NIITLTD - NIIT Ltd. Share Price

Management provided an optimistic outlook during the earnings call, emphasizing the opportunities for growth amid a volatile macroeconomic environment. They affirmed a positive trend with expectations for year-on-year growth of over 25% in FY '26. Notably, the anticipation for growth in Q1 is expected to surpass Q4, rising as local conditions stabilize.

Key points highlighted by the management include:

1. Q4 Performance: Revenue for Q4 reached INR 863 million, a 16% increase year-on-year but down 12% quarter-on-quarter. Full year revenue for FY '25 was INR 3,576 million, an increase of 18% year-on-year, marking a significant recovery from a 11% decline in FY '24.

2. Product Mix and Penetration: They indicated that technology program revenues increased by 20% year-on-year, while BFSI and other programs grew by 8%. The mix for Q4 stood at 67% technology and 33% BFSI/others. The company has broadened its customer base and deepened penetration into GCCs, private banks, and the broader banking sector.

3. Investments and Acquisitions: Management discussed the strategic acquisition of a 70% stake in iamneo, an AI-powered SaaS platform, with an initial investment of INR 613 million. This acquisition is expected to be margin and earnings-per-share accretive from the first year and will enable access to over 6,000 private engineering colleges.

4. Growth Strategy: They emphasized a strong focus on skilling and upskilling driven by generative AI and various government initiatives focused on employability. The company remains committed to continuing an investment cycle to enhance their product offerings and market reach.

5. Financial Metrics: EBITDA for Q4 was INR 4 million, with a full-year EBITDA of INR 115 million. Profit after tax was reported at INR 461 million for the full year, an increase of 20% year-on-year.

Overall, management expressed confidence in overcoming current challenges and anticipated robust growth fueled by strategic initiatives and investments.

Q&A Section from Earnings Transcript

Question 1: "My first question is regarding our new offering GNIIT. And I want to know how it is being received by the student community in this difficult period of IT?"

Answer: "So far, we've seen a good reception for GNIIT. We're in a phase where more audiences are transitioning from exam time to course time, which enhances receptivity. Our marketing campaigns are currently running to promote GNIIT, and we plan to provide updates post Q1 on its market performance."

Question 2: "My second question is regarding our investment in inorganic as well as organic initiatives. Will the investment be reduced for the coming period to improve EBITDA margins?"

Answer: "We will remain in an investment cycle for the next few quarters, as we aim to build our business. The recent inorganic investment, particularly in iamneo, is expected to be accretive, enhancing both growth and margins."

Question 3: "My third question is regarding our strategy for AI skills and AI agents. Can these skills be utilized for any upskilling initiatives beyond technology and BFSI?"

Answer: "Currently, we focus on technology and BFSI for our AI skills offerings. However, we are also exploring opportunities within the India enterprise customer base, creating tools and agents for productivity gains across various sectors."

Question 4: "The GNIIT program"”how is this different from the earlier offering that existed a decade ago? What is the duration and fee of this program?"

Answer: "The re-launched GNIIT remains a dual qualification program, augmenting primary degrees. It now features a flexible stack-based structure allowing customization of skills to acquire. The duration can vary based on personal pacing, from 18 months to 3 years, and involves industry practice."

Question 5: "Despite consecutive quarters of growth, why doesn't it show in profitability if interest income is excluded?"

Answer: "While we are in an investment phase with some operations running on 11%-15% margins, we also maintain fixed costs that impact profit. Continued investment in marketing and scaling our structure will eventually yield profitability as we transition to steady-state EBITDA margins of 15% to 20%."

Question 6: "Regarding the iamneo acquisition, will promoters eventually receive equity in NIIT? Is this structure standard for future M&A?"

Answer: "The phased buyout allows original founders to stay integrated while contributing to growth. This structure facilitates their involvement, and while it may be a common approach, we assess each situation individually based on specific circumstances."

Question 7: "How different is the corporate part of iamneo's business compared to RPS, which also deals with GSI and GCC?"

Answer: "Iamneo focuses primarily on universities for 60% of its business, while 40% involves corporates. This approach contrasts with RPS, and it's more aligned with our strategy to address distinct customer segments."

Question 8: "Is the total enrolment data published unique enrolments or total billed enrolments?"

Answer: "The published data represents total billed enrollments in the quarter, which predominantly consists of unique enrollments due to low repetition in our program offerings."