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NIIT Ltd
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Ladies and gentlemen, good day, and welcome to the NIIT Limited Q2 FY '23 Earnings Conference Call. [Operator Instructions] 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 maybe 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'll 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 30, 2022. And the only opening comment that I would like to make is that despite turbulent macro environment, all our businesses, SNC Skills and 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-quarter 2 and during earnings update there was steeper than anticipated impact of environment on CLG business, which did impact our Q-o-Q growth, and to that extent, Sapnesh would explain that details. But what is important is that the business continues to add new customers and maintain this velocity of customer acquisitions and 100% renewal rates. So 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 for further investments in profitable growth and new capabilities on the back of the investment that we made in a company called KNOLSKAPE in last quarter. So with this opening comment, I would like to hand you over to Sapnesh to provide details of the operating performance. And 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, we really appreciate your presence. To provide you with the highlights, I'll start with NIIT overall and then get into each business respectively. Our revenue stood at INR 3,922 million. This was up 24% year-on-year and was down 3% on a Q-o-Q basis, primarily due to a steeper-than-expected compression in a large customer at CLG. I will cover this detail as I discussed 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 1, a steeper-than-expected compression in some customers with CLG, product mix changes as well as a pickup in travel and premises cost this quarter, which we had anticipated earlier. We 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 an SNC. The net other income showed 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 INR 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% Q-o-Q. And in constant currency terms, it was up 5% year-on-year and down 5% Q-o-Q. The EBITDA was at INR 535 million. The EBITDA margin was at 18%. The EBITDA was impacted on a quarter-on-quarter basis based on account of the planned wage hike during the quarter as well as the lower revenue during the quarter, including the steeper-than-expected operation in one of the large customers. During the second quarter, NIIT hosted its flagship annual customer event conference 2022 in Miami in the United States. NIIT could not hold this event in person over the last 2 years due to the pandemic, but it was heartening to note that the participation in the event was robust and the feedback very, very encouraging and seen 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 3 new customers as MTS customers. And this includes 1 global aviation company, 1 IT/ITES company and a large multilateral ad agency. In addition, the company renewed 3 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 spend. We expect the pace of consumption to pick up as the uncertainty starts to subside. Despite the near-term volatility in spend, I think it is suited 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 Career business, the revenue for the quarter was at INR 918 million, was up 119% on a Y-o-Y 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 at 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 means for both core seekers as well as working professions, leveraging the strength of our brand, deep expertise and pedagogy and the use of technology and learning. This business provides training and 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 multiyear cycle for growth and demand for skill 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 seen -- have been getting offers that are almost price the average starting salaries or 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 INR 12,597 million versus INR 12,593 million 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 NIITens within NIIT, and this was up 59% on a quarter-on-quarter basis. During the quarter, NIIT entered into a definitive agreement with KNOLSKAPE Solutions Pvt. Ltd for an investment of USD 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's platform and portfolio of AI-driven immersive simulations coupled with an IT managed services approach to 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 the CLG business to get back to quarter-on-quarter growth start in Q3 and a team high single-digit year-on-year growth for FY '23. Margin was 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 '23. During the quarter, NIIT continued to win new customers in line with expectations, along with maintaining 100% track record, responds to the strong competitive positioning and the trust that the company enjoys with its customers as well as trending of the business for the medium to long term. Despite the near-term volatility and 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. Our near-term uncertainty has had a short-term impact on our financials. We expect growth in CIG to pick up in H2. The growth in SNC business remains on track. We expect to be -- we expect to remain on track to deliver approximate -- a margin of a shade below 20% for CLG and a small EBITDA profit for the SNC business for the whole year. Thank you, and Vijay, back to you for a brief on the reorganization.
Okay. Thanks, Sapnesh. A very quick brief on the reorganization as seen in the last time we filed an application with NCLT. And NCLT also had the first motion hearing. And based on that, the shareholder and creditor's meeting is scheduled for November 15, for which I think the invite was send in October and the e-voting will open from November 11 to 14. So 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 Services. So I'll stop here. If there are further questions, we'll be very happy to answer. Other than that, we have covered all the grounds. So now we will open it for Q&A. Operator?
[Operator Instructions] The first question is from the line of Baidik Sarkar from Unifi Capital.
