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Edited Transcript of NIITLTD.NSE earnings conference call or presentation 10-Aug-19 10:30am GMT

Q1 2020 NIIT Ltd Earnings Call

Aug 23, 2019 (Thomson StreetEvents) -- Edited Transcript of NIIT Ltd earnings conference call or presentation Saturday, August 10, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Amit Roy

NIIT Limited - CFO

* Kapil Saurabh

NIIT Limited - Head M&A and IR

* Pradeep Narayanan

NIIT Limited - Head of Mind Champion Learning Systems Ltd. (MLSL)

* Sapnesh Kumar Lalla

NIIT Limited - CEO

* Vijay Kumar Thadani

NIIT Limited - Co-Founder, Vice Chairman & MD

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Conference Call Participants

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* Rahul Jain

Dolat Capital Market Pvt. Ltd., Research Division - VP of Research

* Ravi Menon

Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst

* Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner

* Shradha Agrawal

Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile

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Presentation

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [1]

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Thanks. Good afternoon. Thank you very much for joining us today. I know it's a weekend, and it's now the second successive time that we are having this discussion on a weekend. But thank you very much for your interest as well as for participating in this call. And we do appreciate that you may have had a busy weekend scheduled and for you to give us time for that. We really appreciate it.

Today, in today's call, we have 3 discussion points: One is about the quarter 1 and -- quarter 1 of FY '20 business performance, which my colleague, Sapnesh Lalla, will take us through, and he will also discuss future directions and opportunities; the second is, while we have discussed this partly before, but I wanted to review it with you the significant transaction that happened in quarter 1 and the -- its impact on the financials; and the third, we had also discussed in the last meeting that the Board had formed a special committee to look at the going-forward plans of the company as well as rewarding shareholders from the proceeds that we received from this -- from the transaction as well as some other aspects.

So I will first request Sapnesh to talk us through the quarter 1 performance as well as future plans. Then I will talk about the transaction, just remind everybody, and then also on the special committee.

So with me, I have the full leadership team. I do have Mr. Pawar, who is the Chairman of the company; P. Rajendran, who's the Joint Managing Director; leaders of the business, Bimaljeet Singh Bhasin, Pradeep Narayanan, Sailesh and DJ Chadha; as well as people from finance, Mr. Roy -- Amit Roy, Sandeep Bansal, Gaurav Relhan; Investor Relations, Kapil Saurabh; and our CTO, Mr. Rajan Venkataraman. So we are looking forward to an engaging discussion.

And without further ado, I request Sapnesh to give us a brief of the business highlights.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [2]

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Thanks, Vijay. And thank you, everyone, for joining. I know it's Saturday, but thanks again for joining. Please note that our business is seasonal, and therefore, analysis here is on a year-on-year basis. Also note that the current reported financials include the impact of IND AS 116, which started from our quarter 1.

In terms of highlights, our revenue is at INR 2,103 million, which represents a negative 2% growth. Our EBITDA is at INR 220 million. That -- the EBITDA margin is 10%, and that is up 159 basis points. Our corporate business and its value proposition continues to be attractive to key customers. And as we saw last quarter, this quarter also we saw an acceleration in new customer acquisition, the Corporate business added 5 new managed training services customers this quarter. This includes 4 new logos and 1 conversion from a project customer in the life sciences space to an MTS customer. Because of this customer acquisition, our visible -- revenue visibility now stands at approximately $264 million, and that is up 18% Y-o-Y, and that's up from $245 million end of last quarter.

The current tally of our customers is at 49. In terms of our Skills and Careers business, the go-forward business grew at 14.9%, approximately 15%, and the India business grew for the second successive quarter on the back of the growth in StackRoute as well as the Talent Pipeline as a Service product. We do see headwinds that affected us, specifically the volatility in the environment and specifically some of the M&A activity that we saw in a fair number of our customers.

In terms of our Corporate group, the revenue was at INR 1,524 million, which was up 1% Y-o-Y. This is in line with what we had said in the previous quarter where we had mentioned that the growth was likely to be muted. As stated earlier, we acquired 5 new Managed Training Services customers this quarter. The business continues on a strong record. The customers that we acquired, as always, are in the top 10 of their categories. We signed a large 5-year contract with an office automation major. This is the second office automation major that we have acquired over the period of 6 quarters. This contract resulted into an increase in visibility of approximately $30 million.

We also signed a 3-year contract with a large technology company, which focuses on the higher ed segment in the United States and globally. We also signed a 3-year contract with an oil and gas major in Canada. In addition, we also signed a 3-year contract with a Canadian retail major. And then lastly, as I had mentioned earlier, we converted 1 of our existing life sciences project customers into Managed Training Services customer.

We've now added 10 customers over the last 2 quarters, and we continue to have a robust pipeline. So we continue to focus on accelerating customer acquisition. I'm also happy to share that the large contract that we had signed 2 years ago with the Real Estate Council of Ontario, started taking applications from students as of 2nd of July. We expect to start delivering education on this contract from 16th of September and expect to record revenue this quarter on this account.

Between the new deals that we have bought as well as the start of RECO, we are seeing strong visibility of getting back to growth over the next 3 quarters of this year. As I mentioned earlier, the EBITDA for this business is at INR 223 million. The EBITDA margin is at 15%. Our Skills and Careers business reported a revenue of INR 517 million. The go-forward business, based on previous comments, the exposure going forward limit the desire to limit exposure to government contracts as well as reducing our exposure to low-margin products. So our go-forward business, which excludes these contracts and products, grew by 14.9%.

The India business had a second successive quarter of growth on the back of the momentum that StackRoute and Talent Pipeline as a Service have created. The EBITDA for the SNC business was INR 24 million. This is versus a negative INR 9 million, same period last year. The EBITDA margin is 5% in Q1. This is aided both by the growth that the business saw as well as continued cost rationalization. As I have said, over the last 2 or 3 quarters that we are continuing to put substantial amount of energy in reimagining our Skills and Careers business, specifically in India, and we are starting to see some growth coming out of this business in this quarter, and we expect this growth to continue.

The Schools business in the first quarter recorded a revenue of INR 62 million, and EBITDA, which was negative INR 28 million. As I've mentioned earlier, this business is a Q4 business. And therefore, we will not have substantial commentary on this business in this call.

Overall, NIIT is now a net cash company, as Vijay mentioned earlier, the net cash stands at INR 18.87 billion versus a net debt of INR 570 million, and I'm sure, Vijay will talk about it, the liquidity event and its impact, over the next several minutes. Our DSO has improved to 52 days at the end of first quarter versus 69 days last year same quarter and 66 days in the last quarter. The operating ROCE has improved to 15.3%, an improvement of 145 basis points on a Y-o-Y basis and a sequential 25 bps improvement.

