NIIT Learning Systems Ltd. (NSE: NIITMTS) Q1 2026 Earnings Call dated Aug. 06, 2025
Corporate Participants:
Unidentified Speaker
Vijay Kumar Thadani — Vice Chairman and Managing Director
Sapnesh Lalla — Chief Executive Officer and Executive Director
Rajiv Arora — Senior Vice President and Senior Practice Head of LDM
Sanjay Mal — Chief Financial Officer
Analysts:
Unidentified Participant
Siddhant Dand — Analyst
Ganesh Shetty — Analyst
Shradha Agrawal — Analyst
Kunal Tokas — Analyst
Nihar Shah — Analyst
Pranaya Jain — Analyst
Sankaranarayanan — Analyst
Deepak — Analyst
Shradha Agrawal — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to NIIT Learning Systems Limited Q1FY26 earnings conference call. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Vijay Thadani, Vice Chairman and Managing Director. Thank you. And over to you sir.
Vijay Kumar Thadani — Vice Chairman and Managing Director
Thank you Aviral. Good afternoon to all of you. Thank you very much for your interest in NIT Learning Systems and for joining the call today. This is the results time, busy time. So thank you very much for making the time to be with us. We will provide an update on the results of quarter one FY26. We’ll also provide an update on the inorganic activity which got completed. Started during. Which nearly got completed during the quarter but got completed before this call a few weeks ago. And we thought we would give an update on that. And then lastly the outlook for the business in the coming year.
I’ll just make one opening comment and that is that we are in a period of very high global uncertainty and I think everybody is battling with it and every organization has its own response. We believe NIIT Learning Systems Ltd. Has demonstrated fairly high degree of proactivity as well as high resilience. The changes which are taking place and have taken advantage of the opportunities that have been presented. We also have a new member in the family. In the NIT family. Between the time we spoke and now that is an acquisition which we made which is a company called MST Group in Germany.
And we’re very happy to to welcome about 80 more NITNs into the family and to take us through this as well as the outlook for the business. I have with me Sapnesh Lala who is the CEO of the company. And supporting him will be Sanyamal who’s the cfo, Kapil Saurabh, Jasinda Singh Chadha, Gaurav Rolhant and Saurabh Sineja. So all of us will join together. And I also have Mr. Rajendra Naseen Bawar chairman of the company with us. So with this backdrop I will hand you over to Sapnesh who will then take over the proceedings.
Sapnesh Lalla — Chief Executive Officer and Executive Director
Thank you Vijay and thanks everyone for joining. I will take us through our prepared comments and I’ll review the performance during the quarter as well as share expectations that we have for the future. As Vijay pointed out, the global economic environment continues to remain volatile, creating heightened uncertainty for businesses across sectors. This macroeconomic uncertainty is driving increased complexity and ambiguity in both strategic and operational decision making, often resulting in longer decision cycles and sometimes change in key stakeholders and movement of relationships. Despite this challenging environment, the business delivered an 11% year on year growth and 5% quarter on quarter growth.
In constant currency terms, the business grew 8% year on year and 5% quarter on quarter. This is a marginal improvement on the guidance that we had provided last quarter and it echoes the trust and the faith that our customers put in your NIIT to be able to service their critical needs. We continue to see strong customer traction, securing two new NTS logos and all the three contracts that came up for renewal this quarter were renewed, further reinforcing a differentiated value proposition and our continued leadership in the managed service learning services market. The renewal performance, as I pointed out, remains robust, maintaining 100% track record across all customer segments.
Our ability to expand share of wallet with existing customers remains the key growth driver supported by deepening relationships and demonstrated delivery excellence. While spending from existing customers appears to be stabilizing, the recovery remains gradual and is at below the slowdown levels that we saw four five years ago. We remain optimistic as early indicators point towards a bottoming out of this trend. Notably, the business continues to outperform peers demonstrating resilience through industry leading growth and profitability. Please note that as guided earlier, we successfully completed the North American Real estate contract on June 30th. Going forward, we will be involved mostly in teaching out the existing students and transition related activities.