Sapnesh, you did allude to this in your opening remarks with regard to the rundown of the CLG business, the understanding was that just ought to come back in Q3. If you just flesh out the answer a little bit more. Are we on full track for recovery? And secondly, we've been given to understand in the past that H2 sees the impact of large flush and in terms of the client sense. So keeping that flushing perspective as well, how we treating H2?
So there was a part of your question, which I couldn't completely figure out, but let me try to restate what you said and see if that's what you were looking for. I think what we wanted to know was how is H2 looking and 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 what your question was?
That's right. That's right. Yes, please.
Okay. So why there is a budget flush at the end of December with most of our customers, specifically most customers in North America. But 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. So 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 Q-o-Q growth as we get into Q4. But I'm not sure if the impact of the typical budget flush will be as significant as we have seen in the past.
Sure. Sir, secondly, our order book has now been flat for 2 quarters. Is there visibility of acceleration there? And 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 probability of some amount of scale up from last year's order books scale up?
So our visibility -- 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. So that's one. And given that we have a number of renewals on deck and we expect to close those renewals in Q3. So 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 the number of contracts in our Q3, which should also add to the visibility.
Sure on the domestic Skills and Careers business Sapnesh, [indiscernible] we would have grown Y-o-Y, what explains the flattest trajectory sequentially because the domestic hiring environment in India is still very robust, right? So if you could just throw some color on that. And importantly, we had a certain expectation of acceleration here in the years to come for FY '24, FY 25. Is there a reason to believe that, that revenue acceleration is still on track? Or has there been a change in trajectory there? And should that acceleration happen is excited to expect the beginning of mid-level kind of margin starting FY '24, domestic hiring business.
So the India business specifically is a seasonal business. So the best way to look at it is on a Y-o-Y basis rather than on a Q-o-Q basis. We expect that the India business will return a growth of upwards of 50% for the year and continue to be robust in the coming years. But 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 Q-o-Q 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 the acceleration in revenues in '24, '25.
And so we expect the revenues to be on a strong trajectory going forward. We think that the India business has a long-term strength and we are well positioned to capture a lot of that optimism, specifically as you look at the shortage of skills, high attrition rates and so on and so forth. And the fact that we are well positioned not just in the career seeker space, but also in the working professional space. And we are continuing to make significant investments in our digital B2C go-to-market, it 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, that is likely to grow in the next year and from thereon. Eventually, this business should become a mid-teens to 20% profit business.
And are we close to hiring the requisite leadership for this business? Or is that a call you'll take later on closer to the demerger?
Like I pointed out, we have a very strong operating management team, and we are considering all options from a leadership standpoint both internally and externally.
[Operator Instructions] The next question is from the line of Shradha from Amsec.
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? And you also saw good dissecting growth...
Audio is slightly muffled. Please use the handset mode.
Is it better?
Yes.
Yes, sorry. So I was talking about expectations of margins in Q3 for CLG business. So why are we expecting flattish margins despite the fact that salary hike impact has already baked into Q2 numbers? And you're also talking about Q-on-Q growth. So shouldn't margins look upwards in...
I don't get paid salaries in Q2 alone. I get paid salaries in Q3 also. But 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. But after that, we should start seeing growth in margins as well.
Okay. And also, can you highlight the kind of investments of close to INR 41 million accreted. What are the strategic initiatives that we undertook what are the kind of results you are looking at from these initiatives?
Like we pointed out, we are -- we have a mandate to make inorganic investments. You saw some of those come through in terms of a small investment in no state, but we have a basket of such initiatives going on. And some of those initiatives are requiring external help against which we are spending on.
Right. And sir, in your skills and career segment, if I look at...
[indiscernible] 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, sure. And sir, on your skis and career business segment, if I look at the revenue excluding RPS, that number shows decline both from a Q-on-Q and a Y-o-Y perspective. So any comments there?
I think it showed a growth of 29% from an SNC organic business perspective. And that is on a higher base. So I think that business continues to have strong potential. And like I had pointed out, we are investing -- continuing to invest in our NIIT digital go-to-market, and we expect these investments to start aiding growth as we look ahead.
The next question is from the line of [ Siddharth Basi ] an individual investor.
Firstly, congratulations on the numbers. One was a little worried when I read the mid-quarter update. But I think in a tough business environment, we've done a good job. And I'm rather pleased with our management, that we're able to wait through such difficult times with such finesse. So firstly, congratulations on that.
Thank you. I appreciate your kindness.
