NIIT Ltd Management Discussions.

Company Overview

NUT is a leading Global Talent Development Corporation that is engaged in building skilled human capital and in enhancing workforce talent worldwide. The Company, which was set up in 1981 to help the nascent IT industry overcome its human resource challenges, today ranks among the worlds leading training companies. With a footprint in over 30 nations, NUT offers training and development solutions to enterprises and individuals.

NUT addresses these customer categories through its two business groups - Corporate Learning Group (CLG) and Skills & Careers Group (SNC).

Table 1: NUT Business Group

Corporate Learning Group (CLG) Skills & Careers Group (SNC)
FY21 Revenue Rs. 8,254 million Rs. 1,241 million
Contribution to Consolidated Revenue 87% 13%
Value Proposition Productivity Employability
Focus Geography North America, Europe, Oceania India, China, Africa
Offerings • Managed Training Services • Digital Talent Transformation for IT, BFSI, and Others Service Sector Skills
• L&D Transformation Services
• Application Rollout Training • Talent Pipeline as a Service
• Consulting & Advisory • Professional Life Skills

> Corporate Learning:

NIITs Corporate Learning Group (CLG) offers Managed Training Services (MTS) and Learning & Development (L&D) Transformation Services to market-leading companies in North America, Europe, Asia, and Oceania. The comprehensive suite of Managed Training Services includes Custom Curriculum Design and Content Development, Learning Administration, Learning Delivery, Strategic Sourcing, Learning Technology, and Advisory Services. L&D Transformation Services include Augmented Reality (AR)/ Virtual Reality (VR) based learning solutions, Curriculum Transformation, and Portfolio Optimization. With a team of some of the worlds finest learning professionals, NUT is dedicated to helping customers run training like a business by improving the efficiency and effectiveness of their L&D organizations.

> Skills & Careers: NIITs Skills & Careers Group (SNC) delivers a diverse range of learning and talent development programs to individuals and corporate learners in established and growth areas. These include Software and Product Engineering, Data Sciences & Analytics, Cloud Computing, Cyber security, Banking & Finance, Digital Marketing, Professional Life Skills, Business Process Excellence, and Multi-sectoral Vocational Skills.

The Company provides these programs in India, China, and select growth economies. The programs are delivered through digital and hybrid learning models. With its Stack Route offering, NUT serves as a digital talent transformation partner for several corporates, helping them build multi-skilled full stack developers at scale in future technology skills. As online learning becomes mainstream, NIITs robust Digital Platform connects corporate and individual learners seamlessly.

Mind Champion Learning Systems Limited (MLSL): MLSL is NIITs wholly owned subsidiary. The company addresses the K-12 schools market in India and comprises NIITs School Learning Group (SLG), which provides technology- based solutions for learning and education management to K-12 institutions across India, reaching out to more than a million students annually. The focus here is on improving the effectiveness of school education and the academic performance of students. The business is classified as "Asset Held for Sale."

Environment and State of the Industry

The spread of Covid-19 has caused an unprecedented health and economic crisis arou nd the world. Global GDP declined by 4.3% in CY20 (World Bank). The necessary protection measures and the requirement of social distancing have fundamentally altered the operations and prospects of several industries. While some sectors have been impacted in the near term due to various restrictions, demand in sectors such as Hospitality, Restaurants, Cinemas, Aviation, and Oil & Gas is expected to be depressed for a considerably longer period. There are other businesses, majority of whom are digital, that are thriving during the lockdown and benefitting from the shift in consumer behavior. Vaccinations and continuing policy support are expected to drive recovery in economic activity in FY22, even though uncertainty remains due to multiple Covid waves and virus variants.

Covid-19 has resulted in the compression of digital adoption expected over the next several years into a few months. Businesses have accelerated their digital transformation not only to ensure continuity but also to take advantage of this trend.

Corporate training has seen an increase in spending trends as well as an incremental shift in outsourcing to specialist training companies over the last few years. As expected, training spends have been under pressure, as organizations prioritized business continuity and cash savings during the year. However, the shift to digital is driving the need for new skills and companies are seeking out specialist companies to help them with this transition. Given the increased complexity, demand for rapid digitalization, and cost pressures, the trend of outsourcing is expected to pick up as companies adjust to the new normal.

Indias economy also slowed down further in FY21, as the country implemented a strict lockdown to prevent the spread of Covid-19. Real GDP declined 24.4% in Q1 FY21 but posted a sharp recovery in the second half of the year, restricting the overall decline for the financial year at 7.3%. Recovery momentum was expected to pick up in FY22 with projections of double-digit growth. However, the second wave of Covid-19 has tempered the growth trajectory for FY22.

Hiring that had virtually come to a halt at the beginning of FY21 is seeing some recovery. The IT/ITES industry has been resilient through the pandemic and saw strong recovery in hiring demand due to digital adoption by their customers. The BFSI industry is also starting to hire for replacement and for new age roles.

Buyback of Shares

On December 24, 2020, the board announced the second buyback out of the proceeds of the divestment. This was done at the earliest possible opportunity, after the completion of the regulatory waiting period of 12 months following the completion of the previous buyback. The second buyback was for 9,875,000 shares (representing approximately 6.978% of the outstanding shares) of NUT at a price of Rs. 240 per share (the price for this buyback was at a 92% premium to the previous buyback price of Rs. 125 per share) and saw over 5x subscription from the shareholders.

The buyback has been successfully completed as per the schedule in Q1 FY22. The total number of shares outstanding post the buyback is 132.47 million.

Utilization of Proceeds from Divestment of NIIT Technologies:

Transaction Proceeds Rs. 20,204 million
LESS: Transaction-Related Costs Rs. 365 million
LESS: Transaction Tax Rs. 1,512 million
LESS: Debt Repayment Rs. 1,777 million (paid Rs. 1,710 million till March 31, 2021 and balance to be paid in April 2021)
LESS: Prudent Reserve for Indemnity Rs. 2,222 million (11% of Transaction Proceeds)
Net Cash Available from the Transaction Rs. 14,328 million

Cash Utilization for Rewarding Shareholders:

Rewarding Shareholders
Dividends (including applicable taxes) Rs. 2,648 million
Buyback 1 (including applicable tax) Rs. 4,130 million
Buyback 2 (including applicable tax) Rs. 2,970 million
Total utilized for rewarding shareholders Rs. 9,748 million

With this, the Company has utilized about 68% of the Net Cash Available from the Transaction for rewarding shareholders.

The balance cash gives NUT a strong balance sheet and ample liquidity for building new capabilities and expanding reach to help the Company move up to global leadership in the education and training market.

NUT continues to evaluate all options for making judicious use of this liquidity. This includes various organic and inorganic investment opportunities, the liquidity required on the balance sheet to de-risk operations, especially given the disruption caused by Covid-19, as well as efficient ways to reward the shareholders further, along with rationalization of existing products and services with low profitability and growth potential to create bandwidth for growth.

The Board of Directors of the Company has recommended a dividend of Rs. 2.50 out of the profits of the Company for FY21.