During this quarter we made significant progress in building out our AI capability. We now have a pole position as acknowledged by our customers as well as industry analysts. We’ve gone live with a few key enterprise grade implementations of our AI solutions in the previous quarter and that gives us confidence that where we are and where our ambition lies, we will be able to significantly improve the way learning gets delivered globally. Coming to our results, as I pointed out earlier, our revenue for the quarter was 4514 million INR. That was up 11% year on year 5% QoQ constant currency terms it was up 8% year on year 5% QOQ the EBITDA for the quarter was 951 million and while it was down 7% year on year as guided earlier, EBITDA posted a smart recovery qoq and was up 11% quarter on quarter the EBITDA margin was 21% for Q1 it was up 112 basis points quarter on quarter.
During the quarter we added two new MTS customers. These include a leader in pharma and a leader in the hospitality sector. The company renewed the three MTS contracts that came up for renewal maintaining 100% renewal track record. The number of MTS customers at the end of the quarter stood at 95 and like Vijay pointed out, with MST Group joining the NIIT family as of early July the count of MTS customers has now crossed 100. The revenue visibility stands at 388 million versus 350 million the end of Q1 last year. Going deeper into financials, the depreciation was at 181 million INR as compared to 167 million INR in the previous quarter.
Please note that this includes a notional amortization cost of 32 million on account of St Charles. The net other income was negative 40 million INR. This includes treasury income of 125 million INR, exceptional expenses towards transaction related costs for the acquisition of MST group of 63 million INR and St Charles related acquisition related expenses of 49 million INR. Tax was at 237 million. The ETR was 32.5. The tax rate was higher in Q1 due to the impact of 30 million due to withholding tax on intercompany transfer of funds during the quarter to fund the acquisition of MST Group and then certain notional expenses on consolidation that are not included in tax computation.
The PAT was 493 million INR, EPS of rupees and 62 paise per share. If you were to remove the transaction related expenses that were incurred to acquire MST, Brooks adjusted PAC would be at 578 million INR as compared to 493. After including the exceptional expenses on account of acquisition of MST Group, the balance sheet metrics continue to remain steady DSOs to that 68 days as compared to 56 days last quarter on account of marginally higher working capital given a few collectibles got delayed which have since been received. Cash and cash equivalents are at 8,349 million.
CapEx for the quarter was 88 million versus 145 million for the previous quarter reflecting continuing investments in Generative AI net cash stands at 7,704 million versus 7,036 million INR last quarter and 6,489 million INR last year. Coming back to an update on the market environment, the market volatility continues to heighten the emphasis on cost optimization, prompting increased client engagement on large scale cost takeouts and transformation initiatives. We believe that NLSL is well positioned to capture a disproportionate share of these opportunities, underpinned by continued investments in AI consulting and advisory services, disproportionate investment in sales and marketing, as well as the established amendment of a strong and trusted brand that NIIT enjoys.
Deal pipeline remains robust active opportunities across large outsourcing, standing technology, professional services, automotive, life science with the SSI and other sectors so a wide breadth of opportunities. However, I would like to point out that due to the significant market uncertainty, the decision making cycles are starting to stretch beyond what we would consider critical. We continue to see accelerating structural transformation across industries we serve, driven by digitalization, decarbonization, biopharma and more importantly now by AI. Many organizations are actively restructuring to improve cost agility, fueling increased demand for outsourcing and I think this is where our opportunity lies and we are well positioned to take advantage of this opportunity.
NLSL continues to make disproportionate investments in new capability and go to market strength. Generative AI is becoming increasingly central in client discussions, though a broader adoption at enterprise scale for L and D remains cautious. Nonetheless, we are rapidly expanding the use of generative AI across multiple work streams. Where deployed, we are becoming more ambitious in delivering measurable learning outcomes for clients and significantly transform how learning gets delivered. I’m glad to note that a number of enterprise grade generative AI projects went live this past quarter and are starting to show early progress on their mission that we have put forward.
We talked about or Vijay talked about MST Group joining the NIIT family as announced on July 9 and IIT Learning Systems has successfully completed the acquisition of MST Group. They are a leading provider of managed learning services based in Munich, Germany. The acquisition was made through our wholly owned subsidiary in IIT Ireland Ltd. We have acquired 100% equity in MST Group for a total consideration of 22.37 million euros which includes 15.35 million euros for equity and 7.02 million in assumed debt. The transaction has been funded through a combination of internal cash and term loans and has been structured as an all cash deal.
