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NIIT Ltd
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Ladies and gentlemen, good day, and welcome to the NIIT 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. Thank you, and over to you, sir.
Thank you very much, and good afternoon, everyone, for joining us on this conference call. We are here to discuss 2 important issues. One is the demerger of NIIT Limited, which just got completed to brought it to the next milestones. I'll discuss that in a little bit more detail. After that, we also have the results of the 2 entities that have emerged. NIIT Limited, which is the listed part as of now. NIIT Learning Systems Limited, which is not yet listed, but we will go through those results first, followed by NIIT Limited results, which is the balance business, which is still left in NIIT Limited and has its own growth trajectory.
And we'll also be discussing -- revisiting the strategic rationale as well as the plan that we have for both the companies in a larger perspective. With me, I have here Mr. RS Pawar, who is the Chairman and Founder of the company; myself; Sapnesh Lalla, who is the CEO; Sanjay Mal, the CFO, who is now the CFO of NIIT Learning Systems Limited; Sanjeev Bansal, who is now the CFO of NIIT Limited after the demerger of NIIT Learning Systems Limited; Deepak Bansal, the Company Secretary of NIIT Limited before the demerger and now he is the Company Secretary of NIIT Learning Systems Limited; Aprita Malhotra who is the Company Secretary of NIIT Limited is not here with us at this time, but she will be joining us on the call. And then I have another colleague, Gaurav, who will help us with the detailed numbers.
So the sequence we'll follow is I will start by giving a rationale of the demerger after which I will hand over to [ Rajiv ] Pawar to give us the strategic direction as well as rationale and followed by Sapnesh, who will take us through the NIIT Learning Systems that is the CLG business results. I will cover these skills and careers part, erstwhile skills and careers part now in NIIT Limited results and then we'll open it for Q&A.
So if that's okay with everybody, we'll keep our comments short. All the data that we are sharing with you has already been on the Internet, and we have posted it. I'm sure there'll be a lot of questions. We have provided for extra time in today's meeting given the demerger-related questions, which may be beyond the questions covering the performance of the organization.
So let me start with the demerger. Going back in January 2022, the Board of Directors had approved a momentous development relating to the reorganization of NIIT's 2 distinctive business lines, the skills and careers business and the Corporate Learning business in 2 independent companies. We shared this earlier, but I'm delighted to inform you that the strategic action, which was initiated early last year has now been completed with the demerger of NIIT into NIIT Limited and NIIT Learning Systems Limited. This is after receipt of the customary approvals from all stakeholders and regulatory bodies.
With filing of necessary forms with MCA and adoption by the Board, the demerger has created 2 independent entities, like I mentioned before, NIIT Limited and NIIT Learning Systems Limited with effect from May 24, 2023. So the effective date of the merger is May 24, 2023. The appointed date that is the date from which it is -- the results have to be recast in first of April, 2022.
Just to remind everybody that this is a mirror demerger that means every shareholder of NIIT will get 1 share of NIIT Learning Systems Limited in addition to their holding the NIIT Limited share. And this will be done for all shareholders on record as of the record date, which the Board has fixed at June 8, 2023. After the record date and issue of these shares, NLSL will go for a listing, which has to be completed in the next 30 to 45 days subsequent to that, which will then finally complete the demerger process in totality.
So while I did mention the term completed the demerger but completed it to the pre-listing milestone. Now the listing milestone for issue of shares and listing milestone is the balanced part left. And that is what will happen in the coming months. I will halt here right now, and I will ask [ Rajiv ] Pawar to take us through the strategic rationale one more time as well as the direction both the companies have before we get into the results.
Thank you, Vijay, and good afternoon to everybody. Vijay has laid out the larger process and the steps we've been through. But if we step back one minute to make a few points. You all know we have the 2 businesses, and you know that we've demerged the Corporate Learning business into NIIT Learning Systems Limited, NLSL. NLSL has, over the many years, perfected the value proposition for the Fortune 1000 companies that we call Managed Training Services which is offered to these companies and their operations in over 30 countries.
On the learning outsourcing business, which is what we have created, this market is underpenetrated and there's a significant headroom for growth. Now the demerger empowers this newly created entity to sharply focus the management team as well as the capital allocation on significant opportunities that are emerging in the learning outsourcing space. NLSL has over 80 global customers, and it has won over 400 awards for the quality of work and is ranked today among the top 5 learning outsourcing companies worldwide.
Sapnesh who had led the transformation of the CLG business from custom content to Managed Training Services and brought to the top 5 will lead the business and has been appointed as CEO and Executive Director of NLSL. We will focus on accelerating the growth of the company, creating more value for customers, employees and shareholders.
Now given the track record, given the momentum we have, given the excellent team that Sapnesh has built and a strong balance sheet, we see an opportunity to accelerate the business and move towards global leadership. So that's NLSL. NIIT Limited on the other hand, that deals as you know with talent transformation to equip the workforce. And we did that in the 80s and 90s building talent for the IT sector, and in the next decade, we started working to build talent for the banking sector.
Now this moment, we look at as a watershed moment as NIIT Limited is getting ready to deal with the many, many opportunities that are coming for new talent in the emerging sectors, which are in front of us. Now this is, by the way, happening in a period which is a turbulent period, which is driven by 3 factors. First is that the accelerating growth of digital technologies, telecom and data is causing digital transformation in more and more sectors of industry and society. And this is causing many big changes to how we work and how new skills are demanded.
The second is a discontinuity, which was caused by COVID. And that made some very fundamental changes to how we live our lives. How we get educated, how we work from anywhere. In fact, we're making a difference to the employers-employee contracts as is evidenced by gig work and a very big change in everybody's perception of the work-life balance.