The head count is now at 2,521, down 44 on a quarter-on-quarter basis. I also wanted to spend a minute on the treatment of standard IND AS 116 in our accounts. Because of implementation of this standard, our EBITDA saw an improvement of INR 51.8 million, the depreciation was up by INR 47 million, the interest was up INR 13 million, and consequently, the profit before tax was down INR 9 million. We will -- we can discuss this more in the Q&A, but mostly it's a technical adjustment in our accounts. And from a go-forward perspective, we will continue to implement and report basis IND AS 116.

Overall, as we look ahead, we feel that given the Corporate business has had a muted first quarter and it will start growing from second quarter onwards. This business, from an overall for the year perspective, should see growth between 10% and 15% in constant currency terms. The margin should improve to some extent and be around the mid-teens for the year. The improvement would predominantly be based on higher volumes in the second half as well as the impact of revenue from the RECO contract that is going to start generating revenue this quarter onwards.

We expect our Skills and Careers business to continue to show growth for the rest of the year, and we expect single-digit margins for this business. As I mentioned earlier, the skills and -- the Schools business is really a fourth quarter business. And we see -- and it is less than 5% of our overall business, and we see still some confusion from an overall school-procurement perspective on procurement -- procuring services and regulatory issues, which affect procurement of our services. So we expect that business to see some volatility on a continued basis.

Our CapEx was in the INR 500 million range, predominantly around software licenses, new products and other normal CapEx. Effective tax rate was 22% to 24%. We are likely to have interest income this year. And I think based on Vijay's comments, you should be able to see deployment of capital. And because of that deployment, we will -- we are likely to earn some interest. The interest income would be on a pretax basis, approximately 7%. We also expect to pay back our debt over the next few quarters. In FY '20, we expect to pay back INR 1,500 million, and then next year, approximately INR 400 million.

With that, I've come to an end of my prepared comments for the quarter. I will now hand over to Vijay to take us through both the significant transaction, its impact as well as progress on how we want to utilize capital on a go-forward basis.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [3]

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Thank you, Sapnesh. I just thought I will talk about the transaction, which many of you are familiar with the details, but just to remind ourselves of some of the numbers and milestones. The second, I would like to talk about the accounting impact of that. And the third, in how we are deploying the cash and the results of the recommendations, which the special committee, which the Board had formed at the time of closing of that transaction.

So as you are aware, in the first quarter, NIIT divested its holding in NIIT Technologies Limited, and the closing was completed on May 17 after receiving necessary approvals and satisfaction of closing conditions. We received a proceed of INR 20,204 million, which were put to work on the same day in terms of deploying it for earning some interest. The treatment of this transaction in terms of cash flow and accounting. First, from an accounting point of view, on a consolidated basis, this sale consideration of INR 20,204 million was considered as positive against which the carrying value of investment in books was INR 6,721 million. And after deducting transaction expenses, profit before tax on sale of investment was INR 13,117 million, of which -- on which there was a MAT -- incidence of MAT, minimum alternate tax, of INR 3,157 million. And there were some earlier deferred tax liabilities, which were reversed, so that the impact of this transaction in our overall financials is INR 10,870 million. The -- and there is a similar calculation for stand-alone, where the impact of this transaction at a profit after tax on sales is 11,494. All these details are available in our records, which have been shared.

Deployment of this amount, of the INR 2,020-odd crores -- I'm rounding it off to round numbers, the exact details are again available in our data, which is shared -- about INR 300-odd crores was deployed for minimum alternate tax. About INR 200-odd crores have been kept for retirement of debt, and debt is being retired as and when we can retire the debt without paying any prepayment synergy and wherever it is economically more advantageous to retire [with] it.

The third element is prudent reserve for indemnity. As per the SPA, which we had signed at the time of transaction, which is about INR 200 crores. If we look at all that, the balance available to us is about INR 12,560 crores, of which -- sorry, INR 12,560 million, of which the Board had proposed a dividend of INR 5 per share, which is being put up to the AGM on -- in the coming weeks for voting by the shareholders. And based on their approval, that will add up to a total outflow of INR 100 crores, about INR 80 crores to the shareholders and about INR 20 crores to -- for the dividend distribution tax.

The Board had also appointed a committee, a special committee, to look at 3 aspects: one, how to reward shareholders further beyond the dividend that was given at the maximum eligibility limit; and the second was the deployment of growth capital so that we can accelerate the growth of the company in coming times; and third, of ideas and recommendations on rationalization of some of the businesses, of which some of the directions, Sapnesh already alluded upon.

So the committee gave its recommendations to the Board today. On the basis of which, the Board has proposed that the second round of return of money to shareholders will start now with a buyback of INR 3,350 million, which is the maximum eligibility based on the 25% limit of eligibility reserve at a price of INR 125 per share. This will add up to INR 2 crores or 26.8 million shares to be bought at INR 125, subject to shareholder approvals, statutory approvals, and there is other processes to be followed.

This INR 303.35 billion will be in addition to the tax, which will be payable on the buyback transaction, which, therefore, if you add the tax as well as the money returned to shareholders by the end of this transaction, the company would have returned about INR 5.2 billion to the shareholders, part of it would have gone towards taxation, part directly to the shareholders.

The -- and that would represent about 40% of the total amount that was available to us with that all available for distribution based on the earlier calculation. The Board had also requested or has asked the management to fine-tune this growth capital recommendations, which, just to remind everybody, was here to [grow] into certain -- which was to complete some capabilities set to accelerate our offerings in Corporate Learning Group space, in Corporate Learning and as well as look at both organic as well as inorganic plans.

In addition to that, even in the Skills and Careers, there are opportunities for accelerating the growth now that there is a positive environment, and we have successful track record of having implemented StackRoute, which was a new product over the last 2 years and have had a healthy growth as well as Talent Pipeline as a Service, which was introduced last year, and which also has had a positive growth.

So based on that, the recommendations, which will come out of this over the next year -- over the next quarter or so where in addition to the committee, the committee is also looking at external advisers as well as have mandated as such for some inorganic targets.

In addition to that, the committee is also looking at rationalization of businesses, where again, making sure that we indeed do not invest anything more in the low-growth, low-margin and high-risk businesses. We also find ways of monetizing the value that has got created in these businesses as we go forward. So these will then become available at the end of the -- some of these deliberations will be over by the end of quarter 2, and we should be able to see the results of that in our future decisions.

One more thing is the time line of the buyback. The buyback has got triggered today and subject to the postal ballot, which will be -- which the company will be sending out in about a week from now. And the results of that postal ballot, which will be towards the third week of September, it is expected that the buyback process will be completed in the month of late November, mid-December. So more about this as we cross these individual milestones, the stock exchange as well as the statutory bodies have already been informed of this decision.

So that is all I have to brief right now. We could get into a Q&A. I would request if we can have Q&A focus on the business operations first. And then of course, we are also ready for Q&A on the realization of these proceeds from the divestment as well as deployment of those proceeds. Over to you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of [Ganesh Shati], an individual investor.

