan, executive]

Okay. I'll answer that in 2 parts. One, see, last 2 years, physical events are totally dried out and everything had -- the events were taking place in the virtual environment. So we have started tracking the virtual platform events independently, and we had reached a size of about $4 million last year.

However, with the reopening of the economy, not just in India, Asia Pacific and U.S. as well, what we are seeing is the most of the events are now beginning to happen in a hybrid mode. So there is a physical event and there is a virtual event part of it. So there are -- so in an integrated event, which probably is generating a revenue of, say, $100,000, there could be a $25,000 which is attributable to the virtual part and $75,000 for the physical event.

So segregation in that segment is not very -- in that manner is not very digital. However, on an apple-to-apple comparison, I think virtually, event revenues have been shared below $1 million in quarter 1. So that's what the apple-to-apple comparison is.

Our platform, while basically implies similar things like Airmeet, Hopin, Reconnex, 6Connex, et cetera. However, it is different in terms of its adaptability how customizable it is. Airmeet and Hopin are 2D platforms versus a 3-dimensional platform. Probably the closest platform to us is 6Connex.

And in different markets for different customers, we have different competitors. So you will -- we will find Airmeet and Hopin competitor for certain segments and 6Connex as a key competitor for us with Microsoft and AWS. But so if you ask me, there is not a specific competitor in different customer segment. Different customers, we have different competitors, and we fight on a project-to-project basis.

[R. Narayanan, executive]

Arjun?

[Arjun Wadhwa, executive]

Yes, go ahead Satya.

[R. Narayanan, executive]

I think there is a query on [ VBM ]. Is that what something you want me to pick up?

[Arjun Wadhwa, executive]

Yes. Can you talk about the experiences with Vidya Mandir and learnings from the same? Would you like to take that, Satya?

[R. Narayanan, executive]

Arjun, I'm unable to hear you. I hope you can hear me. Okay. So I think it's up. Our association or a collaborative alliance-led experiment with VMC, Vidya Mandir Classes for the IIT, JEE, and NEET, it continues this year in Bombay and Middle East, where we have taken it to the market. And we are looking at it, studying it. It is working well in parts. In some parts, there is improvement that is needed. And the review of it happens on a quarterly basis at a senior level. And the engineering and medical segments continue to be of interest to us with some caveats. And the caveat -- those caveats would be applicable even for an M&A conversation, and that's something that I've already mentioned a little while ago, so I'll not repeat myself.

But this alliance-led models, if it works out well at some point in time, it could lead to interesting conversations. We are not hurrying it. Our hands are full. So it's been treated as a business as usual run by senior teams who run these businesses in those geographies and for those product groups. We will keep you updated. Perhaps a more substantial update could happen more like for -- with the Q3 when we are looking at the 2023-'24 academic year. Thanks, Arjun.

[Arjun Wadhwa, executive]

Thanks, Satya. Nikhil, just wanted to check if you can hear me. Satya wasn't able to.

[Nikhil Mahajan, executive]

Yes, I can hear you.

[Arjun Wadhwa, executive]

Okay. Great. The next question was, where are we in terms of our goal to becoming a 0-debt company?

[Nikhil Mahajan, executive]

Arjun, will you take that? Or do you want me to?

[Arjun Wadhwa, executive]

Yes, I'll happily take that. We've reduced our borrowing significantly from June 21, where we were at about INR 40 crores to about INR 10 crores now. We're well on track towards our stated aim of becoming a 0-debt company by December 2022. It won't be exactly 0, but we'll be very close to 0, and it will be virtually negligible in terms of debt on the balance sheet.

There's another question in terms of how does the management divide its time between EdTech and MarTech, considering that they're 2 vastly different businesses.

[Nikhil Mahajan, executive]

I'll take that, Arjun. So basically, EdTech and MarTech are 2 different businesses and are run by 2 different business teams at the Board and the highest level. The EdTech business reports into Satya, and the MarTech business reports into me. And we spend roughly about 75% of over time dedicatedly to the respective businesses, which report to us, except for the corporate responsibilities. So they have reasonably well-established teams, processes, systems, business boards and monitoring systems to drive them and take them to the next level.

[Arjun Wadhwa, executive]

Thanks, Nikhil. We've reached 5:00, which was our cutoff time. So I'll just take 1 or 2 last questions. I see a couple of people who are still typing. [ Manoj Dua ] asks us, as a franchise owner of CL Educate, what kind of support would a franchisee expect from the company? Satya, would you like to take that as our last question for today?

[Nikhil Mahajan, executive]

I think Satya is not able to hear so I'll take that. Manoj, our franchisee looks at a couple of key factors before he signs up. One is, what is the brand ascription? What is the brand reputation? What is the word of mouth, its product, repository? How well-distributed? Is it geographically pan-India?

So the piece that support that he looks for is brand and the associated marketing standing, the technology backbone and the content backbone and the repository. So basically, as a franchisee, all this comes to him from the corporate side. He's expected to do local marketing and student acquisition and the delivery on the ground in his local market.

This broad model has been in place for the last over 20 years, has been reasonably successful, steady. And we currently have about 200 partners straddling over 130 or 135 cities pan-India. And probably going forward, this is -- we expect not too many changes from our side in terms of contribution. We are always open towards feedback and any incremental support, which the partners require at different points of time.

For example, during COVID, we enabled digital delivery of classes to every center, either centrally or enable them to take classes locally in a digital medium. So those kind of interventions when an external event happens are provided to them and will continue to be provided to them as and when required.

[Arjun Wadhwa, executive]

Thanks, Nikhil. I see there are a few questions that are still unanswered. What I would request you to do is if you'd like us to address those, feel free to give me a call after this session gets over, and I'll be happy to take you through any queries or any specifics that you want on a one-on-one basis. Alternatively, we can schedule some time either tomorrow or early next week to address any additional questions that you have.

We'll wind up our session here for today. Thank you, Nikhil. Thanks, Satya. And we'll see you all at our AGM in early September. Thank you.