NIIT Ltd (NIITLTD) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to the NIIT Limited Q2 FY27 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vijay Thadani, Vice Chairman and Managing Director, NIIT Limited. Thank you and over to you, sir.
Vijay Thadani (NIIT Limited): Thank you. Good evening, and welcome to NIIT Limited's Quarter 2 FY27 earnings call. First of all, I thank you for your interest in NIIT and for joining the call today. It's a busy results season, and for you to have joined this call versus many other opportunities you had, we truly appreciate. I'm looking forward to a very active participation from you and also your questions which as usual have been extremely educative and help us sharpen our strategy. Before I get into our Quarter 2 financial performance, let me introduce you all to our new CEO, Anish Sircar, who took over from Pankaj earlier this month. Before joining NIIT, Anish was Managing Director India and Director of India, Philippines, and Indonesia cluster at Pluxee, formal Sodexo, formerly Sodexo BRS. Before that, he was CEO of Mercer India. In both roles, he delivered strong revenue growth and portfolio expansion, including through strategic acquisitions.
Vijay Thadani (NIIT Limited): and Calcutta. Before I get into the results, I'll invite Anish to say a few words. Anish, over to you.
Anish Sircar (NIIT Limited): Thank you, Vijay. And good afternoon, good evening to everyone on the call. First, I must say that I am both delighted and privileged to be here with you all, and to have joined NIIT at this pivotal point in the journey of this of this of this great organization. It's been just about a couple of weeks, actually, slightly less for me so far. And I have during this time spent time with our leadership team, our sales and delivery teams, to understand more about our business, our markets, our right to win and differentiators, etc. And a few clients already, so far. Now, a few things are are quite clear to me. Firstly, the strength of the brand, of the NIIT brand. It is, of course, an institution. Clients trust us. And I'm quite amazed to see that many have worked with us for for years, if not decades. And that depth of relationship is actually rare, and it's it's a great asset for us. Secondly, the quality of our people, our deep skilling methodology, which has consistently been delivering outcomes for learners and clients for several decades. Third, the size of the opportunity in front of us. I think, AI is reshaping how every enterprise works works, and that is driving demand for new skills at every level. In fact, it is driving a a degree of talent transformation, which is probably unprecedented in a very long while. We are already seeing this in the rapid growth of our AI programs and the early traction of our GenAI sales programs as well. Over the coming weeks, I will be working further with our leadership team, and and the larger teams to work on a more detailed review of our portfolio, our our market segments that we operate in, our go-to-market strategy, and our cost and operations structure as well, with a specific focus also on where AI can create the most value for our clients and for NIIT. We are, by the way, at the beginning of our planning cycle for the year, so it's a good time for me to also reflect on the future and our plan, and see how this can dovetail into the overall planning exercise for the organization. With that, I will stop. Thank you, and I look forward to engaging with all of you today and in the quarters to come. Back to you, Vijay.
Vijay Thadani (NIIT Limited): Thanks, Anish. Just to mention here that I am joined here today by the whole management team at at corporate headquarters. I have the Chairman, Mr. Pawar. I also have Sapnesh Lalla, the former CEO, as well as, now, a Non-Executive Director on the Board. And, as well as the CFO, Sanjeev Bansal. I also have Bimaljeet Singh Bhasin, who's recently joined us joined us as Chief Growth Officer, for which we had sent out a separate communication, then Kapil Saurabh from M&A and Investor Relations, and Umesh, who is the Business Finance Head. We will all seek to answer all the questions that you have, and what I would start is by taking you through the performance in quarter two. I also want to talk about the fact that Anish has come in at a very interesting time as we would go through the results, and maybe I'll cover that at the end as to how his past experience will be extremely useful in, in shaping our future strategy. And it's a timely intervention or timely joining that he has and I think we're looking for exciting times together. So, let's dive into our quarter two numbers. Revenue in quarter two of FY '27 was 982 million rupees, which was down 6% year-on-year, but up 3% quarter-on-quarter. For H1, FY '27 revenue was up to was up to 190 1,939 million, which is up 3% YoY. This is lower than the projections that we had shared with you. In quarter one, we were on the projection, in fact slightly ahead. In quarter two, there have been setbacks and I'll be talking to you about that. The quarter two performance was driven by a quarter-on-quarter compression of consumption by GSIs