So my first question would be with regard to this is like dichotomy that I'm not able to understand. So 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. People are -- 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. So 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 operations happening on a week-on-week Q-on-Q basis. I understand [indiscernible] one of the event which has impacted margins, but I'm talking generically in terms of the U.S. job market. And then I'll just ask a few questions after this one, please.
I think it's a very good question. I think there are 2 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 wages are higher and therefore, inflation is higher. And therefore, the Fed is trying to pull the economy back by raising the interest rates. And what that just 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%. And so -- given what Mr. 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 would mean much worse for the economy as compared to a recession. So most cooperations are expecting a recession. And when they are expecting a recession that's creating uncertainty, and therefore, we are curtailing expenses, which are discretionary in nature as well as capital expenses. So that's what causing the expense on training to be compressed. I know I try and connect a number of economic factors, but I hope I had made some sense.
Right, right. So then my next question is like yesterday, everyone saw the numbers of Facebook, Google, Microsoft, Amazon, their prices collapsing as well in the market in the U.S. So these companies are already playing for recession. Would there be a certain sanctity to the guidance that you are providing now that even the 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. So once the news comes out, it almost becomes like a buy the room or sell a new sort of a thing. So is there a sanctity to our guidance then that even if the U.S. does go into recession, we should be able to maintain the EBITDA in CLG right now and our SNC growth? Or then would they be subject to downward revision again?
No, I don't think anyone can guarantee anything. But what we are seeing -- we just 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 forward level. So we expect that the uncertainty ahead of us is not a hell of a lot more than the uncertainty that was there during forward. So we expect 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 the last few years, we've had high velocity and customer acquisition. And we are expecting to continue to increase that velocity of customer acquisition. So that should add to -- or 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 growth. So that's the thesis that we have used to come up with our numbers. Again, like I pointed out, the large projections and the fact that their projections means that they are based on a reasonably robust set of criteria. Of course, in an uncertain market, the criteria has been changed.
So my third question would now be towards the India businesses. Since the Indian economy is doing recently well, are we seeing further acceleration even say, with respect to our acquisitions? Like, for example, we had the FX summit at the NIIT University, and we had some great speakers speak. And so there were 2 things I want to ask Mr. Pawar there mentioned the 80-20 rule, where you were talking about 80% gross margin and 20% cost on advertising and other expenses. So are acquisitions going to 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. Sandeep Mirchandani was also there, and we've been going to acquire a lot of things. Now I'm assuming there's a close relationship with management. So are we, therefore, also looking at just putting in money like a sort of a private equity and tech firm where we using our network and accelerate these companies that we invest in thereby getting higher valuations and selling them off. So 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 creating shareholder value.
They are acquisitions for a company our size. But 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? And secondly, sir, what is the impact of dollar appreciation on our EBITDA because the dollar has gone up to INR 82. So in this quarter, are we seeing tailwinds to our EBITDA margins because it's already 1 month, so this quarter is also over. So how are you seeing that impact?
So I think you have 2 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. Then you had a second question with respect to impact of foreign exchange. We had some impact of foreign exchange on our revenues. We had an impact of 4% of foreign exchange on the revenues. However, given that euro and GBP has been down, the impact on profitability has not been very rapid.
All the best for the future. And hopefully, we'll be again having a conversation in better -- globally better times.
Sounds good. Thank you. And again, thanks for your kind words.
The next question is from the line of [ Darshil Zaveri ] from Crown Capital.
So my -- most of my questions have been answered and the management did a wonderful job at answering all the detailed question. So my question was a bit more about our long-term approach. So what as I see at in uncertain times you are investing and purely making a very good foundational base. So what do we see -- what is our aim for maybe your next 3 year FY '25 or something that we could share so that we can get a good favor of our long term because I think we'll be able to achieve a lot of good growth when the environment is in our favor.
You're very right. We -- I think 2 quarters ago, we created a goal for ourselves for the CLG business to reach $450 million by FY '27 and a 5-year plan for the SNC business to hit INR 1,200 crores. And 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 amount.
Just in the interest of time, we are at 4:10 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 only 2 questions at a time and we can have another round.
[Operator Instructions] We'll take the next question from the line of Nemish Shah from Emkay Investment Managers.
So I just wanted to understand the sequential dip in the CLG business that you are seeing. 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 have guided. But there is some compression with our existing customers also. So it's a combination of a significant compression in a large customer and some compression with our existing customers going to the current economic situation.