Third, and I think we've all watched this during the COVID time, we saw online taking a big, big growth and then facing some difficulties. And so all of these actually constitute changes in the environment, which are building it into a period of uncertainty. And all of us as founders see this as a time of great opportunity. Over our 40 years, there have been at least 3 instances of fairly dramatic changes in the sector. And in each of these, we seized the opportunity and came back with a much stronger competitive position. And that is what we are trying to do this time as well applying to it this time.
Now during this period of the last couple of years, the Board of NIIT Limited has been strengthened with the appointment of 3 very competent new directors and so that's equipping us to go forward. But when we look at the growth going forward, we see 3 vectors of growth. The first is the broad basing into many, many sectors of the economies where the need for new talent as well as for talent transformation is becoming evident. Today an overriding percentage of our beneficiaries come in the IT sector, then a smaller percentage in banking and much smaller percentage in other domains. Now the initiative rather is cover a wide range of emerging areas, including new manufacturing, engineering, R&D, supply chain management design, and so that's the first vector for growth. The second is to invest more in the mode of delivery, [indiscernible] and now with the emergence of AI as an important change agent, we see that there will be significant change in the way we deliver growth. And so the third vector we are building is to look at organizational transformation of the company. And so this coming year, this year we're in, we'll see many, many changes in the way we manage the organization. So to conclude, let me just say this. The 80s and 90s saw NIIT create talent for the IT sector, the next 1.5 decades for the banking sector. This decade we'll see the company contributing to talent in the various new emerging sectors. And so this reason that NIIT which started with the mission of bringing people and computer together successfully in 1981, it's now creating a new mission of becoming talent builders to the nation. That's what we're looking at as our mission.
So it's a huge ambition. It's fueled by a massive opportunity being created by resurgent India, driven by 4 decades of leadership in global talent development. And I think also something that's expected by the promise of a trusted brand that is NIIT. So these are some comments I wanted to make about how we see ourselves going forward. So back to you, Vijay.
Okay. While we open -- I'm sure there are a lot of questions you will have. But while we will do that, simultaneously -- I mean at one time, finally, let me right now hand you over to Sapnesh to talk to us about NLSL or the erstwhile CLG business results and projections.
Thanks, Vijay, and thanks, [ Rajiv ]. It indeed is a pivotal moment for both NIIT and NLSL, NIIT Learning Systems Limited. I'm sure like you pointed out, it will empower us to create new avenues of growth for NIIT Learning Systems Limited given the independence and the ability to deploy both human as well as growth capital on the value chain.
We have, as I've mentioned in the past, continue to overinvest in sales and marketing as well as new capabilities. And these capabilities have enabled us to continue to win new customers and expand the business that we do with existing customers over the last one year. The last one year, from an overall perspective, has been an year that has been interesting on 2 counts: one, NIIT acquired St. Charles Consulting Group Limited, as you know. So we've added new capability as well as a new set of customers. We've also seen the uncertainty and challenges that uncertainty brings from an economic perspective. And I wanted to provide the results for this last year in that context.
For the full year, revenue stood at INR 13,618 million. It was up 20% year-on-year. In constant currency terms, the revenue grew at 14% year-on-year. NIIT, as I mentioned earlier, acquired St. Charles Consulting Group during the year. Excluding the contribution of St. Charles Consulting Group, the revenue was up 11% year-on-year. The EBITDA stood at INR 3,154 million. It was up 6% year-on-year. The operating margin of 23% was down 310 basis points year-on-year. The profit after tax stood at INR 1,922 million. The EPS stands at INR 14.3. [Technical Difficulty]
We have the management line reconnected. Sir, over to you, please go ahead.
Sorry about that. At the end of the year, cash and cash equivalents are at INR 5,722 million. Net cash at INR 4,563 million. The days of sales outstanding were at 52 and NIITians who are becoming a part of NIIT Learning Systems Limited stands at 2,335.
For the fourth quarter, the revenue stood at INR 3,857 million. This was up 30% year-on-year and 6% quarter-on-quarter. The constant currency revenue growth was 15% year-on-year and 4% quarter-on-quarter. Excluding the St. Charles contribution, the revenue was up 6% year-on-year for the quarter, reflecting reduced consumption due to macro uncertainty. The EBITDA was at INR 948 million, up 30% year-on-year. The EBITDA margin was at 25%, up 70 basis points quarter-on-quarter.
The margin improvement was driven by optimization and improved utilization of resources. The profit after tax was at INR 539 million, the EPS was INR 4. As you know, Q4 is a seasonally weak quarter for the business. as for several of our customers' budgets are just opening up. The uncertainties in the environment continues to affect the business as we had guided while spends are impacted our customer additions, new customer admissions -- additions remained strong. We are seeing an increasing propensity to outsource by customers driven by the need to control costs, and we are seeing a very strong pipeline of deals.
During Q4, we added 4 new contracts, Managed Training Services contracts. One, a technology major, another a health care insurance company, another global payments company and a renewable energy conglomerate. As of March 31, the revenue visibility stood at INR 363 million and the number of MTS contracts stood at 80. In the 80 contracts, we have also added the significant customers of St. Charles.
As I look ahead, I believe that the uncertainty will start to lift around the second half of the year. We expect our first quarter to stay challenged and be flat or marginally up as compared to fourth quarter. We are likely to start seeing sequential growth or material sequential growth from the second quarter, and we should see most of our year-on-year growth towards the end of the year. Overall, we expect to continue to grow at approximately 20% on a year-on-year basis and maintain a margin of upwards of 20%.