Vijay Thadani (NIIT Limited): specifically, in a quarter where spending is traditionally higher. If you see the pattern over the last many quarters, and especially the quarter one and quarter two of the every financial year, we have a significant spend and consumption of training by GSIs. Specifically, consumption from four of our largest clients, GSI clients, alone was down by as as as higher as 100 million rupees YoY in quarter two. This was contrary to a significant growth that we had seen in quarter one. This compression in spend in a certain sense was secular across some of these large clients. And there are many theories to it, but one of them could be that they, A, had had lower numbers of people onboarding, but more significantly, they had significant resources in-house and under the cost-cutting pressures, they felt that it may be easier to insource than to spend this extra money outside. However, all this is a consideration and cannot be considered as as as the the only contributor, but this is a a moving and dynamic situation. And I think we'll see how it plays out. But if you exclude the impact of these GSIs, the rest of the business actually grew meaningfully in quarter two. Now, if you look at the revenue mix by go-to-market, enterprise revenue was 625 million, down 11% year-on-year. While GSIs were impacted, the silver lining is the performance by our Enterprise BFSI and other programs, which is BIPS, the BFSI and Industry Industry Performance industry performance program. In quarter two, BIPS achieved an all-time high revenue of 200 million and a strong growth of 17% YoY and 66% quarter-on-quarter. Frankly, we should have seen going by the past quarter's performance of enterprise tech a similar growth in that, but that was not to happen. In the past, we have spoken about the investments we have been making in our sales team and our focused efforts to expand our client base beyond the top four private banks to cover a broader set of financial services and adjacencies like wealth management, NBFCs, and insurance. These efforts are now bearing fruit as was visible in the BIPS results. During the quarter, NIIT partnered with two of the largest banks to establish dedicated wealth and sales academies aimed at upskilling wealth relationship managers and sales associates. The initiative focused on strengthening role-specific capabilities and enhancing frontline effectiveness using immersive AI simulations and AI coaches. Consumer revenue, on the other hand, was 357 million, up 2% year-on-year. Growth was uniform across technology and BFSI portfolio. Our direct-to-college strategy has created a pipeline of job job-ready talent, which university clients are increasingly valuing. In enterprise and enterprise in enterprise versus consumer, revenue mix was 64:36 in quarter two, which was 67:33, which obviously means that the enterprise part has has increased in value. From a product lens, revenue from technology programs was 661 million, down 30 13% YoY, reflecting compression in GSIs. On the other hand, revenue from BIPS was 321 million, up 11% YoY, driven by strong enterprise demand. Order intake in Q2 was 1,301 million. We acquired 10 new logos in quarter two. This comprises six in tech technology sector, three new higher education institutions, and four new BIPS clients and logos. I am also happy to share with you that we've been selected as the learning transformation partner by one of the top banks in India, which is exploring new ways of talent onboarding and development. However, the impact of this will only be felt in future quarters as we get a sense of the size of that engagement, which will likely
Vijay Thadani (NIIT Limited): to be large as well as scope and and and the business model that will be followed. Just to give you a little more color on the financials, I'll invite our CFO, Sanjeev Bansal, to give you an update on that. Sanjeev, over to you.
Sanjeev Bansal (NIIT Limited): Thanks, Vijay. So I'll just take you through the financials and so, despite impact of revenue decline, we were able to achieve an EBITDA ahead of our breakeven guidance. While revenue declined 6% YoY, our operating expenses declined 8%, that is driven by strong cost optimization measures, simplification, and productivity initiatives, while we continue to invest in GTM and new AI offerings. EBITDA for Q2 was 27 million a margin of 2.7%, which is up from 13.5 million which was reported in Q2 last year, though it was negative 14 million in Q1 of this year. For H1, EBITDA was 12.5 million compared with negative of 49 million in H1 of last year. Below EBITDA, depreciation was 103 million in Q2. Net other income was 65 million that was comprising of treasury income of rupees 41 million. Treasury income is down from 175 million which we reported in Q1, and that's due to the market mark-to-market impact of the rising interest rates. Other miscellaneous income is at 30 million. To this, other income has been offset by net finance cost of 3 million and exceptional expense of 3.5 million because of the legal cost linked to a legacy tax matter that has now been concluded in favour of NIIT. This has resulted in a net loss of 22 million for the quarter compared with a PAT of 14 million in Q2 of last year. EPS was negative at 16 paisa for the quarter versus 10 paisa in Q2 FY '26. For H1, PAT was 59 million and EPS was 43 paisa. Now, coming to balance sheet and cash flows, cash and cash equivalents remained strong at six 6,889 million, underpinning our ability to invest through the cycle. Capex was 44 million for the quarter versus 69 million in Q1 last year. DSO is 63 million 63 days in Q2 FY '27, which is up from 53 days in Q1. That is driven by delay in certain collections which have been subsequently collected in October. Employee count at the end of Q2 was 816. This is down by 50 on QoQ basis and 124 on YoY basis. This is an outcome of unreplaced attrition and ongoing cost and resource optimization measures which have been taken across organization. Back to Vijay.