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Unidentified Participant, [2]

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Congratulations, sir, for a good set of numbers and margin improvement in SNC business. This quarter, also we had similar type of revenues growth over the (inaudible) and except go-forward business was muted, but still it could improve in margins. Can you please share some highlight on the future of the business for the next 1 or 2 quarters? Also SNC business is not at all doing well for us, and we had a proposal in the past for bringing the strategy to investors. So is there any divestment plan for this particular section of our business?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [3]

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Okay. Let me answer your last question first, and then I'll try to make sure I get to the rest of the questions. As Vijay pointed out, we are appointing external advisers to look at not just our business, but as well as our peer group and provide us professional advice. What that does not mean is that we will take the next 5 years trying to get their advice. We will move rapidly and have a recommendation ready by the end of this quarter and start following that advice going forward. So we should have clarity on what we are going to do as far as this business is concerned and others, as Vijay pointed out, both from a rationalization perspective as well as growth perspective, before our current quarter. Can you repeat your other 2 questions? I know you had 3 questions.

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Unidentified Participant, [4]

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Yes. My second question is regarding our Skills and Careers business. When you take the growth in revenue and the margin improvement (inaudible).

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Sapnesh Kumar Lalla, NIIT Limited - CEO [5]

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So I think I mentioned earlier, we have created a go-forward plan for our Skills and Careers business. And that plan is starting to get momentum. The business, both in India as well as from an overall perspective, the go-forward part grew. In the go-forward part, we have limited our exposure in a substantial way to government contracts, which is in line with our strategy, which we had formed as we started ramping down the government's schools business. We are carrying forward that strategy and limiting our exposure to government contracts in the Skills and Careers business as well. We also are starting to rationalize the low-margin products that we sell. And to some extent, the margin improvement that you saw was because of focusing away from low-margin products and also seeing growth in high-margin, high-growth products. To some extent, also the margin improvement, as I mentioned, is because of the change in reporting standards. But from an overall perspective, the -- both the growth trajectory on a go-forward basis is positive as well as given that we are focusing away from low-margin products over as well for margin improvement.

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Unidentified Participant, [6]

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That's all for me, sir. Congratulations and all the best for the future.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [7]

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Thank you.

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Operator [8]

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The next question is from the line of [Vivek Joshi] from BP Capital.

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Unidentified Analyst, [9]

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Thanks for the very detailed explanation of the cash and cash on hand. A couple of questions. What is the amount of the deferred tax liability that was adjusted? And will the promoters be participating in the buyback?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [10]

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Okay. Let me answer the second question first. First of all, the Board has taken a call today to go for a buyback and has also taken a call that subject to shareholders approve it, it will be the tender route, in which case, the promoters are eligible to participate in the buyback. Having said that, the company, the promoters will get a communication from the company on the basis of which the promoters have to confirm their willingness -- or their intention to participate in the buyback in specific terms, and that will become a part of the postal ballot. That communication will perhaps get finalized more towards the end of next week. At the end of which, I think the company will be able to make a comment on that. And the first question was?

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Unidentified Analyst, [11]

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The deferred tax liability (inaudible)

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Sapnesh Kumar Lalla, NIIT Limited - CEO [12]

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So I will request the CFO to answer that question for you. I had given you a quick run-through of the amounts. Yes.

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Amit Roy, NIIT Limited - CFO [13]

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The deferred tax liability is INR 910 million, which got reversed when we create -- when we used to have a undistributed profit from the associate on that, this was created now because the confirmation of the transaction has happened. So now it has reversed back. So this is from the INR 910 million.

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Operator [14]

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The next question is from the line of Sangeeta Purushottam from Cogito Advisors.

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Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner, [15]

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My first was on the Skills and Careers and Schools business. (inaudible)

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Sapnesh Kumar Lalla, NIIT Limited - CEO [16]

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It's very muffled.

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Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner, [17]

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So my question was secondary schools as well as the Schools business. I would like to break even this year at the PBT level? That's one. Second is, could you please explain that the INR 200 crores of debt, which we are returning, which businesses was it deployed in? And do you have any (inaudible) receivable which you need to recover from the government contract or any other parties?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [18]

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Madam, I'm finding it difficult to understand your question. The first question I have a feeling you wanted to know was whether in the Schools business, on an overall basis, we will be breakeven on a PBT basis. I think that was your first question. The second question, I just could not understand. You were -- so if debt was deployed in which -- debt was deployed. Yes, okay. Your next question was on debt. Where was the debt deployed?

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Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner, [19]

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That's right. Where was the debt deployed? And do you have any receivables, which you need to recover either from your earlier government contracts or from any other parties, which are of a sizable amount. So what really was a (inaudible) any receivables?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [20]

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Okay. So Kapil will answer the question.

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Kapil Saurabh, NIIT Limited - Head M&A and IR [21]

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So let me answer the last one first because that seems to be the trend today. The balance receivables, Sangeeta, from our government school contracts is now INR 5 crores as a percent of the number today [since] time was in excess of 200, a much larger amount. Debt, as we had said, the large -- again, in correspondence to our receivable situation, we used to have a large amount of debt deployed in our government schools business. But we now decided to move up as we've recovered the receivables, we've paid down the debt. Now as part of our capital debt in the book of -- on debt stand-alone entity, and there is book working capital debt that we have in our international subsidiary, the (inaudible) debt is small. Most of the debt is about INR 170 crores sits in our India stand-alone entity, which is a parent company. That's what Vijay had mentioned that, that will be returned as and when payment is due, or we can prepay it without penalty. I hope that answers...

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Sapnesh Kumar Lalla, NIIT Limited - CEO [22]

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As the debt in India, the debt in India was taken to fund CapEx. So there was a capacity expansion in the Corporate business, part of the [RECO] used for that, part for creating other assets, for example, the RECO project itself involved (inaudible) of certain assets. And the third was for working capital requirements.

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Kapil Saurabh, NIIT Limited - Head M&A and IR [23]

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And on the Schools business, would you like to answer, Pradeep? Her questions was, are you looking to break even in the Schools business? Pradeep?

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Pradeep Narayanan, NIIT Limited - Head of Mind Champion Learning Systems Ltd. (MLSL) [24]

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So while we are likely to trend positively by the end of this year, I don't think we will end up being positive at the (inaudible) level.

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Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner, [25]

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Since one of the businesses, which I think Vijay mentioned earlier that you would be looking at as a part of your review overall the portfolio, whether you need to be in certain low-margin businesses. Is that a correct understanding?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [26]

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Yes. This is one of those -- one of the businesses which is challenged. So largely the uncertainty in the environment. However, we also have the committee has to examine the feasibility of what can it take to make it a high-growth business and what will it take versus what will it take to do some alternate strategies to take advantage of the situation we are in right now.