That CapEx for the year is expected to be about INR 45 crores. Vijay, that was a roundup of the numbers from FY '23 and Q4 for analysis. Back to you.
Okay. Just to complete the briefing, let me take you through the NIIT Limited's revenue, which is the skills and careers business, erstwhile skills and careers business, which so far we had been sharing the results at EBITDA level. But this time, given the fact that the 2 companies have demerged, I will be taking you right through the PAT stage.
So NIIT's revenue for the year was at INR 341.3 crores, which was up 36% year-on-year. NIIT's work and the NIIT services can be split into 2 broad customer segments. One is early career professionals where we either provide training both pre-hire or during onboarding. This training helps our learners get aspirational jobs and set them up for success in their careers. This segment has been an area of strength for NIIT and continues to be so. And when I say has been area of strength, I'm referring to the last 42 years.
In addition to that, working professionals now where NIIT provides training to working professionals, helping them advance their careers. This category is predominantly serviced through the enterprise go-to-market and was recently strengthened with the acquisition of RPS Consulting. NIIT's training programs are broadly for early career and working professionals are broadly covering 2 sectors, technology and the other is BFSI. There is a small segment of other sectors broadly, which I have clubbed under BFSI only.
And there are 2 go-to-market methods, one, direct-to-consumer and second through enterprise. So the customer mix for FY '23 in early career segment was at INR 183.8 crores, which contributed 54% of the total revenue and grew 15% year-on-year. However, this is -- has this growth dropped rapidly or quite suddenly in quarter 4, and I'll share with you the results or the run rate that we had till quarter 3 separately. Work Pro segment, on the other hand, contributed 46% and grew 73% year-on-year and was that INR 157.4 crores. In program mix, technology sector programs contributed 80% of total revenue, and the balance was with BFSI and others.
This technology sector programs were up 40% year-on-year basis. StackRoute and TPaaS, which is a number that we have been sharing in the past up 17% Y-o-Y and contributed 32% of the Skills and Careers revenue. FY '23 was the first year -- full year of RPS Consulting, reminding everybody we acquired RPS Consulting on first of October 2021. If we exclude RPS Consulting, even then the organic revenue was up 13% year-on-year despite the impact of slowdown in hiring in the second half of FY '23.
The EBITDA for the year was at INR 10 million and versus INR 25 million in FY '22. We have to look at these annual results in the light of the fact that some parts of the business, especially the enterprise go-to market are in profit -- are making profits, but that profit is getting reinvested -- is getting reinvested in the transformation of the business, which is taking place from the consumer go-to-market side. This is one fact, which is not very clear in these results.
The second is the Skills and Careers business has seen strong growth in the last 2 years after pivoting to digital learning in FY '21. We believe quarter 4 was a blip due to seasonality as well as the extreme headwinds coming from the environment. Despite this blip, the business achieved a CAGR of 66% over FY '21, with organic revenues growing at 31% CAGR. So this part is not coming out clearly in our results. Since over the last few years, all our discussions have been in the overall NIIT Limited and therefore, the smaller part of -- the smaller part of the business, which is Skills and Careers, may have gone unnoticed in terms of the growth that it has experienced.
The transformation of the business is underway and we expect the growth to become more sustainable, consistent and profitable over a period of time. The training volume is expected to pick gradually during the year, with growth in second half of FY '24, and we expect a double-digit growth for FY '24 with margin improvement to mid-single digits for the full year.
I'll pause here and now open the floor for questions.
[Operator Instructions] The first question is from the line of Jyoti Singh from Arihant Capital Markets.
The first question is on the margins side, what are our expectations going forward for FY '24 and '25 as macroeconomic uncertainties, so what's our overall outlook on that?
Jyoti sorry to interrupt, your voice is breaking. It was not clear. Can you please repeat the question?
Now, it's better?
Yes, slightly better now.
Yes. So I need a view on the company going forward. What are the expectations on the growth side and margin side for FY '24 to '25 as we are seeing macroeconomic uncertainties. So what's your overall view?
Given the macroeconomic uncertainties, what is the view on growth and margin guidance for FY '24 for both businesses.
For both businesses.
So I'll start with the NLSL business. For the NLSL business, we expect to grow at approximately 20% for the fiscal year '24 and at a margin of upwards of 20%.
And for NIIT Limited, erstwhile Skills and Careers business, as I explained to you earlier, we are seeing a stabilization happening during the year, but the growth, while we will see sequential growth quarter-on-quarter, but I think there will be an acceleration in the second half of the year. And therefore, for the overall year, we see an 8% to 10% growth. I did mention double-digit short while ago. So I would say we'll aim for double-digit growth for the year and a mid-single-digit margin because the investment in transformation will still continue.
Just to say that the enterprise go-to-market business has quite a healthy margin, and we are reinvesting that margin back into the business to make sure that the consumer go-to-market gets strengthened because unless the 2 are working together, we will not be able to clock a sustainable growth over a period of time.
[Operator Instructions] The next question is from the line of Ganesh Shetty an Individual Investor.
Am I audible, sir?
Yes.
Very clear.
Yes. Congratulations to the entire management team for the completion of demerger. And also, I'm very happy for the pain taken by the management to increase the shareholder value. I've been the investor of NIIT Limited since before the demerger of NIIT into NIIT Technologies and NIIT and NIIT has created immense value for all the investors community, and I wish them all the best and all the information given by the management is quite sufficient at this point of time. Thank you very much, the management team.