Rationalization Initiatives: Creating Space for Growth

NUT undertook the following steps during the year:

a) Accelerate Digital Transformation of NIITs B2C Business

NUT has always been at the forefront of utilizing technology to improve effectiveness and efficiency in the delivery of education and training to its learners. NUT has been actively investing in its online learning platform (NUT Digital) over the last few years. As a result, NUT was able to seamlessly offer continuation of learning services to its existing learners, who had enrolled at the Education Centers for classroom-based courses, despite mandated lockdowns in response to Covid-19.

Covid-19 restrictions have compressed the adoption cycle for digital businesses across industries. This shift is here to stay. NUT has established credentials for delivering strong outcomes in online learning across segments. The disruption provides an opportunity for NUT to accelerate Digital Transformation of its Skills & Careers business and take leadership in delivering deep skills using the NUT Digital Platform.

NUT accelerated this transformation to a fully digital business on NUT Digital. This includes learner acquisition, academic delivery, learner services, alumni engagement, industry engagement, and placement.

The students who prefer face-to-face learning can continue at Business Partner-owned centers after these centers are allowed to open. Students enrolled at these centers would continue to benefit from access to existing services and new online resources provided by NUT to enrich their learning experience.

b) Exit from the Schools Business

NUT had transferred its schools business (School Learning Group — which provides content and services to schools) into a 100% subsidiary, Mind Champion Learning Systems Limited (MLSL) in 2015, with the purpose of creating flexibility for attracting risk capital for the growth of its private school business while managing a planned exit from the government schools business. In subsequent years, MLSL achieved growth in its offerings to private K-12 institutions, creating a unique platform with close to 1,000 private schools as customers with an asset-light and IP-driven model, while completing the execution of remaining contracts in government schools.

Regulatory ambiguity during the last couple of years had caused uncertainty for private school customers, which resulted in a decline of volume in FY20 at MLSL. The last of the government schools contract was completed in FY19. While MLSL was expecting to recover growth in FY21, lockdowns in March led to deferral of order intake and missed revenue.

While the current environment has created an opportunity for K-12 focused Edtech players for using technology to aid and complement formal school education and provide managed services to education institutions, addressing this opportunity would require aggressive investments and attention from management. Given the low contribution of the business in schools to NIITs revenue and restrictions on schools due to the pandemic, the Company believes that divesting the current schools business to an investor focused on the K-12 market and allowing NUT to sharpen its focus on the larger two businesses of Corporate Learning and Skills & Careers would be prudent and beneficial for all the stakeholders.

The Company received interest from investors during the year. However, the transactions could not be completed due to the prevailing uncertainty. The Company has decided to continue to look for a potential buyer for the business. In the interim, the Company has taken steps to rationalize costs and operations.

Investing for Growth

The strong balance sheet and liquidity position give NUT an opportunity to invest in accelerating growth of the Corporate Learning business given the large opportunity ahead, as well as addressing the opportunity created by digital disruption in the SNC business. NUT is actively seeking to invest in both organic and inorganic initiatives for adding new capabilities relevant for its customers and to deepen its penetration into select customer segments/geographies.

The Company continued to invest in identified organic growth areas to accelerate growth by:

a) Expanding the sales team for CLG and setting up a dedicated sales team for larger deals, including the on boarding of a senior salesperson with a proven track record and experience in winning large outsourcing deals

b) Setting up the Digital Reality (AR/VR) practice

c) Strengthening India leadership for Stack Route and TPAAS with the on boarding of senior talent in business development and technology

d) Hiring of a dedicated team for NIIT Digital

e) New products for in digital skills such as Full Stack Product Engineering, Big Data Engineering, Data Science, Cloud Computing and devops, Cyber security and SecOps, 5G etc.

In addition, the Company remains in active engagement with bankers in the US, Europe, and India to actively search and build a pipeline for inorganic opportunities. While the current environment has caused disruption in businesses in the short term, the Company is looking to invest in businesses that are thriving or can emerge stronger once the situation normalizes.

Company Performance

The consolidated financials for FY21 are provided in Table 2.

Table 2: Profit & Loss Statement

Rs. Million FY21 FY20 YoY
Net Revenues 9,495 8,892 7%
Operating Expenses 7,742 8,040 (4)%
EBITDA 1,753 852 106%
EBITDA% 18.5% 9.6% 888 bps
Depreciation &Amortization 589 598 (1)%
EBIT 1,163 254 359%
Net Interest Cost 79 194 (115) mn
Other lncome/(Expenses) 863 1,158 (295) mn
Forex Loss/(lncome) (4) 1 (5) mn
Exceptional Income/ (Expenses) (9) 12,917 (12,926) mn
Profit before Tax 1,942 14,133 (86)%
Tax (Operational) 336 1,466 (1,130) mn
Operational Profit after Tax 1,606 12,667 (11,062) mn
Profit/(Loss) from Discontinued Operations (169) (305) 136 mn
Non-controlling Interests (6) 3 (9) mn
Tax on Associate Profit 0 (910) 910 mn
Profit after Tax 1,430 13,275 (89)%
Basic EPS (Rs.) 10.1 82.9 (88)%
PAT% 15.1% 149.3% (13,423) bps

 

FY20 financials include one-time capital gain on divestment of holding in NIIT Technologies Limited. Excluding this, the like-to-like growth in PAT is 134% YoY.

Net Revenue in FY21 was Rs. 9,495 million vs Rs. 8,892 million last year. Revenue was up 7% YoY despite the impact of Covid-19 related restrictions. Revenue from CLG grew 19% YoY. The growth has accelerated for the business during the year.

In FY21, CLG led growth for NIIT with revenue of Rs. 8,254 million, up 19% YoY (the growth in Q4 FY21 was 34% YoY). The business contributed 87% to NIITs revenue in FY21, as compared to 78% in FY20. The impact of Covid-19 restrictions on the SNC business was more severe. Revenue in the SNC business, which contributed 13% to the overall revenue, was down 37% YoY. This also includes the impact of steps taken for the transition to Digital. The business, however, improved sequentially in each quarter during the year and achieved 12%YoY growth in Q4 FY21.

NIITs recovery has been driven by transition to Digital solutions based growth, in new customers added over the last few quarters, new offerings, and scope expansions with existing customers. This was despite reduction in consumption of L&D during the year, along with pick-up in economic activity, as countries gradually relaxed restrictions during the year, post the shock in Q4 FY20 and Q1 FY21.

Figure 1 Improving Performance Trend in FY21

NIITs Schools business is categorized as Asset Held for Sale, and the net impact of the business (Revenues Less Expenses) has been shown separately, below the operating results.

The Operating Profit (EBITDA) more than doubled to Rs. 1,753 million. EBITDA was up 106% YoY versus Rs. 852 million in FY20. The EBTIDA margin was 18.5% in FY21 versus 9.6% in FY20, an improvement of 888 basis points YoY. The improvement in margin was driven by better product mix, higher productivity, savings due to shift to digital, continuing work from home, improved leverage of fixed costs, as well as impact of cost optimizations achieved during the year.