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Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner, [27]

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Right. And finally, on the Schools business, we're likely to break even at the PBT level this year?

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Pradeep Narayanan, NIIT Limited - Head of Mind Champion Learning Systems Ltd. (MLSL) [28]

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We are EBITDA positive. And I think we are above breakeven on PBT as well.

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Sangeeta Purushottam;Cogito Advisors;Cofounder;Managing Partner, [29]

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Okay. So the only business which is going to be bleeding at the PBT level will be the Schools business.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [30]

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That is accurate.

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Operator [31]

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The next question is from the line of [Suresh Agrawal], an individual investor.

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Unidentified Participant, [32]

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What's the other income (inaudible)

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Sapnesh Kumar Lalla, NIIT Limited - CEO [33]

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I'm sorry?

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Unidentified Participant, [34]

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Other income, other income?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [35]

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Yes. So other income is a complex calculation. I'll suggest Kapil Saurabh take that too then.

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Kapil Saurabh, NIIT Limited - Head M&A and IR [36]

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So first, the other income is primarily due to the capital gain on the sale of transactions. This is what Vijay had earlier explained. If you want, I could -- we could have an offline call to discuss that in full details again.

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Unidentified Participant, [37]

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Okay. Okay. How much is the indemnity time like we have kept INR 200 crores rupees for indemnity? How much time that we will have to keep the provision for this one, INR 200 crores?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [38]

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About 30 months.

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Unidentified Participant, [39]

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About 30 months, means 2, 2.5 years?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [40]

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Yes, yes. It is 2 years plus.

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Unidentified Participant, [41]

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Okay. Okay. (inaudible) you said earlier how much is affected in buyback actually?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [42]

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Can I completely answer?

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Unidentified Participant, [43]

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Okay. Okay. Please go ahead.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [44]

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But we will be releasing amount out of this indemnity account every year outlook based on that -- based on the requirements that we -- based on the request for indemnity or the claims on the indemnity that may come forward.

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Unidentified Participant, [45]

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Okay. And sir, how much is the tax on the buyback?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [46]

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How much is the tax on buyback? The tax on buyback, we have -- there is obviously the capital gain tax and there is a minimum alternate tax. In our case, the minimum alternate tax is higher than the capital gains tax. Therefore, the tax outflow for the buyback is INR 315.7 crores.

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Unidentified Participant, [47]

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No, no, no. It's the buyback amount is INR 335 crores.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [48]

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I'm sorry, you're referring to the buyback amount. I'm sorry, including to the capital gain.

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Unidentified Participant, [49]

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Yes, yes, yes.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [50]

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On the buyback, the total tax -- the buyback amount is INR 335 crores. If the buyback is fully subscribed, then it will be INR 76 crores.

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Unidentified Participant, [51]

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Maybe around 20%?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [52]

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22.5%.

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Unidentified Participant, [53]

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Then what is the logic of -- sir, what is the logic of going for buyback than to go for the dividend?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [54]

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Okay. There are 3 logics...

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Unidentified Participant, [55]

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Okay. Please go ahead.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [56]

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There are logics and these logics have been derived after consulting experts, advisers and other wise men in the industry, including our major investors. The first is dividend, why dividend and buyback? The tax reduction from the company side is the same in both cases, approximately the same in both cases. But the tax in the hands of the recipient, which is the shareholder, varies. There are some for whom dividend is more preferable. There are others for whom buyback is more preferable. And there are some who are neutral to this. But irrespective of that, everybody stands to benefit uniformly in terms of buybacks. So one was that it will get consistently applied and will serve all sections of the shareholders. The second reason is that the buyback reduces the share capital, the equity capital of the company. And therefore, to that extent, the equity capital, the EPS, going forward, EPS will improve, which is beneficial to the continuing shareholders if the fee was to remain the same. The third dimension of the buyback -- no. No, but that is what I said, taxation-wise. So essentially, these are the 2 major contributors to our feeling that we should go for a buyback.

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Operator [57]

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We will move to the next question, which is from the line of Shradha Agrawal with Asian Market Securities.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [58]

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Thanks for an elaborate discussion on the capital allocation strategy. A couple of questions. First is on we've not given out the fresh order intake for CLG this quarter. Can we have that number, please?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [59]

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Sure, fresh order intake for CLG. Just a minute. We normally report our visibility. The visibility is INR 264 million (inaudible). And I'm sorry, the visibility is at USD 264 million and the fresh order intake was $24 million.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [60]

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And Sapnesh, you were hopeful of a large deal closure in CLG last time around. So have the 4 deals that we talked about, does that include one of those deals?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [61]

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Yes, indeed, it did. The office automation deal that I talked about was a large deal.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [62]

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Right. And just to get it right again, we could [easily be] revenues for 15 days in 2Q?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [63]

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Approximately, yes.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [64]

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Okay. And so I presume that AS 16 benefit would have accrued lately in our SNC segment. So pre-AS 16, what could be -- I mean if we were to look at on an adjusted basis, what is the margin on a like-to-like basis in SNC for this quarter?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [65]

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I think, first, I don't think it is significant at SNC. I think it's about half and half between CLG and SNC, I think from -- give me one second, I'll tell you. Not including the IND AS treatment, the SNC margin would be about breakeven.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [66]

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Okay. Which was minus 1.6% as of last quarter -- as of last year same quarter?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [67]

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That's correct. There is an improvement in SNC performance in terms of overall productivity of revenue, either way, whether you look at it from AS 116 point of view or not.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [68]

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Agreed. And are we saying that we should be looking at positive growth in SNC for each of the next 3 quarters of this year?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [69]

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Certainly, for the go-forward business.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [70]

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Right. Right. And Sapnesh, I mean...

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Sapnesh Kumar Lalla, NIIT Limited - CEO [71]

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(inaudible)

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [72]

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Yes. So if I'm not wrong. I mean when you elaborated on the inorganic opportunities, which you will be considering on which the committee would be deliberating upon, you did touch upon SNC, but there were no comments made towards CLG. So would it be safe to assume that we are not looking at any acquisition in the CLG space?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [73]

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I [already] think I said anything like that. I think I will try to explain what was said. And I think it was said by Vijay. I think what was said is that we have a committee who's looking at each one of our businesses. The committee's goal would be to help us accelerate -- use capital to accelerate businesses that are doing well, which includes the corporate business as well as the go-forward part of the SNC business and rationalize businesses that have either exposure to the government or our low-margin business or are not scalable and so on and so forth. So from an inorganic perspective, again, we have not made our choices yet. We have made recommendations, and we are in deliberations with the committee as well as external advisers, and we will finalize the recommendations, both from an acceleration perspective as well as both organic and inorganic growth capital utilization as well as rationalization towards the end of this quarter.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [74]