Deeply appreciate your comments, Mr. Ganesh Shetty. Yes, I remember. You've been on this call for now nearly a quarter of a century. And I think that is really very, very -- we are very proud of having you as a part of our shareholder family, and we hope we'll continue to live up to your expectations as we go forward.
Thank you very much, sir, and all the best.
The next question is from [ Pooja Doshi ] from [ Southern Management Advisors ].
I wanted to if you could give me your onshore and offshore employee mix, that would be great, for the CLG business.
So the number of -- total number of employees in NLSL on 31st of March 23 stood at 2,330 approximately. Out of those, about 600 are employed outside of India. This is approximated, maybe a couple of things here and there.
Yes, fair enough. Sir, I believe within CLG almost all your training is propriety training. So just wanted to understand what sort of trainers or suppliers you hire? Are they old industry experts or are they ex-company employees? And what are the contract terms with NIIT? The reason I'm asking, this is because, for example, in oil and gas, it could be an extremely technical training. So would you want to need an expert to train the employees, is essentially why I'm asking this?
You actually answered the question quite well. You are right. We employ trainers, some of them on our roles. and several on contracts. We do that to ensure that we have reliability in our system. And like you pointed out, these folks have proprietary expertise in the domain that they serve. So folks in oil and gas will have deep oil and gas expertise, people in pharma, likewise will have pharma expertise and so on and so forth.
At like I pointed out, we employ some of them on as full time equivalents on our payroll, but a large number of them as contractors. We don't disclose contract terms, neither of our contractors or employees, but suffice it to say that the terms are those of a typical independent contractors.
And Pooja, let me complete the head count for you. We discussed the people who are on roles of NIIT Learning Systems Limited, in addition to that, on NIIT Limited payroll, we have 959 employees as on 31st March at the end of demerger, who have moved into NIIT.
Okay. And so within CLG, again, if you could give me a mix of your mandatory or non-mandatory training. By mandatory, what I mean is that like that's going to happen irrespective of the market scenario, whether we are into recession or inflation or whatsoever. So if you could help me with that mix.
Sure. So let me clarify something. All training is discretionary in nature. However, like you pointed out, mandatory training has higher amount of certainty as compared to nonmandatory training because mandatory training often is regulatory in nature or licensed to operate in nature. About 50% to 60% of our training tends to be the regulatory or mandatory training.
Okay. And sir, just one last question. If you could help me with the other assets bifurcation of that INR 120 crores in the balance sheet for NIIT.
Of NIIT Limited?
Correct. Correct.
Okay. I'll request my colleague Sanjeev Bansal to take this to -- fixed assets -- it's fixed assets breakup or...
Other assets, INR 120 crores.
Other assets. Okay. So we just take this question after a few minutes. While I -- my colleagues will prepare the answer. We can till then handle the next question.
No that's it from my side. Thank you for answering all my questions and good luck to you.
Okay. But Pooja, I will just revert back with answer to this question about asset breakup, okay?
Yes. Sure.
The next question is from the line of Shradha from Amsec.
Congratulations to the team on completing this milestone. So a few questions on NIIT Limited first. So the guidance is of double-digit growth or is it 8% to 10% growth that we are guiding to?
Yes. I did mention 8% to 10%. However, I also said double digits, so right now, you can assume 10%.
Okay. Got it. And another thing is I mean, have we hired any CEO of NIIT Limited? Or how are we looking at the top leadership for this business?
Yes. So as of now, given the strong transformation, which has to take place and in an accelerated manner given the current environment, we decided to opt for the founders rolling up their sleeves and jumping in the fray and making this transformation happen, while the individual business leaders will directly work with the Board. The purpose of this is to ensure that we use the experience of the founders who have done this kind of a rapid transformation without allowing and therefore, making sure that there is a direct connect with the market, and therefore, the response time of the organization will be much faster.
If we had a leader through whom this transformation took place at this point of time, so that's a considered decision. But in the next 4 to 6 quarters, definitely, there will be a transition to a leader and that can be in the early part of the 4 to 6 period or maybe around that.
Got it. Got it. Sir, another thing is we were of the opinion that the NIIT Limited business was a negative working capital business. But when I look at the DSO, even this business shows a 33, 35 days DSO. So just wanted some clarity on this front.
Yes. So 2 parts. The RPS business which we acquired, which is predominantly an enterprise go-to-market does have a working capital need. The consumer part of the business is a negative working capital business. But at this point of time, the enterprise business is in excess at this point, the enterprise go-to-market part of the business is in excess.
Okay. Okay. And if I can squeeze in some questions for the CLG business. So would it be possible, Sapnesh, for you to give the split between organic and inorganic growth in the guidance?
The organic growth is likely to be mid-teens for FY '24.
For FY '24.
Organic growth, you mean excluding St. Charles, is that what you had in mind?
Yes, yes, yes, excluding St. Charles.
Shradha I want to also complete for you that now RPS is 100% subsidiary. We bought the last 10%, and that's also public knowledge now. In April or -- in May, early May, we completed the last 10%. And there is an earnout attached to it, which will get over in the next 18 months.
Yes. So just to clarify, on the NLSL guidance, the organic guidance is of mid-teens. Is that what you're referring to?
I'm sorry. Can you repeat? Just say it loudly whoever...
NLSL guidance for FY '24 [indiscernible]
Organic. Organic is mid-teens but for the full business, it is 20%.
Okay. Okay. And for the revenue...
Business including St. Charles full year numbers was inorganic because last year, they were included only for about 1.5 quarters.
Got it, sir. And this revenue visibility number, which increased to $363 million in this quarter, how much of it is attributed to addition of StC? And how much is it because of the full organic business growth?