The Company recorded a PAT of Rs. 1,430 million, leading to an EPS of 10.1 in FY21 versus Rs. 13,275 million in FY20 (PAT last year included one-time gain on divestment the Companys holding in NIIT Technologies).

A detailed discussion of NIITs business and performance is given in the subsequent paragraphs.

NUT Business Highlights

^ In CLG, the Company signed 9 new global customers in FY21 for its Managed Training Services despite the impact of Covid-19. In addition, the Company expanded 5 MTS contracts and renewed its contracts with 12 customers during the year. NUT ended FY21 with 58 MTS customers and Revenue Visibility of USD 287 million (as compared to USD 263 million last year), up 9% YoY.

^ In SNC, NUT continued to drive the use of technology in learning to increase reach and improve efficiency. The business witnessed a sharp impact of Covid-19 related restrictions across its key markets and had decided to transition to NUT Digital. The business improved sequentially in each of the four quarters. Despite the decline for the full year, Stack Route and TPaaS remain strong growth pillars for NUT, with strong customer value proposition and proven learning outcomes. They contributed 40% to SNCs revenue. NUT has recently launched new courses to address deep skilling demand in digital skills, including Full Stack Product Engineering, Big Data, Data Science and Analytics, Cloud Computing and DevOps, Cybersecurity and SecOps, 5G, and Game Development.

Covid-19 Impact:

Starting in Q4 FY20, governments globally implemented some form of lockdown and placed various restrictions. These restrictions and requirement of social distancing affected businesses worldwide.

These affected NIITs businesses across various geographies as well:

• The Company had to suspend the operations of education centers in China from the third week of January 2020.

• Similarly, in India, education center operations were severely restricted from early March 2020 and were suspended in the last two weeks of the month.

• The enterprise business across the US, Europe, and India saw significant deferrals of planned in-person instructor- led training events starting early March.

• There was a reduction in consumption of L&D at several large companies, as customers prioritized business continuity plans. While spends appear to have bottomed out as economies have reopened, they are meaningfully lower than pre-Covid levels.

• Demand side impact for some categories of customers, such as IT Services and BFSI in India due to massive slowdown in hiring, also affected the results.

Covid-19 caused a global economic slowdown during FY21, with partial recovery in the second half of the financial year, driven by stimulus measures and vaccinations. The uncertainty caused reduction in consumption of L&D during the year. While the spending remains depressed in the near term, the Company expects recovery as the economic activity picks up. As companies scale back L&D spends, the propensity to outsource is also expected to increase instead of adding fixed internal capacity.

In addition, Covid-19 restrictions have compressed the adoption cycle for Digital products and services across industries, including Digital Learning. While learning delivery has moved to online in the near term, it is likely to gain higher prominence even post Covid-19.

NIITs Response and Decisive Strategic Actions

NUT responded to the crisis with agility and taken decisive strategic actions, which prioritized safety and health for all stakeholders and ensuring continuity of services for its customers. During the year, the Company took the following actions:

• Enabled 100% of the workforce to shift to work-from- home protocol, ahead of lockdowns in respective countries

• Prioritized support for customers in ensuring the continuity of operations, as well as rapid transformation to meet the changing customer requirements

• Transitioned to digital delivery of learning on the NUT Digital platform and ramped up digital customer acquisition

• Worked with focus and determination to launch new innovative offerings for existing customers, as well as aggressively approach new customer segments with emerging requirements due to the crisis

• Took strong steps for cash conservation, which is visible in strong collections and improvement in DSO

• Implemented strategies for cost rationalization across its businesses, which contributed to the expansion of margins during FY21

• Adopted strong and decisive measures for portfolio and cost rationalization Figure2: NIITs Response to Covid-19

Corporate Learning Group

NIITs Corporate Learning Group provides Managed Training Services to Global Multinational Companies, headquartered in North America and Europe.

Global spending on corporate training is estimated to be USD 370 billion per annum (Training Industry: 2019). Companies typically spend over 1 % of their revenue on employee training (excluding the cost of employees in training). This represents over a thousand dollars per employee each year. About 70% of the spending goes toward proprietary training, so that employees can do their specific job or customers can adopt their products. Majority of this spending is the salaries of L&D staff. This includes areas such as training on proprietary products, processes, and systems of respective companies. Balance spending is on buying off the shelf or standardized training from third parties.

All this training needs to be created, maintained, updated frequently for changes, and delivered to employees or customers. Companies employ dedicated L&D staff to do this, which is often underutilized. Training is not their core activity, and therefore the quality can be mixed. While training demand fluctuates, the cost is largely fixed.

CLG operates in this space and is an established leader (among top 10 globally) in Managed Learning Services. NUT can do this work significantly faster, better, and more efficiently compared to internal training organizations. In addition, NUT brings unique capabilities that internal training organizations do not have and are unviable for them to invest for captive use.

CLG helps its Corporate customers achieve strong benefits of reduction in cost and fixed head count for training, as well as move to a variable model (pay per use) while achieving substantial improvement in learning outcomes (reduced time spent for up skilling, improved productivity, improved business results, including increase in sales, etc.).

Currently, less than 250 out of the Fortune 1000 companies outsource training in any substantial way. Less than 5% of the overall L&D spends are currently outsourced, representing a large opportunity for your Company. While overall spends reduced in FY21 and may remain lower in the near term, outsourcing is expected to pick up post Covid.

The market for Managed Training Services is expected to grow substantially as companies focus on core business, and training specialist companies demonstrate reliability and improvement in both efficiency and effectiveness of learning.

Learning and Development (L&D) is increasingly seen as a key enabler for business success. Therefore, global corporations are not only demanding greater accountability and efficiency on spending from their L&D function but also expecting it to lead to a measurable improvement in employee productivity and business outcomes.

NUT offers innovative solutions under its Managed Training Services that help clients accelerate the business impact. NIITs team of learning professionals is helping the worlds leading companies transform their training function through training outsourcing services that reduce costs, add a measurable value, and increase the business impact, while allowing customers to redirect resources and energy into core business functions.

CASE STUDY - I Overview

Our customer is one of the worlds leading global oil and gas companies with over 86,000 employees across 70 countries. Our challenge was to transform learning through comprehensive and scalable managed training services at a global scale with improved effectiveness and effciency across the enterprise.

CASE STUDY - II

Overview

Our customer is one of the worlds largest fast-moving consumer goods companies with over 2.5 billion consumers for its products represented by over 400 popular brands across 190 countries. Our customers goal was to transform learning operations to generate measurable business growth while providing increased value by simplifying the operational model. The specific challenges for L&D were to reduce and optimize costs, simplify and centralize structures, and move to agile, digital-led strategies.

Key Services Provided

Key Transformations

Asimplifed and agile learning operations model with an optimized and centralized portfolio of comprehensive services. The transformation roadmap included:

Global companies are increasing the use of technology especially around augmented reality (AR) and virtual reality (VR) to drive L&D transformation. NIIT is taking the lead in helping companies in this area.