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Maybe I need to comment since I had made the statement. So what we were -- what I was referring to, first of all, was Corporate Learning Group. So first, the acquisition targets are primarily and the search mandate given is also primarily for the Corporate business. It's not to say that there are not attractive opportunities in Skills and Careers, but at this point of time, the action in figure is in Corporate business, where our primary focus will be to fill certain capability gaps or strengthen some identified capability on one hand. And the second is to look at improving our market region, certain industry verticals.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [75]

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Right. Vijay, that's helpful. And what will be a comfortable acquisition size? And what is the target opportunity you would be looking at? Any road map in terms of what could be our acquisition strategy would be helpful.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [76]

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So I can tell you, typically, from our past experience and the philosophy and approach, which the company has used in the past, we typically go for midsized acquisitions, very large acquisitions create a very high degree of exposure and risk. Very low acquisitions -- very low size acquisition creates a lot of -- consume a lot of energy, but don't give the adequate returns. So midsize acquisition, and as we have discussed before, is anywhere between $25 million to $40 million were midsize companies or businesses that we would look to acquire. We have certain hurdle rates, which our investment committee looks at as long as the IRR is in excess of 25%. Those are -- and the business is accretive on gross margin as well as EPS. We would typically go for such acquisitions. Having said that, in certain emerging technologies like AR and VR, some of these parameters may move, but then we have to take a larger view of the situation, given the overall strategy of the company.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [77]

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Right. So assuming that we go in for an acquisition of the size of, say, $40 million, we would still be sitting on a good amount of cash. So the question is basically to understand what will be our strategy in terms of giving us further money to shareholders? Or will acquisition be an ongoing part of our business strategy?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [78]

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Let me try to answer it in multiple ways. First of all, at this point of time, the Board has made an overall conclusion that we would obviously handsomely reward our shareholders and the second tranche of this is visible in this buyback. This is the maximum eligibility that existed at this point of time. At the end of this, and based on the economic situation, as you know, the economic situation is likely to be rather volatile in the coming future. And based on the finalization of our growth plans, still there may be opportunities in future for us to consider future rewards as well, but those we will cross those bridges as and when we reach there. The company is committed to rewarding shareholders, and not keeping excess cash just for the sake of keeping the excess cash, and sharing it at appropriate points of time in a prudent manner.

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Shradha Agrawal, Asian Markets Securities Private Limited, Research Division - Analyst of IT and Textile [79]

--------------------------------------------------------------------------------

So when do you think would we be getting more clarity on the future course of action of the company? By end of 2Q is when you get back to us in terms of what needs to be done with the remaining cash? Yes. Okay, that's it.

--------------------------------------------------------------------------------

Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [80]

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So I think 2Q and 3Q will be very important milestones. Our 2Q, because I think our strategy will become clearer and our advisers, et cetera, will work on it, would have kind of given us a direction. But 3Q will be more appropriate because by that time, I think we'll get a high degree of clarity and also get the results of the buyback action.

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Operator [81]

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The next question is from the line of [Havish Shent] from Dolat Capital.

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Unidentified Analyst, [82]

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Yes. So this (inaudible). So congratulations on completing this large deal and also on announcing already regarding dividend and buyback package efforts. A couple of questions on my part: a, on the CLG business, if I heard it right, you said 10% to 15% is the growth one should be looking at this year? And also that the RECO deal should be giving partial revenue in Q2? And how many days is that number? If you can please reconfirm that.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [83]

--------------------------------------------------------------------------------

So Sapnesh?

--------------------------------------------------------------------------------

Sapnesh Kumar Lalla, NIIT Limited - CEO [84]

--------------------------------------------------------------------------------

Like I said earlier, we will start delivering education to students from 16th of September. So we will have a couple of weeks of revenue in Q2. And what was your second question. You had a second question as well.

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Unidentified Analyst, [85]

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I think in your closing...

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Sapnesh Kumar Lalla, NIIT Limited - CEO [86]

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Book guidance of 10% to 15% is accurate.

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Unidentified Analyst, [87]

--------------------------------------------------------------------------------

This is for CLG?

--------------------------------------------------------------------------------

Unidentified Company Representative, [88]

--------------------------------------------------------------------------------

(inaudible) RECO.

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Unidentified Analyst, [89]

--------------------------------------------------------------------------------

And this 10% to 15% is for CLG business only, right?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [90]

--------------------------------------------------------------------------------

Yes, that is correct.

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Unidentified Analyst, [91]

--------------------------------------------------------------------------------

And from a revenue growth perspective, you said that some of your clients have seen an M&A kind of situation. If you could give a bit more on that? And is this 10% range that we are assigning to on the lower end, is it related to some unexpected events, which we see now versus what we might have seen at the end of Q4? Because given that recourse possibly would add significantly to our run rate at least on the exit quarter. So is that number still conservative at this point of time?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [92]

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I think that's a very good question. The events did not necessarily happen after Q4. However, over the last 6 to 7 months is when most of the M&A activity has happened. I think from an overall perspective, the M&A activity that has happened would be to our benefit because in a number of cases, it is our customers who are acquiring others as well as, in some cases, 2 customers coming together. So from an overall perspective, long term, I think this activity will keep us in good stead. However, like M&A, like in any M&A situation, things come to a pause or there is uncertainty in terms of structure or how people are placed, and that causes our business to go on a pause. And then we have to wait for things to pick back up. So from an overall perspective, we feel that we are not in a fatal situation. We are in a reasonable situation. I think better than what would be if we were in a situation where our customers were getting acquired by somebody else who have a different view on training.

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Unidentified Company Representative, [93]

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Or there were contract cancellations.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [94]

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Or there are contract cancellations. Like I have said, I think in the last quarter or the quarter before that, one of our large customers, Red Hat, was acquired by another one of our customers IBM. And Red Hat ended up renewing our contract before the IBM deal consummated. So that goes to state that our customers continue to have great confidence in our services. However, in a number of situations, there is a pause in the work that they do with us just because M&A creates reorganization and such.

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Unidentified Analyst, [95]

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Right. Right. So it's more a cautious tone rather than any risk to delay in (inaudible).

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [96]

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I would say that from a long-term perspective, we don't see huge risk in revenue. I mean I would say, some of our customers have seen volatility in terms of environment. For example, one of our large aerospace customers have seen volatility in their business due to things that he may have read in the newspapers. I can't name names, but that's just how it is. So I mean that's -- that at times, some of these things come together, and we have to calm them down and ensure that we continue to service our customers so that even when they are going through relatively volatile situations, they continue to trust us as a partner who will be with them and help them continue to get benefit from the training dollars that they spend.