The transaction is fully aligned with our stated strategy to drive growth through investments in new capabilities, geographies and industry verticals. MSP significantly extends our presence in the dark region which is Europe’s largest economy and one of the fastest growing markets for LND services. Investigroup brings with it a high quality client portfolio with over 20 marquee customers across automotive, industrial and energy sectors. Some of the marquee names that you might associate with Germany are part of their customer list. Their Quick Start Learning Academy capability, powered by the proprietary Extra platform, further strengthens our the capability to offer agile, scalable and customized learning solutions to global customers.
For calendar year 2024, MST reported a gross revenue of 17.43 million euros as per local GAAP with pro forma consolidated net revenue of 10.6 million euros with margins that would be accretive to our business. The business is asset light margin accretive and cash generated and we expect it to be EPS accretive from the first year on. With this acquisition we will add seven new Global 1000 clients to our MTS portfolio, taking a total to over 100 managed learning services clients globally. It also expands our capabilities across Europe including a nearshore hub in Hungary which will enhance our ability to deliver multilingual, on site, regionally tailored services across Western Europe.
Importantly, the MST leadership team including their Chief Executive Officer Lena Gents and their Chief Sales and Marketing Officer David Uhrich will continue to lead the business. Their deep diversity domain expertise and strong client relationships will be invaluable as we integrate and scale the MST business across Europe as well as globally. We also welcome MST’s team of over 100 L&D experts that join the NIIT family, bringing the total headcount to approximately 2,500. This combination is a powerful one. We are bringing together MST’s local agility, deep sector expertise within IIT, MTS’s global scale and AI enabled learning solutions, positioning us to lead as the partner of choice for large enterprises navigating learning transformation globally.
We’re confident this acquisition will generate strong strategic and financial value and is an important step forward in a journey to global leadership and managed learning services. I wanted to spend a minute on our guidance. We see robust contract pipeline and ramp up in new customers. Revenue growth during the year would be moderated by the completion of our North American real estate contract on June 30th. As I pointed out earlier, for the full year, therefore we will have a netting impact. For the full year we expect 10 plus percent growth in constant currency. For Q2 we expect an 8% year on year growth in constant currency, the MSP acquisition would add another 3 to 4 percentage points to this growth.
So the organic growth in Q2 would be at about 8% year on year in constant currency terms, the revenue from MS.2 group would add 3 to 4 percentage points in growth by way of inorganic growth. Margins are expected to range as guided in the 20 to 21% range for the full year. While the Q2 margins would be just about 20%. With that I would hand you over back to Vijay for any closing comments. And then we will go into Q and A.
Vijay Kumar Thadani — Vice Chairman and Managing Director
I think we are excited for the addition of industry group amongst us. And Sapnesh has already covered their details. So at this point of time I think we will open the floor for questions.
Questions and Answers:
operator
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Siddhant from Goodwill. Please go ahead.
Siddhant Dand
Yeah. Hi. My question is regarding the MSC acquisition. You know, the. The clients of mse, you know regarding them. So when we speak to auto ancillary companies or you know it companies who are supplying to these guys, those guys are under severe margin pressure because of increased competition and some slowdowns. So do you see a business over there or do you see this as an opportunity to lower cost and increase our share?
Sapnesh Lalla
You said it. We see it as an opportunity. We see it actually as a great opportunity. Because what we’ve seen in the past through different slowdowns is that when margins are under pressure, organizations think about transforming themselves. And LND in the HR workstream is a key area for transformation. And we stand a great chance to benefit from these transformations.
Siddhant Dand
Okay, thank you.
Sapnesh Lalla
And of course the acquisition of MS.2 Global with their existing relationships would help us accelerate.
Siddhant Dand
Okay. Okay. Yeah. Thanks.
operator
Thank you. The next question is from the line of Shraddha Agarwal from AM Securities. Please go ahead. Since there is no response from the current participant. Moving on to the next question. The next question is from the line of Ganesh Shetty, an individual investor. Please go ahead.