Very good question. Approximately $30 million is associated with St. Charles.
$33 million.
$33 million is associated with St. Charles.
Just to complete the picture. Last quarter -- since last quarter, we added 4 new MTS clients and 2 clients from the earlier list got reduced because those contracts got completed. And therefore, we now have 73.
73 MTS customers from an organic point of view, and we added 7 St. Charles for whom we added a visibility of 33.
So 73 at 330 and 33 -- 7 more at 33 were added.
And we have said, at least at this time from the acquisition that we'll watch the performance for about 1 quarter to 1.5 quarters before we bring their numbers into visibility.
Got it. And sir, if you look at the top client's concentration for NLSL, the top 5 client's contribution increased quite significantly. So was it related to some particular clients that did well in this quarter? Or how should we read this?
The top 5 client's concentration, there's been an increase. It's because of St. Charles -- there's been in correlation and their last client coming in as well, as well as growth in other clients.
Yes. So the client concentration increased because one-off St. Charles customers as a revenue that's greater than average, so a large customer. So they entered the top-5 list, as well as one-off the organic or CLG customers did well.
Next question is from Siddharth, an Individual Investor.
Congratulations on the results and the demerged process. Actually, quite a few questions from my side. So my first question would be regarding the demerged entity that we have at NIIT, the smaller business. Now we have been giving guidance from even in the last con call that we'll be growing at around 40% to 50% a year.
Why this sudden sharp cut saying that we're now talking about single digits because one of the rationales for the demerger would have been to accelerate the growth and to capitalize on 40%, 50% growth numbers, like you mentioned, even this year it was a 66% growth. So I mean, we're targeting something like a small company INR 100 crores, INR 200 crores revenue -- INR 300 crore revenue companies, this will be growing much faster. Why are we looking at such a degradation in terms of growth? Secondly, within this NIIT, we are looking at cash equivalent of INR 700 crores. So even if I put a 4% bank interest that comes to about INR 28 crore as interest, and we're saying our EBITDA should be only single digit. So let's assume on a revenue base of maybe INR 5 -- 500 crores, essentially what we're saying is we're going to consume all the money we earned and essentially the interest cost is all that is what we're going to earn from this business. Could you please clarify? And then I'll ask more questions, post.
Yes, certainly. And I must compliment you on thinking this through, but I would like to explain this in that perspective. First of all, we are looking at the business that it is work in progress in terms of transformation. And we are not expecting that this transformation will last for the next 3 years or 4 years that we have till we said we would reach INR 1200 crores. That transformation unfortunately got interrupted very sharply in the fourth quarter of this year. I had mentioned sometime back that I will share with you the growth that we were clocking before that. So I want to share with you some statistics. If you look at our growth till CYD Q3, enrollment growth in early career was 78% year-on-year. But now at the end of fourth quarter, it has come down to 38%. That is, fourth quarter of the previous year was phenomenally large because at that time, if you remember, there was a euphoria with huge recruitment in progress. In contrast to that, there has been a sudden freeze in recruitment, pressure recruitment or headcount addition, and I'm sure we both read the same newspapers. In fact, in quarter 4, the headcount addition has been negative. The second is the freeze on the spend and the freeze on spend has also come very rapidly because, obviously, people are saying there are massive layoffs. You know all the numbers, all the biggies and the majors and the way they have dropped numbers on one pretext or the other. Each one of them have a backlog of fulfilling recruitment promises which they made last year. So in that environment, in the next 2 quarters, we don't see the situation improving, in fact, I went on to say that we will have a sequential growth quarter-on-quarter. That is coming from the fact that our organic growth in enrollment will help us achieve that growth despite a very massive uncertainty in the environment and the freeze, this is a very unique situation. Couple this with one more fact, start-ups which were falling over each other trying to recruit people and the salaries were going through the roof and laying off people because their funding season has dried up. So I think we don't think this situation will continue. So we have actually fallen in a trap, but I believe that the recovery as soon as the backlog gets over, will also come sharply. And now the consumer go-to-market part of our business also, I think the experiment that we were doing over the last 3 or 4 quarters have now shown us the way forward.
So we do see that there is a possibility of a strong possibility of a V-shaped recovery from the current situation, and we should be back on track. Now we fell down from INR 900 million run rate in quarter 3 to INR 600 million. And this is despite the fact that the enterprise part of the business has been stable or declining in terms of margins though declining in revenue. So when we come back for recovery, I think we will see sequential growth, but it will take us a better part of this year to come back and make up for what has got caused in quarter 4. So this is my answer to that. Are we committed to that trajectory? Indeed, we are. Will this happen purely through organic means? It was not meant to, and it will not happen that way. Most probably, there will have to be inorganic activity. The bright side of the picture is that inorganic activity will be more feasible now given the fact that like us, many of our competitors if I just say are in what shape than we are and have been much mostly affected. We have a strong balance sheet, we have money in the bank, and I think it's a great opportunity for us to add up and to get back on the growth track. I don't know whether I answered the question or not?
Absolutely. So just a few more questions. So secondly, what we've been doing -- yes, so we've been doing the -- again, this is also related to NIIT, I thought to address that later. So we've also been doing the NIIT boot camp at the NIIT University. And there were certain startups that you also mentioned and Mr. Pawar in his speeches has mentioned, and are getting training from the NIIT team as well. So anything that we are looking to acquire over there and since you mentioned the acquisitions, is there any monetary target we can set in terms of certain companies we are looking at the moment? Or any new kind of SNC space we're looking to enter maybe a level below, say, a K-12 or we're very clear we're not going into that space at all?