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Unidentified Analyst, [97]

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Right. And on this payout kind of a thing, so as you said, we did all this maximum kind of a limit, which you've allowed, so technically, this eligibility is relevant for the fiscal, right? So it's a marked possibility, anything in this fiscal in any format, even if the -- [both highly] to you, right?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [98]

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So there are two answers to this. One, this eligibility is determined on the basis of unaudited balance sheet. Our audited balance sheet on March did not permit us to give this. We got a special audit done for first quarter balance sheet so as to create an eligibility. Second, once a buyback process starts, then the next buyback process can only be initiated about a year at the end of this process, which means nearly 1.5 years, before the next buyback growth will happen. Having said that, there is a dividend-paying policy of the company, which is to provide a stable and consistently increasing dividend based on the cash and results available in the balance sheet. And I think those opportunities will come in the last 2 quarters of the year.

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Operator [99]

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I would request Mr. [Jain] to come back in queue for follow-up questions. (Operator Instructions). We'll move to the next question, which is from the line of [Vivek Joshie] from BP Capital.

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Unidentified Analyst, [100]

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I had just a quick accounting question. Out of this MAT that we have paid in excess of the normal tax, what is the credit? What is the amount that is available as credits going forward?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [101]

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INR 175 crores.

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Unidentified Analyst, [102]

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Okay. That's (inaudible) of your official tax, right?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [103]

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No.

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Operator [104]

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The next question is from the line of [Suresh Agarwal], an individual investor.

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Unidentified Participant, [105]

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Sir, I was going through your -- this Vivek's question. Sir, one thing more. Like you have said that after buyback actually -- you're taking buyback -- considering buyback because after buyback the EPS will be much more and the equity capital will be less. But sir, we are investor in your company this last 5 years. We are holding more than [50%] shares in my family, but we got -- we have not got benefited anyhow from your money -- from this mix (inaudible). After this, actually, shares of new technology is [shareholding] . Actually, we thought that we will be rewarded handsomely. But looking at the cost of extra [second] by the company, it feels that management is not at all interested to part this money with the minority shareholder. I don't know what is the end of that, but it seems -- because in different investor forums, it has been discussed repeatedly. The investors are not at all willing to part any money. They are -- they want to take any money -- all the money by turning to some other ways, okay? Because you are taking -- you're going through buyback and because the taxes and rate is on the dividend and the buyback is the same. But still, you're going through a buyback because you want to lengthen the process like (inaudible) 4 months or 5 months, okay, because all those new shareholders (inaudible), they didn't trust it and get out of -- from this company, actually. Actually, you are only a minority shareholder. You're having 23% shareholding. But still, you're -- we're playing (inaudible) with you, okay. You shouldn't mind all of their vision because I am looking at your completions last 5 years. But I am seeing that you have good results, you don't want to part any money with the investor.

You have talked about the bigger -- only (inaudible) dividend and still, you have not stated that amount with the shareholders, okay. And then you're going through buyback and you're taking so much long time that all minority shareholder, they will get [faster than] they will be a vote out from the company. This is not good service. This is you. People are different and respected people. We respected a lot like the idea on all this. But now it is looking that you people are [trading U.S.] money, hungry for the money, so okay. So you are going for this money, but you don't want to part any money you have -- money that (inaudible) concluded at committee for special -- these recommendations. What recommendation the committee has given? Nothing. Then you have (inaudible) recommendation. You people don't want to part any money with any investor, which is really very bad. These are [bad] money. Maybe that corporate (inaudible).

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [106]

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Okay. I would not like to respond in detail, but I just want to say the following two or three statements. Number one, the money, which is lying in the company belongs to all shareholders and not to any particular category of shareholders, small, big, medium, whatever. It belongs to all shareholders. The second, that the company has to make sure that it gives the interest of all shareholders and not just 1 or 2 or certain category or not. Number three, the company has appointed professional advisers, consulted experts, consulted investors extensively over a period of -- over the last 6 months or 5 months that this whole process has been going on. And based on these recommendations, the company felt that in addition to rewarding shareholders, the company also needs to make sure that the existing or the continuing shareholders -- because at the end of buyback process or at the end of any other distribution process, the company's own capital base should reduce so that they can deliver a better return on that capital going forward. It is after considering all those requirements that a buyback was thought of. If buyback was a method of delaying capital, then there were many other methods which are available for which we have provided. The company did not have to take a quarter 1 audited results but could have waited very happily. So I hope that these things will help you change your impression about what is the intention of the company. The intention of the company is -- has to be consistent across all shareholders.

Having said all this, let me tell you that by the end of the buyback process, INR 520 crores out of the INR 1,256 crores that are available would have already got distributed. You would agree that as a shareholder and as a company for which you want to be consistently involved in, having been involved for the last 5 years, you would like the company to grow consistently and not just distribute everything that it has on a given date. Second, there is an economic volatility facing us. The whole world is going for a slowdown. And as you can see in the press, there is lot of risk in the environment going forward. I'm sure you would like your company to be adequately protected and not having to go and start borrowing again to run its future. Number three, in these downturns, there is also an opportunity -- a new opportunity has come up. And the company should be ready to take advantage of new opportunities.

Having said all that, you must know that our overall business is not as capital-intensive as it used to be and company has systematically worked towards deploying lesser and lesser capital.

So all these are pointed in the same direction. Number one, increase the value that we offer to the shareholders. Increase -- obviously, that can only happen if we increase the value that we offer to our customers. And the second is make sure that we keep giving a consistent reward and consistent return on people's capital.

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Unidentified Participant, [107]

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[So maybe you will consider this?]

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [108]

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Yes. And by the way, you also had a comment that we kept this money after declaring dividend. Dividend, unfortunately, can only be declared after all the shareholders approved. Now whatever are your sentiments as a shareholder, similar and other sentiments will be available with the other shareholders also. And that's why these decisions are not taken by the Board. These decisions are taken with shareholders' commission. So I -- all that we are discussing today is recommendations made by the Board, and the shareholders of the company will take a final call in the matter based on the recommendations that we make.

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Operator [109]

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We'll take our next question, which is from the line of Rahul Jain from Dolat Capital.

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Rahul Jain, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [110]

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One more question regarding the profitability. When we see this profitability on the CLS business back to 85% and beyond -- I mean 15% and beyond or 14% to 15% is the kind of a band that we should be pertaining to.

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Unidentified Company Representative, [111]

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Okay. I think you are referring to the EBITDA margin of the corporate business.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [112]

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Yes. Right. But like you rightly pointed out, the EBITDA margin for this business has hovered in the 14% to 15% range. And one of the reasons why it has done so is because we have continuously increased our investment so that we can accelerate our sales and marketing activity to grow our business. I think like I pointed out earlier, we will continue to accelerate our investment in sales and marketing so that we can accelerate customer acquisition as well as work with our existing customers to generate more from them.

That having been said, on a go-forward basis, our contract mix is changing for the better, and we should have improved margins on a go-forward basis.