Vijay Thadani (NIIT Limited): I think from an understanding of financials we do have we have had a reduction in our cash balance to a small extent and that, in a certain sense, is also deployed partly in working capital and partly in capital expenditure that got incurred. I would now like to provide an update on our AI initiatives. AI represents one of the most significant demand opportunities in front of us, and it is happening now and not in the future. AI is embedded in a large part of our portfolio. However, we have separated out the revenue which AI is directly contributing to, and that has grown from 9% last quarter to 12.4% this quarter, which is a significant investment or return on the investment that we have made in in AI. There are many many elements in which AI has been deployed, both for internal efficiencies as well as improving effectiveness of our customers. Well, I would like to just talk about one part, which is very significant, which is of AI coaches. We have now built a number of AI coaches, and two specifically that I want to mention are coaches that let salespeople practice real customer conversations with an AI and get coached in the moment. As an example, the Wealth Management Sales Coach serves bank relationship managers and wealth advisors, whereas, DILOS, our Day in the Life of a Salesperson Coach, serves sales teams in auto and consumer goods. Both these tools are now or both these coaches are now live at
Vijay Thadani (NIIT Limited): one but more than one customers. And have contributed to a significant part of our customers' businesses as well as obviously a part to our revenues. In some of these cases there are new business models which are emerging and therefore amongst other things it enables us to grow learner engagement beyond the classroom to their place of work and add non-linearity to our revenues. The AI coaches run as a subscription on top of the training fee and they bring delivery, content, and LMS businesses along with them. So it is not only a one-time revenue, but it's a continuing revenue. It's very small in comparison to the overall thing, but that's a very very positive trend that should help us in future. There are a number of other AI offerings that one could talk about. We did mention some of them in the recent conferences, so I will not touch upon them unless somebody wants to know more about them in the Q&A session. Talking about future, or just yeah, talking about future, one thing which is visible is GSIs are returning with more advanced requirements, but overall volumes are likely to remain under pressure for the next couple of quarters. The reason is all GSIs have a huge task of talent transformation, but what we see as a first step what they have done is control their expense which they were spending outside, taking a stock of the situation, figuring out the talent transformation strategy, and then deciding to do what they would like to do in-house and what we would like to get done from others. This is a a a continuing task, but I think in the next two quarters we don't think this will bear fruit to the extent that it should. There are some green shoots where some of the GSIs have got back to us with their revised talent transformation strategy and we've been able to contribute to bit of that. But GSIs continue to represent a significant long-term opportunity. Many are still defining, as I mentioned, their strategy for their transformation. So we are expecting that some will move faster than others and we will see orders as we go along, but I don't see an impact of that coming up in the next two quarters in a significant manner. Outside the GSI segment, new logos and new initiatives, and some of which I shared, have been gaining momentum. We did we did experience a growth even in the last quarter, and we do see that that growth will perhaps accelerate as we go forward in the coming quarters. This is not to say that there is a great amount of turbulence in the market. AI is just one of the disrupting forces. There is economic uncertainty. There is There are rising interest rates, and there are many other moving parts, and the way strategies are changing. There is also the major cybersecurity threat, which is off late becoming visible in more ways than one. And all these forces have to be considered. Amongst that, talent transformation remains a common theme. How and when will companies find it very very important and urgent to spend that money will come on an individual company strategy point of view. Not having to depend on that, we are at this point of time looking at the rest of the year and going by the experience of this quarter, assuming that the revenue is likely to be broadly flat. We will revisit this outlook next quarter because this is a dynamic situation and I think Anish as he also gets his arms around the business and gets a better sense, I think we'll be able to get a better sense of situation when we meet one quarter later. Meanwhile, cost optimization measures are in place and we expect a slow single-digit EBITDA margin to continue for the year. Working on a positive EBITDA margin was a very important requirement which many of you stated as our going forward strategy. And we took a full note of that and had very aggressive cost optimization measures put in place. Given the turbulent times, we said we should conserve our capital and spend on only those strategic initiatives which are likely to deliver us good results.
Vijay Thadani (NIIT Limited): and, increase the EBITDA. There are many green shoots in this business. AI revenue is growing, deep skilling is, revenue is growing. However, if there are newer recruitment patterns which emerge, we should be, very, we should not be, we should be wary of that and be ready with alternate solutions, which we are. And, therefore, being close touch in, being in close touch with our customers is an important issue. As I mentioned, cost initiatives are in place and delivering results. GSIs continue to represent a large opportunity. They are reconfiguring their talent transformation. So, their volumes are likely to be muted under pressure in, in the near-term. We believe that we have a large opportunity. They all have a very strong, growth agenda in terms of trans- talents. GCCs are also battling cost pressures, but present an unpenetrated opportunity. University segment is growing because the graduates need deep skilling and early solutions are very clearly differentiated and preferred by discerning universities. And, lastly, Anish Sarkar, who has joined us as CEO, brings extensive experience across global GSIs. Understanding how a GSI works and how various levers work, I think his more than 15 years of experience in the technology sector or technology services sector, specifically with GSIs, will be extremely useful and he'll bring very clear insights. His significant experience as CEO of Mercer India will give us a very good understanding of what kind of talent transformation strategies have been used by companies in the past and how this might play out in the future. And, lastly, his deep relationships with HR leaders through his last assignment, Proxxi, should give us inroads into how organizations are thinking about talent transformation at an individual level and, from there, drive our strategy set over the next 60-90 days. So, I will pause right now and open the house for questions and after that if there is a need, then we will summarize this discussion. Over to you, operator, please open it for questions.
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