So we are not going into the K-12 space. That is a definitive answer. We are definitely looking at the start-up growth camp that you mentioned about, those are fairly early stage start-ups and what we are looking at is how can partnerships with those, whether they are financial or strategic can help us move forward on our trajectory. K-12 and test prep are not the areas that are of interest to us, and we are not going to be there because that's a decision that call was taken some time ago.
Are there other acquisition targets that we are considering? Yes, we are in active discussion on a few possibilities. But as you know, these things happen only when they happen. So I can't tell you when whether we have a monthly or quarterly target there.
Right, sir. So one more question. So the other day, this is about a month or so back, CNBC TV in the U.S. was discussing the impact of AI on learning companies. So for example, on that particularly, it was very disturbing to see Chegg goes down 20% and Coursera was down 15%, 16-odd percent in the market. So my question was, how do you see AI impacting the learning trajectory because a lot of students would now say, hey, for example, if I want to learn something on marketing, why take a course, why not just ask ChatGPT to help me create a marketing framework or something of that sort? For example, if I want to create a code, why not use AI in some manner rather than trying to go to an NIIT or an UpGrad, whoever to actually learn. So isn't this a significant risk to the business, and how are we planning to mitigate it in our learning as well as our CLG side of the business?
So this is one of the favorite subjects around this table. We actually spent 2 days in the Board meetings before we came here, and this was a very active part of the discussion. Before that, a few of our Board members and I, we spent time in U.S. with some of our strong partners as well as thinkers. And here is our considered view. And I would say my part and I'm sure Rajiv and Sapnesh will add to that. First of all, AI presents a phenomenal opportunity for us to scale up very, very fast. One, to make sure that we have AI as a subject in which large number of people will need to be trained and large corporations will need help in finding out what they should do with AI. That is AI as a subject. The second is AI in learning. AI in learning is a great opportunity as well because in very simple words it will contribute substantially to the efficiency of learning as well as the effectiveness of learning. Efficiency of learning what used to take 10 number of hours to create and 10 number of hours to deliver can now be done in a fraction of time which can -- which means much more can be delivered in the same time with the same resources. Effectiveness, because you can actually personalize the learning experience to a class of 1, something [indiscernible] that we had before. So if we use both these, it represents a huge opportunity. How is this materializing in real sense, I will request Sapnesh to say because he is coming right from the battle ground.
Thanks, Vijay, and it gives NIIT great opportunity to deliver AI. In fact, we've had under our Chief Learning Scientist, Dr. Gregg Collins who incidentally got his PhD in AI from Yale almost 35 years ago. Under him, we have a team of about 30 to 40 engineers working to see how we can -- how they can enable us to embrace AI. And like Vijay pointed out, we have a number of experiments going at this time, both on the dimension of efficiency as well as on effectiveness. I will make a comment on the point that you made about Coursera or Chegg. Just like what calculators or google did, remembering tables by both became irrelevant. Similarly, remembering information or having Encyclopaedia Britannica on your bookshelf became irrelevant because of google. Similarly, knowing a lot of information will become irrelevant as far as AI is concerned. So training that was masquerading as information has become irrelevant. It was relevant in the past, but it has now become irrelevant.
What is relevant is training that creates outcomes that enables people how to do a task. For example, if you wanted to learn how the swim and swimming was important to you, AI is not going to replace your ability to swim. Now AI could instead of you watching a video of my friend swimming or teaching you how to swim, you could get AI to show you another video. But you still have to go out into the pool and in the process, learn how to swim and then you'll be able to swim. So in that shell, I think AI will help us make the process more efficient and more effective, and it will lower the value of training that was actually not outcome-oriented, it will, on the other hand, significantly increase the value of training that was outcome-oriented. And one thing that I know about NIIT over the last quarters, it's focused only on outcome-oriented training.
Right. My next question is, again, related to NIIT, the smaller company. Today, Mr. Pawar mentioned on television in on CNBC that he spoke of, the hybrid model of training. Are we by any chance looking now to set our physical centers or that's also no go for us considering the -- it's basically a drag on profitability?
I think hybrid can be understood in many, many formats. We have a number of experiments underway on that. In the future of learning, there are enough schools of thought which believe that without a face-to-face intervention at specific parts of time, learning effectiveness remain challenged. Having said that, we have mastered the learning delivery online completely, but there are other portions of the learning cycles from acquisition right up to careers and building careers which are being considered in other parts, but more about this as we discover the results of our discussion.
Okay. My next question would be for NLSL. So 2 questions on this one. Firstly, you mentioned that there was one company whose contracts did not get renewed. Until now we have prided ourselves on the fact that we've had 100% renewal rate. So why is it that at this point of time, one company did not even after this contract get over, renew our NPS services, number one? Secondly, am I right in assuming that we will have INR 500 crores cash available to us? And if so, do you think that is sufficient for future inorganic growth for NLSL? And thirdly, would the founders, Mr. Thadani and Mr. Pawar also be spending some time on NLSL they would be totally focused on NIIT? And one last question would be regarding dividend. Why not reward shareholders for the time they spent with the company with a dividend considering demerger has now happened, and we do have significant cash on the books?
Very relevant questions. So let's start one by one. Let me work backwards from dividends. We do believe NIIT has been a dividend-paying company. And we had mentioned in January of 2022 when we declared the interim dividend or not interim, special dividend because we had said that till the demerger process is complete -- sorry, after the demerger process is complete, both companies will take their individual decisions on dividend. The demerger process is complete to an extent, but not fully, as I mentioned in my opening comments also.