Figure 4: Comprehensive Content Development Capabilities

NIIT provides the following services to its customers:

• Custom Content and Curriculum Design

• Learning Delivery

• Learning Administration

• Strategic Sourcing

• Learning Technology

• Advisory Services

• Application Rollout Training

• L&D Transformation Services

The strong value proposition, innovation, and excellence in customer service continue to be widely recognized. This is also reflected in the large number of industry recognitions and awards that NIIT received during the year. In FY21, NIITs Corporate Learning Group earned 55 industry awards (including awards jointly with customers), including 45 Brandon Hall awards.

NIIT is focused on the following industries/verticals:

• Technology & Telecom

• Energy & Commodities

• Life Sciences

• Banking, Financial Services, and Insurance (BFSI)

The selected verticals represent the highest per employee spending on training with a significant portion of the training spend driven by regulation, making them non discretionary.

Figure 5: Number of MTS Customers

The uncertainty and disruption caused by the pandemic led to reduction in consumption of L&D by some of NIITs large customers. However, continuous investments in S&M and new capabilities helped CLG recover from the impact.

CLG added 9 new logos in FY21, despite the impact of Covid-19. In addition, the Company secured 12 customer renewals and 5 scope expansions during the year. NIIT has been investing in building new capabilities. The increased velocity in contract wins and strong renewals are vindication of this strategy.

The Company had set up the Digital Reality practice in the previous year to strengthen capability in immersive gamification of learning, including immersive AR/VR and Mixed reality. NIIT continued to strengthen talent and leadership in this practice with the onboarding of a senior leader and his team of Digital reality professionals from Regatta VR.

The year saw further acceleration of new MTS contracts in Life Sciences. Integration of Eagle productivity is helping CLG make further inroads in the segment. NIIT also partnered with Josh Bersin Academy (JBA). The partnership strengthens NIITs L&D Consulting and Advisory practice. Along with JBA, NIIT is helping global companies plan necessary transformation in L&D functions as the world prepares for the new normal post Covid-19.

During the year, the Company took proactive steps to help customers transition from in-person training to live online learning to ensure business continuity. The Company launched a series of new offerings to help its customers in business continuity and transformation. These include offerings for

(a) Digital Assessment services,

(b) Virtual Selling Skills,

(c) Rapid Portfolio Digitalization, and

(d) Technology Training aggregation.

NIIT further ramped up learning delivery for its real estate training contract in North America. NIITs investments in digital learning and the digital platform ensured continued access to the program for aspirants wanting to be part of the real estate industry. Strong real estate market and convenience of digital learning with proven outcomes led to strong uptake of these courses in FY21.

Figure 6: CLG Revenue (Rs. million)

Ramp-up in new customers and expansion of scope for existing customers helped the Company achieve industry leading performance for its Corporate Learning business in FY21. Revenue in CLG grew by 19% YoY. The growth was 13% YoY in constant currency terms despite the impact of Covid-19, which caused reduction in L&D spends. Top 10 customers contributed about 59% of the CLG revenue in FY21, compared to 62% last year. The business achieved an EBITDA of Rs. 1,885 million, up 103% YoY. EBITDA Margin was 22.8%.

Table 3: Financials for Corporate Learning Group

Rs. Million FY21 FY20 YoY
Net Revenues 8,254 6,913 19%
Operating Expenses 6,369 5,983 6%
EBITDA 1,885 931 103%
EBITDA% 23% 13% 938 bps

Skills & Careers Group

NIITs Skills & Careers group provides a wide range of programs that deliver digital talent transformation for individuals and corporate customers. These include programs in Technology, Banking & Finance, Digital Marketing, Data Sciences & Analytics, Telecom (5G), Cloud Computing, Cybersecurity, Professional Life Skills, and multisectoral vocational skills. The business has transitioned to digital learning during the year.

The Company provides these programs in India, China, and select growth economies. NUT leverages its presence in these markets to offer professional courses for Young Adults, preparing them for careers in different industries, and for working professionals, who wish to upgrade their skills for career advancement.

NUT also offers innovative solutions to corporates in India to transform their talent, including deep skilling programs in IT through its StackRoute initiative, and its new offering to provide companies with just-in-time, day one ready professionals through its Talent Pipeline as a Service (TPaaS).

StackRoute

NIITs deep skilling initiative, StackRoute, which helps companies transform their existing talent, continues to receive sustained and enthusiastic response from IT companies. StackRoute has now been adopted by several corporate customers, to develop their top talent, including a global systems integrator and 2 of the top 5 IT services companies in India. StackRoute has achieved industry leading completion rates (over 10x of industry average) and strong outcomes for its learners, resulting in improved recognition from employers along with material increase in compensation levels. During the year, StackRoute expanded its portfolio of offerings to include a larger set of digital skills

Talent Pipeline as a Service (TPaaS)

TPaaS is NIITs strategic initiative to address the changing talent requirements for the industry with a new model of delivering just-in-time, job ready talent with integrated offering of talent sourcing, training, and on boarding.

Volumes were impacted in FY21 due to a sharp reduction in hiring in the first half of the year. However, there has been recovery in hiring by the IT/ITES industry as well as resumption of hiring by BFSI for replacement as well as demand for new age skills in H2. As the situation normalizes, the Company expects StackRoute and TPaaS to lead recovery for the business along with NUT Digital.

Given the mandatory lockdowns due to Covid-19, the Company stopped fresh enrollments for in-person classes in education centers operated by the Company. The Company has been able to offer live online learning to its existing customers across centers operated by the Company as well as centers operated by NUT Licensees, through its online learning platform, NUT Digital.

Since April 2020, all direct enrollments for the Skills & Careers business are exclusively for NUT Digital. In view of the environment and greater acceptance of online learning, the Company decided to accelerate transition to NUT Digital.

The financial performance of the Skills & Careers Group for the year is provided in Table 4.

SNC reported a revenue of Rs. 1,241 million versus Rs. 1,979 million last year. The Company focused on cost management initiatives, which helped the business moderate the negative impact of operating leverage. The impact of operating leverage due to reduction in volume and transition expenses led to losses during the year. However, the Company achieved growth and profitability in Q4 FY21 on rationalization of fixed costs, transition to digital, and pickup in demand due to gradual opening of the economy.

Table 4: Financials for Skills & Careers Group

Rs. Million FY21 FY20 YoY
Net Revenues 1,241 1,979 (37)%
Operating Expenses 1,373 2,013 (32)%
EBITDA (132) (35) (97) mn
EBITDA% (11)% (2)% (890) bps

School Learning Group:

NIITs School Learning business faced direct impact of Covid-19, as schools have remained shut during the lockdown.

As a result, revenue in SLG declined 58% YoY in FY21 to Rs. 102 million. The net result of the business is included in the loss from Asset Held for Sale in consolidated accounts.

Awards and Acknowledgments

• NUT earned 30 coveted Brandon Hall Group HCM Excellence awards, jointly with customers in 2020.

• NUT won the Learning Impact award at the Learning and Performance Institutes Learning Awards 2021, jointly with MetLife.