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Rahul Jain, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [113]

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Right. And lastly, if you could spare a minute on the acquisition pillars. So please, as we shared, do you think the ideal acquisition size for us would be $25 million to $40 million in revenue? And I feel within IRR, there's been -- I think there's 25% I -- is what I heard. Is that for the casualties? And if it is the number, don't you think it is too stretch a number and there will be very little opportunity in that zone?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [114]

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Sorry. Your question is there will be very little opportunity? See, these are our investment hurdle rates. And obviously, as I mentioned, sometimes you have to take deviations from [done] that basic -- based on the overall attractiveness of the target. So that's our call, which we will take, but the Board's investment committee typically puts through any of the acquisition targets through a certain set of filters. And one of the filters is the hurdle rate. And that hurdle rate, as we said, is 25% IRR or better.

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Rahul Jain, Dolat Capital Market Pvt. Ltd., Research Division - VP of Research [115]

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All right. And lastly, on this revenue, ideal revenue size of $25 million to $40 million, do we know that -- any ballpark number in terms of how many such companies would be there? I mean is it a very large number of companies that you will be operating in this revenue zone? But there are very select few names.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [116]

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There are several that operate in this range.

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Unidentified Company Representative, [117]

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[You're going to explain further] (inaudible).

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [118]

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Yes. I mean there are many companies who have stock at about $10 million or $20 million, then there are companies who have stock at $50 million, and then there are a few that are greater than $100 million. And then beyond a couple of hundred million dollars, you start seeing very few companies. That having been said, in the mid-range that Vijay commented on, there is a fairly significant choice.

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Operator [119]

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(Operator Instructions) The next question is from the line of Ravi Menon from Elara Securities.

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [120]

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I apologize if this has been covered already, I joined the call late. Could you give a breakup of [the days] impact the EBITDA level for the 3 segments separately?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [121]

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Yes. Ravi, I can give -- get back to you quickly offline. Is there any other questions?

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Unidentified Company Representative, [122]

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Because Vijay shared this with everybody a few minutes ago...

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [123]

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Then I don't want to waste time, I'll connect with (inaudible).

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Unidentified Company Representative, [124]

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[I will try everything.] No problem.

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [125]

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Sure. And just one -- a long ago, a question about again the acquisition strategy. Do you think that on the CLG business, if you are in more verticals or if you, I'll say, in more geographies here does scale actually act as a real benefit of this business?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [126]

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It actually does. I mean if you notice, our acquisition philosophy has been to improve capability, to create intersections of increased capability and market access. And that's what we have done in the past. As Vijay mentioned earlier, we have appointed an adviser, and the adviser has met several companies so far. Our goal is to continuously improve our capabilities so that our customers can depend on us for most, if not all, of their needs. And there are a plethora of capabilities that we can add so that we can do more and more for our customers. End of the day, if we did everything for our customers, we would be looking at a $300 billion marketplace.

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [127]

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Right. And Sapnesh, do you think that the trend of -- [contribute] outsourcing at -- more people or more enterprise customers. Now you're evaluating training outsourcing compared to, say, 2 or 3 years back?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [128]

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Yes. Absolutely. And that's also visible from the acceleration in deal volume as well as velocity. You're seeing more deals in the market. We are also finding our customers look at NIIT as a differentiated and distinct partner, and they are preferring us. And that's the reason why you see acceleration in the number of deals we are able to bring to the table.

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [129]

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Great. So then I can take it back to CLG growth -- I'm sorry.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [130]

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We have a tally of 49 customers there.

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [131]

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So I think that's...

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Unidentified Company Representative, [132]

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Yes. And it's in our report.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [133]

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Sorry...

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [134]

--------------------------------------------------------------------------------

My apologies. Yes, yes. So sorry, go on.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [135]

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No. I was saying that out of the tally of 49 that we have now, 10 were added over the last 2 quarters. So there is acceleration and momentum.

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Ravi Menon, Elara Securities (India) Private Limited, Research Division - VP of IT Services & Internet and Analyst [136]

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Right. And so I take it that -- and this is not just market share gains, that the overall market is also gaining. It's growing. So that's -- it's a combination of 2 factors. Or would you say it's primarily the market growth and less of the market share gains for you because those -- it's really not a very contracted space, right? You're not displacing anybody.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [137]

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No. It is predominantly market share gain. The market, it's -- if you were to look at the outsourcing space, it's about a $4 billion space. It's not like that space is growing by 15%, 20% year-on-year, it is doing a low single-digit growth from a year-on-year perspective. However, more customers in this space are choosing to outsource. And a lot of them are choosing NIIT versus others.

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Unidentified Company Representative, [138]

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And the headroom is...

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [139]

--------------------------------------------------------------------------------

And I mean given where we are and given where others are, there is substantial headroom for us to grow in the segment of our choice.

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Operator [140]

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The next question is from the line of [Ganesh Shetti], an individual investor.

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Unidentified Participant, [141]

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Yes. I really appreciate our company's high corporate governance practices. And I would also add that the NIIT group has really done a lot for the [minister], especially NIIT technology, (inaudible), everyone, a lot of value to NIIT, group shareholders and the acceptance of NIIT Technologies in the buyback was also very high. So I would say that as an individual who has been as a shareholder of the company for more than 10 years, NIIT has been really a backbone of my (inaudible) in terms of creation. So I'm really grateful to all the NIIT Limited Group, its founder members and the Board of Directors.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [142]

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Thank you, Mr. [Shetti]. You make our eyes water. Thank you. Really appreciate your comments. You've been more than kind. I'm sure everything that we did was not right, and I'm sure we can keep learning as we go forward, and we keep taking feedback from all of you. And it is obviously a -- are different kinds of feedback, but we act on all that feedback, positive or negative, to make sure that we create more value for our shareholders.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [143]

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And we appreciate all of you.

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Operator [144]

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We'll take one last question from the line of [Suresh Agarwal], an individual investor.

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Unidentified Participant, [145]

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And what's the deferred tax is all about?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [146]

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I beg your pardon?

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Unidentified Participant, [147]

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Deferred tax. Deferred tax, INR 96 crores?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [148]

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Deferred tax.

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Unidentified Participant, [149]

--------------------------------------------------------------------------------

Yes.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [150]

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About INR 96 crores.

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Unidentified Company Representative, [151]

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(inaudible) INR 99 crores.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [152]

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No, no. So I'll explain to you. We -- when we used to -- then, NIIT Technologies was a part of NIIT Limited's investment portfolio. At that time, we used to get a share of their profit as a profit which would get added in our profit as associate profit because we had more than 20% holding. And last year, the government announced that the treatment of that profit should be that not only should you book that profit, but also create a deferred tax liability on that profit. Now because we've reversed the profit itself by selling the investment, therefore, the deferred tax liability also needs to be reversed. That is the INR [91] crores.

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Unidentified Participant, [153]

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So that deferred, that will come in next quarter?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [154]

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No, no, no. It is a deferred -- it was a deferred tax liability sitting in our balance sheet.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [155]

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It was a [non cash] entry.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [156]

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It was a [non cash] technical entry.