Immediately, the Board meetings which take place after listing of NLSL, that is the place at which the 2 Boards will take a call on declaring dividend for their respective part. So therefore, given the time that it takes for the listing process, you can expect that the Boards will consider declaring a dividend, I think by end of this quarter 2 results quite certainly, and if things happen in time, then even quarter 1 results is a possibility. But quarter 2 results, interim dividend is perhaps more in line with the current time lines on which the project is working. That's one. Your second question was whether INR 500 crores -- whether or not founders will spend time. So Rajiv will also answer this part, but sufficient to say that both are -- on both the Boards and I am, a Vice Chairman and Managing Director on both sides. But Rajiv will add more to this.
I think as I mentioned in the outset, the NLSL strategic direction that Sapnesh created a while ago and then the whole strengthening of the team and the improvement of the process and more use of science and technology and learning, all of that has gotten in a very good role. So strategic inputs of the type we need in NIIT limited at this time are not necessarily on the other side. However, we do see many more drivers of growth in which we all get involved, and we'll continue to get involved. NIIT limited on the other hand is sitting on an opportunity where there's many turbulent factors in the environment. And also, we want to broad-base many things about how we do things. So there is a need to do many more things on the drawing board, including, of course, dealing with the headwinds of IT sector not high. So as we said at that time, all the moments where you need to roll up your sleeves and get into taking certain operational and tactical decisions, certain talent addition decisions, which are very direct. And therefore, that will take time for [indiscernible] Rajiv to work on more than what we have done in the recent past. So it's not that there will be no time left for NLSL that needs our time in a certain fashion because as I said and I repeat, with an excellent strategic direction and with excellent competitive net which we are working upon. So there the support is much more to give a shoulder once in a while and of course, the whole governance area. I hope that answers this part of the question?
Okay. Then the question, your last. There was one more before that, but let me complete the INR 500 crores. So first of all, the NLSL is opening its account with nearly INR 570 crores, INR 500 crores which that account which got opened in 2012. Even after the St. Charles acquisition, we are left with 5 -- we now have INR 570 crores. And this is INR 200-plus crores of cash generation every year which you add to that?
Our typical sweet spot for acquisitions is a $25 million to $50 million company. And therefore, I think there is sufficient headroom available for us to add a few more in our journey towards $0.5 billion, not thereabouts as we had mentioned.
And lastly, you had a question about the 2 contracts that we declassified from MTS contracts. Look, every quarter, we take a look at all our contracts, we have -- I do want to confirm that all contracts that have come up for renewal over the last 3 years have been renewed. The 2 contracts that we have declassified from being MTS customers, both customers continue to be our customers. It's just that given the shrinkage of volume, we have not classified them in this quarter as MTS customers. And we have not taken visibility on that.
Hello, are you able to hear us?
One last, one last question.
One more question. Can we know if this is the last question...
This is one last question. This is more with respect to, again, creation of shareholder value. With all due respect to everyone else on this call, I was not hearing the names of large institutional holdings like a mutual fund or an ICICI people on this call. It's more smaller houses or individual investors like myself. Why is that we're not able to attract these large institutions into our stock, into our company, considering we're doing such a nominal job? And secondly, don't you think as founders and as the CEO, when I hear on other con calls, they use words like cautiously optimistic, more -- they give a bit tones, they try to fire up the business rather than turning it down, like we talk about uncertainty, turbulence. Don't you think this is -- some level is discouraging institutions and institutional activity in our share and therefore, impacting shareholder value for smaller retailers like us?
Okay. I think there is a larger discussion involved here. So first of all, I think if you look at our -- we are very proud of our shareholders first of all, you are one of them. But I'm saying you let -- you referred to large fund houses, I think there are large fund houses who have exposure to stock and market gaps of our size. I think we enjoyed a solid position there. And we have absolutely no hesitation in saying that we are very proud of their association. Our shareholders have been with us for longest periods of time. But then, for certain considerations of their own, they decide to get out of certain values of a certain level of stock, then obviously, they have to go back to the norms that they set. But typically, in the market caps that we enjoy at this point of time, I think we have excellent shareholders. Our inclusion in the MSCI has also helped us get a large number of EPFs who track us. And I would not like to get into individual details or individual names of our shareholders because I think we are supposed to keep them under the wraps to the extent that we can. Our FIIs owned the FPI, I think we have a stake of 21% which is a fairly decent percentage compared to our contemporaries as well as in contemporaries in the IT services which is where we combine very quite often. So I don't think we have a death of the quality of shareholders. I think we have very good shareholders and we are very proud of that. And they have had long associations with us. Should we be able to attract more? Of course, we should be able to attract more. And we are making all efforts to do that and when we have committed to passionate shareholders such as yourself, I'm sure you will help us in that journey as we go forward, which is a win-win.
The next question is from the line of Baidik Sarkar from Unifi Capital.
Most of my questions are answered. But if I can just step in and ask your comment on the endeavored growth for FY '24. How much of this is really dependent on the environment really getting better or deteriorating? I ask this because leaders like us or to consolidate on the market share irrespective of what the macros are?
So I can answer the question on behalf of NLSL. You're very right. When demand is compressed or constricted, opportunity is in growing market share and also increasing new customer acquisition. And that's really where our focus is. However, demand contraction does result into lower growth. But that is a short-term phenomena. The new customers you acquired and the gain that you get in wallet share lives for a much longer period of time, and that's really where our focus is at this time.