• NUT earned 15 coveted 2020 Brandon Hall Excellence in Technology awards, jointly with MetLife.

• NUT was ranked among Training Industrys Top 20 Training Outsourcing Companies for the thirteenth consecutive year.

• NUT won 2 coveted 2020 Learning Technologies Awards, jointly with MetLife.

• NUT was named a leader in Nelson Halls 2021 NEAT evaluation forvendors offering learning services.

• NUT was named to Training Industrys 2020 Top 20 IT Training Companies list for the eleventh year.

• NUT was accredited by the Learning and Performance Institute for the fifth consecutive year.

• NUT was ranked among Training Industrys Top 20 Content Development Companies for the tenth consecutive year.

• NUT was ranked among the 2020 Top 30 Highest Performing Learning Providers by the Learning and Performance Institute.

• NUT was named to Training Industrys 2021 Top 20 Experiential Learning Companies list.

• NUT featured as the only company in the Educational Services Industry in the Fortune India 500 list 2020.

• Rajendra Singh Pawar, Chairman & Co-Founder NUT Group and Founder NUT University, was felicitated with the "Lifetime Achievement Award" at Dataquest ICT Awards 2019.

• NUT recognized as the "Best Education Company to work with" at Indian Education Congress & Awards 2020.

• Parappil Rajendran, Joint Managing Director and Co Founder, was felicitated with IIT Delhi Alumni Award for Outstanding Contribution to National Development — for Corporate Excellence.

Consolidated Financials of the Company

The consolidated financial summary for FY21 is provided in Table 5 below:

Table 5: Consolidated Statement of P&L for FY21

Rs. Million FY21 FY20 YoY
Net Revenues 9,495 8,892 7%
Operating Expenses 7,742 8,040 (4)%
Personnel Cost 5,300 4,693 13%
Professional and Technical Outsourcing Expenses 1,484 1,626 (9)%
Purchase of Stock in Trade 93 133 (30)%
Other Expenses (excluding Finance Costs) 866 1,588 (45)%
EBITDA 1,753 852 106%
EBITDA% 18.5% 9.6% 888 bps
Depreciation & Amortization 589 598 (i)%
EBIT 1,163 254 359%
Net Interest Cost 79 194 (115) mn
Other lncome/(Expenses) 863 1,158 (295) mn
Forex Loss/(lncome) (4) 1 (5) mn
Exceptional Income / (Expenses) (9) 12,917 (12,926) mn
Profit before Taxes 1,942 14,133 (86)%
Tax (Operational) 336 1,466 (1,130) mn
Profit/(Loss) from Discontinued Operations and Asset Held for Sale (169) (305) 136 mn
Non-controlling lnterest& Associate Profit (6) 3 (9) mn
Tax on Associate Profit 0 (910) 910 mn
Profit after Tax attributable to Equity Holders 1,430 13,275 (89)%
Basic EPS (Rs.) 10.1 82.9 (88)%

 

FY20 financials include one-time capital gain as a result of divestment of holding in NIIT Technologies Limited. Excluding this, the like-to-like growth in PAT is 134% YoY.

Net Revenue

In FY21, the Company recorded revenue of Rs. 9,495 million, up 7% as compared to last year, despite the impact of the pandemic on the business. This was driven by 19% YoY growth in revenue from CLG. Growth in CLG made up for decline in revenue from Skills & Careers.

Operating Expenses

Operating expenses for FY21 were Rs. 7,742 million, down 4% YoY. Transition to Digital, strong focus on costs and savings in premise, and travel expenses led to reduction in operating expenses.

Depreciation

For the year, the Depreciation and Amortization was Rs. 589 million compared to Rs. 598 million last year. This includes Rs. 16 million of accelerated depreciation for certain assets related to physical centers due to the transition.

Net Other Income

The Net Other Income for FY21 was Rs. 778 million compared to Rs. 13,879 million in FY20. The details are given in Table 6 below:

Table 6: Other Income

Rs. Million FY21 FY20
Treasury Income on Cash available 796 1,134
Foreign exchange Gain/(Loss) 4 (!)
Net Interest lncome/(Expenses) (79) (194)
Gain on divestment of holding in NUT Technologies Limited 13,117
Expenses related to restructuring of subsidiaries (7)
Provisions related to Impact of COVID-19 on Skills and Careers Business (83)
Provision related to exit from government projects (107)
Other Exceptional lncome/(Expenses) (9) (3)
Miscellaneous income 66 23
Net Other Income 778 13,879

Net Interest Expenses of Rs. 79 million in FY21 includes Interest Expense on Loans ofRs.31 million, Interest Expense on Right-of-Use Assets as per IND-AS 116 of Rs. 29 million, Bank & Other Financial charges of Rs. 27 million, and Interest Income on other deposits of Rs. 8 million.

Profit/(Loss) from Discontinued Operations and Asset Held for Sale

The net result of operations from MindChampion Learning Systems Limited (MLSL) and the skilling business of NIITYuva Jyoti Limited (NYJL), which is being serviced by NUT Limited, have been reported as a separate line item in pursuance of

IND-AS 105.

Loss from Discontinued Operations and Assets Held for Sale reported in FY21 reduced to Rs. 169 million compared to Rs. 305 million last year. This includes Rs. 138 million related to MLSL, which is classified as "Asset Held for Sale," and Rs. 31 million related to NYJL, net result of which is classified as "Discontinued Operations".

Taxes

The Company had Rs. 336 million of income tax provisions (for NUT Ltd and its subsidiary companies) as compared to Rs. 1,466 million in FY20. The effective tax rate for the year was 17%. Please see note 23 in Consolidated Financial Statement for details.

Table 7: Detailed Analysis of Consolidated Balance Sheet at the End of the Financial Year 2020-21

Rs. Million As on31-Mar-21 As on 31-Mar-20
Sources of Funds
Share Capital 285 283
Reserves & Surplus 16,120 14,925
Shareholders Funds 16,404 15,208
Non-controlling Interests 34 27
Secured Loans 206 660
Unsecured Loans
Loan Funds 206 660
Total Sources of Funds 16,643 15,895
Application of Funds
Net Fixed Assets (with CWIP) 2,863 2,973
Right-of-Use Assets 283 800
Deferred Tax Assets net of Liabilities 152 292
Inventory 1 5
Cash & Equivalents 13,894 12,088
Trade Receivables 1,407 1,375
OtherAssets 2,740 2,557
Other Liabilities (4,419) (3,443)
Lease Liabilities (300) (824)
Assets Classified as Held for Sale 171 300
Liabilities Classified as Held for Sale (148) (229)
Total Application of Funds 16,643 15,895

 

The analysis in this MD&A does not conform specifically to the Schedule III format. Numbers have been regrouped for analysis.

Share Capital

The Share Capital of the Company stood at Rs. 285 million as compared to Rs. 283 million in FY20. The increase is due to issuance of 836,583 shares during the year, on exercise of Employee Stock Options.

Non-controlling Interests

Non-controlling Interests increased from Rs. 27 million in FY20to Rs. 34 million in FY21.