So ex of that large customer also there would have been some decline on a substantial basis. Is that understanding correct?
No. I think like I pointed out, we saw a compression in some of our existing customers. We saw a significant compression in one customer, as we have pointed out. And that's really the core to the Q-o-Q the slide.
Okay. And so I just wanted to understand the guidance a to Q-on-Q growth that you guided for in the coming 2 quarters? Or is that -- does that include any inorganic acquisition as well? Or it is from the current business?
No, this is organic.
The next question is from the line of Sameer Dosani from ICICI Prudential AMC.
Just one thing. The client addition has been very strong for us. Is there some metrics or if you can share ex of the ramp down of a large account. How the growth has been? And I mean the majority of last 12 months addition in the customers, how could -- I mean, if you can share something about how these clients will ramp up? And is -- there is some slowness in the ramp-up of these accounts given the macroeconomic situation?
So I think like you pointed out, we've had strong new contract additions. The velocity is good. We've been adding at 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.
So a number of customers had increased their consumption in FY '22 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 5 to 6 months for a new customer to get to a material level. And for example, currently, we had 3 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. Understood. So 2 follow-ups here. One is, is there some slowness in the ramp-up for opening customers?
I won't say there is a slowness in ramping up. Like I pointed out, it often takes 3 to 6 months for the customer to transition their work to NIIT, and I think we are seeing that site.
And the other follow-up was, I mean, obviously, we are confident that ramp down from the COVID level won't happen, right? That's our understanding, right? And 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 am able to see doesn't seem to be unprecedented. COVID saw unemployment levels become very significant. We are not seeing that. So I think while there is uncertainty, we don't see the environment anywhere close to being as similar to our COVID levels.
So there can be some more pressure now given -- I mean, the situation is evolving, right? So do we expect this to happen? You already have seen volumes going down for some of our customers.
I didn't follow your question.
So I'm saying FY '22 has seen some recovery in terms of volumes from COVID. Now all these customers are again adding back to COVID levels we are reducing volumes, right? So do you think there is more to come in terms of between the volumes? That's it.
No. Like I pointed out, 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. So we are seeing a little bit of jerkiness in response, which is human but as organizations start looking at the future and say, okay, this is reality what are we going to do if we start increasing their spend on training.
[Operator Instructions] The next question is from the line of Aman Shah from Jeetay Investments.
Sir, just wanted to know the acquisition of KNOLSKAPE that we did. It appears like we will be acquiring 5.88% in that. What is our nature of investment in this company? Is it -- it does not look to be strategic given the small stake that we have post conversion. So one of -- is it more of a financial investment? Or how are we going to use this as a synergistic way to our growth? And 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 failed. So is that like a fast growth rate that we are seeing on sales that -- that's why we had this consideration paid out?
So 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. So it is synergistic, and that's the reason for the investment.
And sir, the second was on the MTS customer. Last year that we had 16 customer additions to our MTS [indiscernible]. H1, we already have around 7 customer additions. Would you -- is there some visibility of the -- we will have a growth in the total addition of MTS customers in FY '23. Would you think of some visibility, is that...?
Yes, we have a very strong pipeline, and I think we will be ahead of the numbers that we did in the previous year.
[Operator Instructions] The next question is from the line of Jay Daniel from Entropy Advisors.
Yes. So this is more of a bookkeeping question. You have 3,300 staff. So what would be the approximate breakup of the staff, I mean, in terms of what kind of work they are 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.
And sales and marketing would be?
Yes. 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 management offering.
Because I had -- your physical infrastructure has closed down. So I was just wondering -- I mean, why do you require so many people?
Because we create and deliver a lot of training. We are among the top 5 provider of managed training services in the world.
Okay. And this project retailer, if I were to look at your block professional and technical outsourcing expenses around INR 75 crores, and they have gone up quite substantially on a year-on-year basis. So is this completely variable in nature? Or how do we look at these costs?
Yes, 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.
Yes, we have increased variability.
The next question is from the line of Sameer Dosani from ICICI Prudential AMC.
Just one clarification. So we have already pointed out that our CLG business is more towards the regulatory side of the service. So hiring freeze by a lot of these companies globally. Is that impacting us? Will that affect 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. And the hiring freezes are predominantly or at least what we have heard so far are predominantly from the tech sector in the United States. And a lot of what we do is to teach technical skills to employees of tech companies or telecom companies. And if they hire less than it does impact consumption of training.