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Sapnesh Kumar Lalla, NIIT Limited - CEO [157]

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(inaudible) noncash entry, which was (inaudible).

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Unidentified Participant, [158]

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Okay, okay, okay. Sir, one more thing. Like you are aligned with now like INR 821 crores. The (inaudible) gets, and that's lessened given by you. And if we include CLG like indemnity, then it will come around INR 1,021 crore. So regarding acquisition, you are telling that the future acquisition, all of these. So you are talking about acquisition of INR 4 crores or INR 5 crores, 40 million, 50 million. Then, sir, a great amount of money will be left with us. Isn't it, sir?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [159]

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Yes. So I -- yes, yes, yes. So the first question is that the company believes that the company should return the excess cash that is required over and above its requirements of growth capital as well as providing for environment risk back to its shareholders. And the company believes in sharing that in a stable and consistent manner. Number two, the number that you talked about, INR 4 crores to INR 5 crores is 40 to -- 25 to 40 is the millions of dollars. I don't think the -- it would be viable for us to go and buy our INR 2 crore or INR 4 crore company because otherwise, the cost of managing that company and doing that transaction will far exceed the benefits that we may derive from it. So we are discussing the ideal size of an acquisition to be $25 million to $40 million of revenue run rate.

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Unidentified Company Representative, [160]

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INR 250 to INR 300 crores.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [161]

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That is INR 250 crores to INR 300 crores.

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Unidentified Participant, [162]

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Just one more thing, sir. Please -- while going through all this, please consider from minority shareholder. Those who are with you for last -- so many years, like one participant has already told -- already thanked you for the -- like he has made a lot of money investing in NIIT Limited. So I wish him best luck, but he would have made money in NIIT Technologies; but in NIIT Limited, since last 10 years, nobody has made many money because from 2011, actually, I myself invested in this company. So I know that from last 8 to 9 years. But I will request Mr. Thadani and you all like please consider the benefit of small and marginal shareholders because they are expecting a lot from this transaction. Okay. That's my request, please.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [163]

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Thank you so much. First of all, I am about to tell you, for us, the small and marginal shareholders are a very important part of what you call marginal. No investor is marginal. All are investors in the company. I want to tell you that we give equal importance to everybody's comment, number one. And we would definitely take your suggestions as well. The second, which I want to tell you is we are committed to share and reward the shareholders going forward, our current shareholders. And through our subsequent actions, I hope we will be able to change your view about what you said a little earlier.

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Unidentified Participant, [164]

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Have you conducted through this revision...

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [165]

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(inaudible)

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Unidentified Participant, [166]

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Hello?

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [167]

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Even if the buyback -- I'm saying, even in the buyback, the smaller shareholders have a larger benefit because there is a reservation for them, which is 15% of the issue volume, and given our current distribution of shareholdings, they will get a disproportionate -- disproportionately higher allocation and entitlement for their buyback requests.

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Unidentified Participant, [168]

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Also please if this buyback can be conducted for dividend because the taxation is the same. So please don't consider this like our equity will reduce after this buyback and the future remaining shareholders will be benefited. Simple ask, what's for future one? Because we are with you from the last 5 or 33 years.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [169]

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We are -- I hope you understand that buyback is beneficial to current shareholders only. That is the shareholders who are there because after we buy back and let us assume that the buyback gets fully subscribed, the EPS for the company for those shareholders who are continuing will increase. And that will benefit all the existing shareholders. And by the way, dividend is -- dividend distribution is not a onetime announcement. It is a continuous announcement. So please look forward to more such announcement for those are decisions which the Board has to take at that particular point of time. And as I mentioned that the next such event will be perhaps in the third or fourth quarter once the buyback results are clearly visible.

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Unidentified Participant, [170]

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Because sir, one thing I want to tell...

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [171]

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(inaudible)

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Unidentified Participant, [172]

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Sir, like in Meghmani Organics Limited, if you have heard, actually, that company was very good. But their management -- actually, their money -- they only can give of their own benefits instead of these marginal and small investors. And their company is now in (inaudible) that INR 125 or INR 30 to INR 50 here. They are now [ruling] at INR 47, INR 48. So everybody has got out from that company because the management was so money-centric like promoters are so [selfish]. They only wanted everything for them. They are not thinking about the smaller and marginal shareholders. So I know your [indiscernible]...

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [173]

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Mr. [Agarwal?]

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Unidentified Participant, [174]

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Yes. Yes.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [175]

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Mr. [Agarwal], I would like to explain to you in person or on phone or/and explained to you how these management decisions are not of the kind that you are referring to. We are -- we have been listed since 1993 and have built a reputation for ourselves in very strong corporate governance as well as other practices to do with shareholders. So I hope I will get a chance to explain this to you and help you change your thinking about, at least, this company. So give us an opportunity to do that. And I don't think we need a public forum for this debate right now because there are many others who are on the call at this point of time, but I'll be very happy to talk to you. Kapil will be happy to call, talk to you. Where are you based? We can even meet you because we travel all over the country. So...

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Unidentified Participant, [176]

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No. I'm based in (inaudible). I might [stay] with your mechanical engineer.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [177]

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(inaudible)?

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Unidentified Participant, [178]

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Yes, yes, yes.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [179]

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No problem. No problem. No problem We have operations in (inaudible). We will meet you there.

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Unidentified Participant, [180]

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Sir, like the company

(technical difficulty)

getting all they want to get out of the business. So that's why they are getting out from the listed entity and they had -- wanted to take all the profits with them. That's -- that money is actually going on the investor cycle. That is the report which I am getting. That's why I'm telling you something, is there's no problem because I am invested in so many companies. It will not benefit me, not for them. I will think that it is my mistake investing in this company. But I think you will think about all these things. Okay, sir.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [181]

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I will do that, and I hope once we speak to each other, you'll -- it will help you change your mind about NIIT. Thank you very much for that.

All right. I think we have gone 30 minutes behind -- beyond. So operator, can we now close the call unless there is a question.

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Operator [182]

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No, sir. We don't have anyone in queue. You may go ahead with your closing comments.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [183]

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Okay. Sapnesh?

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Sapnesh Kumar Lalla, NIIT Limited - CEO [184]

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Thanks, everyone, for joining, and we look forward to a continued conversation. Thank you.

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Vijay Kumar Thadani, NIIT Limited - Co-Founder, Vice Chairman & MD [185]

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And thank you very much for all your suggestions. We take all the suggestions very, very seriously and all the comments and really appreciate your giving us a very precious time on a weekend to listen to us, to participate and to help us grow this company. Please do reach out to us in case there are any further questions or interactions or clarifications required. And as usual, we stand benefited from this interaction like always. So thank you very much, and we look forward to speaking with you or meeting you soon. Bye-bye.