Reserves and Surplus

Reserves and Surplus stood at Rs. 16,120 million in FY21 compared to Rs. 14,925 million last year. Please see note 12 for further information on changes during the year.

Loan Funds

As on March 31,2021, Gross Debt of the Company stood at Rs. 206 million versus Rs. 660 million last year. This is net of impact of change in foreign currency exchange rates on fully hedged foreign currency loan.

The Debt to Equity ratio of the Company improved to 0.01 as on March 31, 2021, as compared to 0.04 last year, reflecting a strong balance sheet.

The Company has Net Cash of Rs. 13,689 million compared to Rs. 11,428 million in FY20. This does not include the impact of the Buyback of shares completed inMay2021.

Fixed Assets

During the year, the Company had a total capital expenditure (including Capital Work in Progress) of Rs. 296 million.

The category-wise addition in fixed assets is given below:

a) New initiatives and products: Rs. 62 million

b) Project-related capital expenditure: Rs. 169 million

c) Normal capital expenditure: Rs. 65 million

The Capital Work in Progress as on March 31,2021, was Rs. 50 million as compared to Rs. 203 million last year. This includes intangible assets underdevelopment.

The Net Block stood at Rs. 2,863 million as on March 31, 2021, as compared to 2,973 million last year.

Rs. million As on31-Mar-21 As on 31-Mar-20
Property, plant and equipment 1,448 1,478
Capital work-in-progress 50 203
Investment property 1 1
Goodwill 354 364
Other Intangible assets 1,010 927
Net Block 2,863 2,973

Right-of-Use Assets

Right-of-Use Assets as on March 31, 2021, stood at Rs. 283 million as compared to Rs. 800 million last year. The reduction is due to transition to Digital, leading to lower requirementof physical infrastructure.

Deferred Tax Assets/Liabilities

At the year end, the Deferred Tax Assets were Rs. 165 million. This is primarily due to the timing difference in amount of provisions carried in the financial statements and allowed on actual write-off as per the income tax provisions.

Deferred Tax Liabilities increased from Rs. 3 million in FY20 to Rs. 13 million in FY21.

Rs. million As on31-Mar-21 As on 31-Mar-20
Deferred tax liabilities (13) (3)
Deferred tax assets 165 295
Net Deferred Tax 152 292

Other Assets & Liabilities

The elements of Net Current Assets were as follows:

> Inventories

Inventories mainly comprise training materials including educational software used by the Company for imparting training and education. Over the year, the value of the inventory held by the Company decreased from Rs. 5 million in FY20to Rs. 1 million in FY21.

> Trade Receivables

The total receivables of the Company were at Rs. 1,407 million, as compared to Rs. 1,375 million as on March 31, 2020. Days Sales Outstanding (DSO) improved from 56 last year to 54 as of March 31,2021.

> Cash and Bank

The Cash and Bank Balances as on March 31,2021, stood at Rs. 13,894 million compared to Rs. 12,088 million as on March 31,2020. During the year:

• Net Cash from Operations for FY21 was Rs. 2,233 million vs Rs. 509 million for FY20. The improvement is due to an increase in operating margins as well as increased efficiency in working capital.

• Net Cash from Investing activities for FY21 was Rs. 551 million vs Rs. 18,431 million for FY20. Cash flow for FY20 included proceeds from divestment of holding in NIIT Technologies Limited.

• Net Cash from Financing activities in FY21 was Rs. 978 million vs Rs. 8,092 million for FY20.

Rs. million As on31-Mar-21 As on 31-Mar-20
Investments 8,539 8,439
Bank Deposits 5,344 3,640
Cash, Cheques and drafts on hand 0 2
Dividend Accounts 11 7
Cash & Equivalents 13,894 12,088

> Other Assets

Other Assets include Security Deposits, Interest Receivable, Unbilled Revenue, Other Receivables, and Advance Income Tax. These have increased from Rs. 2,557 million in FY20 to Rs. 2,740 million in FY21.

> Other Liabilities

Other Liabilities include Trade Payable, Other Financial Liabilities, and Provisions. These have increased from Rs. 3,443 million in FY20to Rs. 4,419 million in FY21.

Rs. million As on 31-Mar-21 As on 31-Mar-20
Trade payables 807 958
Provisions 403 295
Statutory Dues 218 113
Rs. million As on 31-Mar-21 Ason31-Mar-20
Deferred Revenue 715 310
Advances from Customers 218 136
Other Payables* 1,731 1,320
Others 327 312
Other Liabilities 4,419 3,443

 

*Other Payables include capital creditors, amount payable to employees, and payables on account of Strategic Sourcing for customers.

Key Financial Ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as compared to the immediately previous year) along with explanation therefore in key financial ratios (including sector specific equivalents).

The Company has identified the following as Key Financial Ratios:

Particulars FY21 FY20 YoY
Revenue Growth (%) 7% 3% 403 bps
Operating Profit Margin (%) 18% 10% 888 bps
Net Profit Margin (%) 15% 149% (13,423) bps
Basic EPS (Rs.) 10.1 82.9 (88)%
Operating ROCE 38.4% 7.3% 426%
Days Sales Outstanding (DSO) 54 56 (2) days
Debt to Equity Ratio 0.01 0.04 (71)%
Interest Coverage Ratio 20.03 1.73 1,057%
Current Ratio 3.78 3.79 (0)%

Revenue growth has increased to 7% in FY21 as compared to 3% in FY20, driven by growth in NIITs Corporate Learning business, which offsets the impact of the pandemic on the business. EBITDA Margin increased to 18.5% vs 9.6% last year driven by transition to digital, rationalization of costs, savings in premise, travel expenses due to continuing restrictions, better product mix, and improved leverage of fixed costs.

Net Profit Margin decreased to 15% as compared to 149% in FY20. The decrease was primarily due to gain on divestment of holding in NUT Technologies Limited during FY20. As a result, Basic EPS, which is calculated by dividing net profit by total number of shares outstanding, decreased by 88% YoY. Excluding the gain on divestment, the Net Profit Margin improved YoY by 819 bps (vs 7% LY) and EPS improved 173.5% YoY (vs Rs. 3.7 LY), including impact of Buyback in FY20

Operating ROCE of the business increased to 38.4% in FY21. Operating ROCE measures the efficiency of the net assets employed in the business, excluding cash balances. It is calculated as EBIT divided by capital employed in the business, excluding cash. EBIT was impacted in FY20, due to impact of Covid-19 in Q4. Improvement in operating margins in FY21 and improved efficiency in working capital led to an increase in Operating ROCE for FY21, as compared to FY20.

Interest Coverage Ratio increased from 1.7 in FY20 to 20.0 in FY21 owing to an increase in EBIT in FY21 and further reduction in outstanding gross debt compared to FY20. Current Ratio remained stable at 3.78 vs 3.79 last year.

EBITDA margin, Debt to Equity ratio, and DSO have been explained in relevant sections above.