Sure. And on the international business, what were the one-off costs we booked in Q4? I think that is adequate disclosure on the full year numbers, but I'm just curious about what were the one-off costs on Q4 international [indiscernible]. So in Q4, I believe the acquisition was already booked in Q3, if I'm not wrong. And my question is specific to Q4, please.
Can you just identify because I think we also have a slight audio issue. So I have to keep asking again and again. Can you refer to the line item that you're referring to?
No. So I'm referring to the international business. I think there's an adequate disclosure in your PPT that talks about the one-off costs for FY '23 as a whole, right? For instance, your acquisition cost sufficient...
So [indiscernible] are to do with St. Charles acquisition and there would be costs relating. Yes, and you said it's FY '23, whether that happened. So quarter 3 was part of FY '23.
Let me repeat my question. What were the one-off booked in FY '24? It's a different question. In Q4 of FY '24?
In FY '24, there is no one-off cost booked...
So I believe in Q4 of FY '23, just for one quarter, Q4?
No. Q4 FY '23. Can we take it offline from you because I think we are struggling to understand. And by the way, I still have to answer the third question, yes. Hold on, can we revert back to you in a short while?
Yes, sure. No worries.
The next question is from the line of Anirudh Jain, an Individual Investor.
First of all, congratulations for completion of demerger. Sir, I have 2 broad generic questions. One is, how those businesses will pan out in the next 4 to 5 years, including the revenue and margin growth? And what are the factors which will contribute to the growth? And the second is on the competition side, how is the competition for both the businesses? And what is our cutting edge?
Let me repeat. The first question was, how do you see the next 4 or 5 years for this business? And how do you see them panning out? And...
Yes. And the factors contributing to the growth.
And factors contributing to growth for 4, 5 years and second related to competition in these 2 areas. Okay. So Sapnesh, can you talk about NLSL?
You asked about how the business is positioned for the next 4 to 5 years and how are we looking at competition. So from the point of view of NLSL, like we said, our goal is to $10 million to -- $400 million to $500 million. I think a large part of that movement will happen organically. And part of that movement will happen in organic. And this is something that I've said in the past. Whenever economies experience recession and are coming out of recession, [indiscernible] starts focusing on what is core to them and look at outsourcing as a means of doing what is not over there.
We saw this happen when the financial [indiscernible] place, we are starting to see that now. And with the continued disproportionate investment in sales and marketing, as well as building of capability that we will be able to acquire a higher share of deals that come up. We do think that the propensity to outsource will increase, and there will be an acceleration in deals. And I think we will be very well positioned to capture larger percentage of the deals that come up for outsourcing. With respect to competition, the largest competitors we have are the large GSIs, like Accenture, IBM, Raytheon. Then there is one competitor of general physics who is a specialists learning outsourcing company should be strict [indiscernible] strategies. We are in the group of top 5 at this point in time. And our goal is to achieve market leadership over the next 5 to 6 years.
Okay. Perfect. And 2 questions on the bookkeeping side. So for this FY '23, in the CLG business, why expenses has been growing in significantly -- sorry, significantly compared to the revenue growth? And the second is if you could elaborate on the net other expenses?
The net other expenses or the exceptional expenses are predominantly on account of the acquisition of St. Charles as well as the scheme of arrangement that we just completed, which was demerger of the CLG business into NIIT Learning Systems Limited. And a part of other expenses would also have the -- so for example, there are employees of any one company will get their options converted into options of both the companies. So the options of the second company are not expenses of this company. And to that extent, I think there is a below the line special or other expense is separately classified. So these are all scheme-related expenses.
And in terms of operating incentive?
The first question was why are operating expenses growing faster than revenue in NLSL, which is why margins have come down.
Yes. So actually, that's not operating expenses having gone up. It is a product mix from a revenue point of view, a lower volume of a slightly higher-margin contracts. We have talked about the realization would happen, and this is well within [indiscernible]. In fact, it is better than what we had assumed it to be or guided you to be.
Just to recap, the margin for FY '22 was 26%. The exist margin for -- before FY '23 is 25%. The reason why the margin for FY '23 is 23% because we saw a lot of headwinds to where the margin was 19%.
Yes, there was one question which we were question which we were to answer of [indiscernible] in terms of what our other effects in NIIT's balance sheet? So I just wanted to clarify to her that those consists of tax deducted at source by customer, unbilled revenue which is revenue which is a work in progress or which the billing deadline has not come in, input credit of GST and prepaid expenses, as well as some interest recoverable by receivables of FDs which will get paid on due date. With that said, I hope it answers all your questions.
Right. Ladies and gentlemen, that would be our last question for today. I now hand the conference back to the management for their closing remarks. Thank you, and over to you.
Okay. So all that I want to say is thank you very much for a very interesting set of questions, very insightful, and thank you for starting our numbers as well as all our announcements. Thank you for keeping a track of the progress of NIIT.
We truly support -- truly appreciate your support through these times of discontinuity.
Thank you very much for your compliments. So the teams that have been leading the demerger, I think it's a very, very encouraging content to know that this was well appreciated by our shareholder base. We are all available to you to answer any questions. We don't know these are periods of discontinuity as well as transition and therefore, in that position, the least we can do is to make ourselves available and answer all your questions.
Do reach out to Kapil Saurabh, who will continue to represent both the companies as the Investor Relations, and therefore, to that extent, we'll be able to answer your questions, not only relating to any one of them but also relating to the products which have happened between the 2 of them. So with that, I would like to end this call and wish you all the best and looking forward to interact with you in person at the earliest possible opportunity. Thank you.
Thank you very much. Thank you. Ladies and gentlemen, on behalf of NIIT that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.