Okay. And I mean, I don't know whether we 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. That's the first train that they get. And then I mean the more employees you have, the more training you will consume.
Right. And 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 going out? And will that trend actually accelerate or deaccelerate during uncertain macro? If you can just throw some light around that.
Actually, I would say the trend in high-performing organizations is the reverse of what we expect. The large, high-performance companies try to consume training that is designed for them because that's significantly more efficient and effective for them. And most of our customers are of the size that they can afford to customized training programs, given their size and scale. So we are seeing a trend amongst high-performing organizations who are consuming more customized training programs. And we think that, that trend is likely to accelerate and become adopted more widely.
Understood. Understood. Great. Third and lastly, if you can just throw some light on competition because the number of clients that you are acquiring, and I assume these are big clients, right, the Fortune 1000, Fortune 2000 clients, right. For a company of our size, how is the competition faring? Is there some struggle -- are we struggling with the volatility in the business? And how are these winning businesses because the number of client additions that you've done is very good.
At least my read of competition is that we are ahead of the pack.
We are ahead of the ahead of the pack. Our win rates also a number of times we bid a number of times we win, [indiscernible].
The next question is from the line of Rahul Jain from Dolat Capital.
Yes. Is my line audible?
Yes, sir.
Just wanted to understand the way our guidance and performance has laid out over last several quarters. We were kind of very conservative the previous fiscal, while we continue to do better both on growth and margin. And now it's kind of working macro moving in the other direction where we are cutting back to that in terms of guidance for growth and margin.
So now when you read your outlook at this point, it's kind of becoming a little confusing from the sense that we were very conservative and now it seems like we were underestimating the pain. So in those light what could be the stand? Is it like now we are far more conservative now in our thought process even that matters 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. So you should look at it as a projection that we see, Rahul.
Right. And 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 the business growth and the kind of cost base and also the mix of virtual versus on-site delivery of the training. What are the ideal growth rate on profitability that one should anticipate in this business on a more structural basis even if you give a band, I think that would also do.
Yes. I think from a midterm, long-term perspective, this business is a 2020 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. But I think from an overall perspective, this is a 2020 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 2020 business.
Okay. So basically, like 3 to 5 years versus 2020 is an achievable number for this band of the business. And just quickly if I could squeeze in one more. In terms of the new customer ovation, which has been quite consistent for us while we are seeing some softness in existing customers in terms of consumption of the payment.
So is there any way you are reading that in terms of your net new and existing new deal and also some what is the denial reading that you can take out? Is it like people want to outsource and those other customers that are giving you base opportunity While existing customers, they may have pressure at their own business level is where we are seeing the pain. So is there any clear readout out of the customer behavior based on the interaction and also in terms of what kind of business they're asking you for?
Look, I've been in this business for the last 3 recessions. And every time there is a recession the outsourcing trend improves. We've seen it the last 3 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. So we expect to continue to increase the velocity of customer acquisition. But like you pointed out, I would echo what you said that as organizations start seeing a recessionary trend there is -- they pulled out -- they go towards outsourcing as a method of transforming themselves.
Right, right. So we may see a pent-up. We can potentially see a pent-up like with the sales after the COVID that is a possibility given the situation?
Yes, we'll see an outsourcing activity.
As there are no further questions from the participants. I now hand the conference over to the management for closing comments.
If there are no more questions, thank you very much for your time and also all the questions that you asked. As I have mentioned before, each of your questions give us an opportunity to think. So these are very educated questions for us. And certainly, we take your suggestions as well as comments very seriously. Sapnesh 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. And there are uncertainties in the environment within that uncertainty for us to be able to say what we want to say is based on action figures that are available to us. . Can these action figures change over a period of time. They can, nothing, but we will keep you informed. We do have the benefit of getting to understand it a little faster than you get to now. So to that extent, we will remain very transparent with you. But at this point of time, we do believe that quarter-on-quarter growth will be possible in CSG as we go forward, and SNC is on a strong track.
So on this happy -- and of course, we'll continue to look for inorganic opportunities. We have put some substantially more effort in recent times as well. And hopefully, those will give some designs. So on this note, I thank you once again, and we look forward to speaking to you either one-on-one or on other forum.
Thank you. Ladies and gentlemen, on behalf of NIIT Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.