The details of return on net worth are mentioned below:

Particulars FY21 FY20 YoY
Return on Net Worth (%) 13% 138% (12,463)bps

Return on Net Worth (RoNW) is computed as Profit after Tax divided by Net Worth. Net Worth represents the total of Companys equity and reserves excluding capital reserves, hedging reserves, and cumulative translation reserves. RoNW was 13% in FY21 as compared to 138% in FY20. While net profit declined by 89% to Rs. 1,430 million, Net Worth increased from Rs. 9,629 million to Rs. 10,817 million in FY21. The calculation for last year includes the impact of gain on divestment of holding in associate company during the year and is not comparable to FY21.

Accounting Policies

The Company has selected the accounting policies described in the Notes to Accounts, which have been consistently applied, and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31,2020, and of the Profit or Loss of the Company for the year. The significant accounting policies and practices followed by the Group are disclosed in Note 2 of the Consolidated Financial Statements for the year.

Related Party Transactions

Related Party transactions are defined as transactions of sale/ purchase of goods / services made by the Company with Promoters, Directors, Key Managerial Personnel, Subsidiaries, Associates, or other parties in which Promotors or Director are having significant interest / control directly or indirectly, which may have potential conflict of interest with the Company. There were no material transactions during the year under review that were prejudicial to the interests of the Company.

All transactions covered under related party transactions were regularly ratified and/or approved by the Board, the guiding principles being arms length, fairness, and transparency. Please refer to Note 34 of the standalone financial statements and Note 33 of the consolidated financial statements for details of related party transactions during the year.

Human Resources

The year brought focus on new ways of working in the pandemic world, and on skill sets that would be required in the post pandemic world. The focus of the human resources efforts was to promote connectivity and engagement through online connect sessions across units and levels. NIITs responded with innovation and resilience, creating and improving the ways of working together, in a remote mode. The Companys vision document promises to "foster career building by creating opportunities that demand learning, thinking, and innovation from each one of us." People are at the core of the organization and its values and beliefs. The Company believes that the growth of NUT is a function of the growth of individual NIITs, and that in all its engagements, society shall stand to gain substantially more than it gives to the Company. The emphasis on the learning and growth of each individual NIITi an, a culture of strong quality consciousness, and focus on the value creation for society are the cornerstones of NUT culture. NIITs demonstrated this consciousness as they drove customer value with a heightened sense of responsibility amidst an uncertain environment.

During FY21, the Company continued to drive a high- performance culture through data-driven decision-making. The performance management system "AGILER" enabled frequent performance conversations and check-ins along with a section to define, track, and drive transformational initiatives. The fast-track, ladder-based growth model, Accelerated Career Enhancement (ACE) added more entry- level roles into its fold. ACE now covers over 580 NIITs, thus enhancing performance and accelerated career growth. The Company plans to bring more entry-level roles into the folds of the ACE model in line with the career ambitions of a young and dynamic workforce. Steps were taken to identify and groom future leaders, strengthen the succession planning process, and enhance organizational resilience and sustainability.

The Company continued with its sharp focus on the overall health and well-being of each NIITian during FY21. NUT has an integrated "Health and Wellness program" in place. The program addresses wellness from a proactive and holistic perspective, addressing dimensions of physical, mental, and emotional health. Expert consultations, online counseling, as well as online workplace fitness initiatives were organized under this program. Due to significant adoption drive initiatives, a large number of NIITs actively participated in health & wellness programs. To motivate NIITs to take up health as an important priority, a Digital Gym was introduced, covering live-streamed sessions of Yoga, Aerobics, and Fitness dance routines. Atie-up with an online fitness group saw over 500 NIITs actively participating and benefiting from this program.

In 2018, the Company had introduced an Al-powered employee engagement bot called "Amber." During the year, Amber gathered responses to provide an organization-wide "daily mood sentiment" score as well as specific feedback during the pandemic period, enabling an agile management response.

Higher Education Scheme and "Lifelong Learning" program were introduced for NIITs for their professional and personal development. The Company continued to focus on training in the areas of "Gender Sensitivity," "Prevention of Sexual Harassment (POSH)," "General Data Protection Regulation (GDPR)," and "NUT Code of Conduct," as mandatory training. The Internal Committee for dealing with POSH cases was strengthened by formulating Zonal ICs and imparting training to all the 1C members. The "diversity, equity, inclusion, and integrity (DEII)" committee was built upon existing culture and practices of the Company, and it established a greater rigor into the Companys hiring and career progression processes.

As of the end of FY21, the people count stood at 2,531 (excluding project retainers) as compared to 2,600 last year (down 69 YoY), with 79% in Direct roles, 11% in Sales & Marketing roles, and the balance in Indirect roles.

The Employee Satisfaction Survey score stood at an all-time high of 85% during FY21, aided by an agile management response to the feedback from the Digital feedback bot, Amber.

Managing in COVID times

At NUT, several best practices were implemented to prepare for, and then to manage the impact of COVID-19:

Enabling work from home: The Company continued enabling NIITs to seamlessly work remotely in an organized manner. This support included appropriate computing hardware, software licenses, data connectivity, implementation measures for data access and security, and reimbursement of internet expenses.

Enabling digital processes: People initiatives such as goal setting, performance review, learning delivery, induction as well as the core operational processes have been enabled through digital mode.

Keeping connected: The CEO and senior leaders maintained regular virtual connect sessions with all NIITs. All people processes, including e-induction, were conducted virtually and seamlessly. The Company conducted fun events, including gaming contests, fitness challenges, music, and dance shows virtually. NIITs also used social media platforms to connect across locations. The Company carried a special newsletter capturing all the stories of "NIITs in COVID Times." Amber, the Al-powered CEOs assistant, reached out to NIITs to gather the "mood score," enabling an agile management response. To complement the WFH process, benefits and allowances to buy work-from- home accessories were introduced to take care of the out-of-pocket expenses.

Keeping all NIITs updated: Connect sessions and communication initiatives continued through the year to give guidelines to keep safe during the pandemic and contain spread. Further, regular information updates and advisories were provided to NIITs on the Companys intranet portal (iNIITian.com). This acted as a repository for all the Companys directives on the subject.

Variable Compensation Policy: In view of the COVID uncertainties and the consequent challenges, the Company designed a unique Variable Compensation Policy, tightly coupling company profitability to variable payouts, globally.

Raising the learning quotient: Various courses were designed, targeted at virtual modes of working, for teams and supervisors for holding meetings remotely and for giving feedback remotely. The "NUT Learning Portal" on the Companys staff portal, iNIITian, puts together all the curated virtual training sessions for easy access. Popular productivity tools, technical training, leadership, and communication training were added to the catalog. The Sales Academy launched training for remote counseling and tools for virtual selling.

Emphasizing fitness: The Health & Wellness team launched initiatives for a holistic fitness program, including yoga, mental health, and emotional counseling, as well as expert sessions on good posture, eye health, body clock management, and diet and nutrition tips to avoid stress. Weekend live physical workout sessions were held for NIITs to participate in along with their family. A subscription to online fitness services was also given to NIITs to kick-start a workout regime at their own convenience. Senior medical practitioners and nutritionists conducted live webinars and sessions virtually, followed by Q&A. They also conducted webinars to create awareness about the right precautions to take to prevent COVID, and the rehabilitation measures for those affected.

Future Outlook

> Corporate Learning: Global corporate spending on L&D represents a USD 370 billion opportunity. With the penetration of training outsourcing at less than 5%, there is a large headroom for growth. A large proportion of this expenditure is on in-house or insourced resources. However, there has been an increasing trend toward outsourcing, as Training is becoming increasingly complex and outsourcing frees the customers to focus on their core.

Given the impact of Covid-19 on businesses, there has been a temporary impact on spends on L&D. Post the initial shock, most customers want business continuity and stabilization of their L&D functions. Some have started to roll out new plans for transformation.

Economic slowdowns typically drive companies to find ways to drive efficiency including outsourcing of non core functions. Training is a potential area for greater penetration of outsourcing due to the potential to improve efficiency as well as the need to transform L&D for the new normal. As businesses stabilize, NUT expects a big shift to outsourcing and it is well positioned to benefit from this opportunity.

Investments in S&M and digital capabilities have helped the business achieve growth in FY21, despite near-term reduction in consumption of L&D by some of its large accounts. The Company plans to keep investing in the above, ahead of growth.

NUT is ranked among the top 10 providers of Managed Training Services. The Corporate Learning business has industry-leading growth and profitability metrics. With a strong balance sheet and availability of growth capital, NUT sees an opportunity to move up the leadership ladder.

CLG plans to leverage this capability and experience to accelerate growth through large-sized annuity contracts. To achieve this, the Company plans to continue sustained investments in innovation to create customer delight, in advisory services to drive thought leadership, and in Sales & Marketing and building a global platform for large comprehensive deals to accelerate growth rates.

As economies recover from impact of Covid, CLG expects some expenses and investments that were depressed in FY21 to pick up.

CLG would continue to explore inorganic opportunities to add new capabilities. Identified areas include companies with expertise in AR/VR as well as Transformation Services in focus verticals. The Company is actively engaged in the evaluation of such target companies.

> Skills & Careers: Digital transformation of businesses is driving demand for digital talent. NUT plans to continue to focus on IT and BFSI markets that offer significant growth opportunity due to the need for talent transformation. With the pivot to digital, new products focusing on deep learning, proven outcomes, strengthened leadership team, and strong balance sheet, NUT is well positioned to scale its SNC.

COVID-19 has compressed the adoption cycle for digital businesses across industries. This shift is here to stay. The same is happening in learning as well. NUT has been a pioneer in the use of technology to improve learning efficiency as well as to drive learning effectiveness.

The SNC business is emerging as a strong Edu-tech platform for Digital Talent Transformation for both Individuals and Corporates, leveraging the four decades of experience in pedagogy and the use of technology in learning. Given the increased adoption of online learning, the Company believes there is an opportunity to scale the business and take a leadership role in delivering deep skills in digital technologies using the NUT Digital Platform.

NUT plans to continue to invest in to accelerate the transformation and achieve scale, including investments in new products, ramping up digital learner acquisition and in marketing automation tools. As the business gains scale and improves acquisition metrics, it is expected to return to profitability.

Risks and Concerns

NUT services customers in over 30 countries. As a global enterprise, the Company faces a variety of risks. Risk management is, therefore, an integral part of the Companys core process and involves recording, monitoring, independent testing, and controlling of the internal functions of the enterprise by way of establishing Risk Control Matrix (RCM) to ensure process control, Business Risk Management (BRM) framework for business objectives, and Entity Level Control (ELC) for a comprehensive risk reporting. The rapid changes in technology across the globe have necessitated a dynamic change in the Companys business and delivery models.

NUT has implemented enterprise risk management framework across the organization, strengthening the existing risk management process and enhancing risk culture across the company. A robust structure based on global standards and best practices has been developed. The Companys Enterprise Risk Management (ERM) framework supports the achievement of strategic goals under the current disruptive environment by identifying, assessing, mitigating, monitoring, and reporting any risk to these goals thereof, enabling effective and timely decisions. Strategic decisions are taken after careful consideration of key risks and residual risks. The Companys risk framework encompasses strategic risks, operational risks, financial risks, governance risks, and information & technology risks.

Risk Management Committee reviews and provides inputs on the overall risk framework at regular intervals, in discussion with senior management.

As risk-taking is an intrinsic part of all the businesses, it has been NIITs constant endeavor to balance risk appetite in each line of business to ensure that each of the businesses generates high risk-adjusted returns, with the underlying objective of maximizing value for the shareholders.

Enterprise Risk Management Framework

Our ERM framework is developed by incorporating the best practices based on COSO & ISO 31000 and then tailored to suit our business requirements. NUT has taken proactive steps to identify and prioritize the risks up front, document them in consultation with the business groups, and define the risk management framework. These risks include customer concentration, competition, people, cyber security and data protection, investments, and exchange rate. The Company has laid out internal controls over Financial Reporting to be followed by the Company. Such internal financial controls are adequate and operate effectively.

At entity level, NIITs risk management framework addresses all significant risks of the businesses as envisaged by the management from time to time, based on the experience, the environment surrounding each business activity, and future initiatives, to achieve the business groups objectives along with the relevant mitigation strategy. The mitigation strategy is simultaneously addressed by the respective business groups for each of the identified risks while finalizing strategic and operational parameters of the business. The compliances and assurance of the risk mitigation strategies are addressed by the Internal Audit and Assurance Group. The Company has identified the major and significant risks into two broad categories, External Risks and Internal Risks, with mitigation strategies of each.

The Company is well diversified in terms of both its service offerings and geographic spread. While there is concentration risk in its Corporate Learning business as top 10 customers in CLG contributed 59% to the revenues of the business, the company has maintained a healthy contract renewal rate and strong velocity of adding new customers despite the pandemic. Also, the mix of revenue from the different business lines (Corporate Learning, Skills & Careers) ensures that the Company is well positioned to manage slowdown in a particular product portfolio or in a specific geography. With the Enterprise Risk Management (ERM) process in place, the Company has a robust mechanism for risk management, and the strategies for risk management are reviewed at appropriate levels at regular intervals.

A strong balance sheet and liquidity position give the company strong ability to withstand external shocks and provide a lot of confidence to all the stakeholders, including its global customers as well as employees.

Internal Control Systems and their Adequacy

The Company has adopted global practices for evaluating and reporting on internal controls, based on its operational experience in multiple countries. It has also implemented one of the leading ERP solutions in its global operations to integrate various facets of business operations, including Human Resources, Finance, Logistics, and Sales. This has enabled the Company to control and monitor its worldwide operations and strengthen the ability of internal controls to function most optimally. The evaluation of internal controls is an integral part of the plan for Audit & Assurance Organization.

Disclaimer

Statements in this management discussion and analysis describing the Companys views about the industry, objectives, projections, estimates, and expectations may be "forward-looking statements" within the meaning of applicable laws and regulations. The Company undertakes no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances, or achievements could differ materially from those expressed or implied in such statements. Readers are cautioned as not to place undue reliance.