Ganesh Shetty
Congratulations for resilient performance during tough macroeconomic conditions prevailing. So my question is regarding MSC acquisition. With this acquisition, our major dependency from North American market can slightly tilt to European market. You see that after two, three years of business which will have a very substantial part of our business coming from Europe, including MSC and NIT learning. Can you please throw some light on?
Sapnesh Lalla
Sure. So our current mix is 70 30. About 70% of our business comes from companies that are domiciled in North America. And then about 30% comes from companies that are domiciled across UK and Europe. I would say that a very large percentage of our customers or clients are large multinational companies. So in a way it is a moot point where they are domiciled. However, I think Europe, especially with its complexity and its ways of working and its languages, is a market that is hard to penetrate. Has been hard to penetrate. And that’s the reason why we have a 70:30 ratio with this acquisition.
It will enable us to bring benefits to our clients on two dimensions. One on local relationships, which can be agile, which can be custom tailored, which can be high touch relationships for the clients, but also provide the same clients the reliability of the NIIT MTS brand, the global capability and the investments that we are able to make in AI and other emerging technologies to improve our capabilities.
Ganesh Shetty
So my second question is regarding the sectors which are being gathered by MSP Group like eco ancillaries and industrial products. So my question is whether the capability of NIT learning can be integrated into these offerings from mst. Similarly, MSP offerings in auto and industrial products can be deployed in North American market. So whether there is a possibility of this situation where we can really make use of the both competencies in the both companies and increase our revenue from these companies. Can you please explain regarding this?
Sapnesh Lalla
Ganesh, I must compliment you on how well you know your niit. You have read from the page. We work on our strategy. You are absolutely right. While NLSL has significant strength in the industrial vertical, we do not have enough in terms of a market share of the German market which is very strong on industrials and automotive. We will be able to bring our capability across the industrial sector into the German market and be able to accelerate growth in the German market by leveraging the relationships that MST already has. And also like you pointed out, the fact that they have deep relationships into automotive as well as in energy.
Those reference customers would be key as we expand relationships in industrials and automotives beyond Europe into North America and other markets.
Ganesh Shetty
Thank you very much sir for the excellent and underweb for the future.
Sapnesh Lalla
Thank you.
operator
Thank you. The next question is from the line of Shraddha Agrawal from Asian Market Securities. Please go ahead.
Shradha Agrawal
Yeah, hi. Sorry, last time I got dropped off. Congratulations sir on a Good quarter and this acquisition of msp. So I was looking at the historical financials and the numbers suggest that MSP had strong growth of upwards of 30% in 50% in CY 23 and 24. In an environment when other L and D players are struggling, what drove the strong growth in MST in the last two years and how should we look at growth going forward from mst?
Sapnesh Lalla
I think the growth that MST has achieved is a testament to the close relationships that they have with their clients. They are seen as a trusted partner. Culturally, they are very aligned with how we look at working with our clients. So it’s a very strong cultural match. They are very, very client focused, they are very agile, they’re very nimble and they are able to structure and adapt their services to meet their clients needs as they become part of niit. Not only will they have advantages that I just mentioned, they’ll also have the backing of a global player.
I mean, if you think of a large global automotive company based out of Germany, while Germany and Europe tend to be a large part of their market, but it’s not limited to just that. North America tends to be a very large market for them as well. And with NIT’s capability, MST will be able to service their needs globally. So we’re very excited about how NIIT can help MST grow their own client relationships. And likewise, we feel that with NIIT’s scale and capability, we will be able to accelerate penetration into the dark market.
Shradha Agrawal
So for any quantification on growth numbers that we should build in for wings to come in.
Sapnesh Lalla
We think that their growth is likely to be in line with the growth that we are aspiring towards, which is 20% growth and 20% profitability.
Shradha Agrawal
Right. And in terms of clients, so we get seven new clients from MST or is there an overlap in the large clients that we have with MST?
Sapnesh Lalla
There isn’t any overlap across MST’s large customers and ours. So it’s complementary. So all of their clients would be net new clients for niit.
operator
Moving on to the next participant. The next question is from the line of Kunal Tokas from fvc. Please go ahead.
Kunal Tokas
Hello, I’m audible.
Sapnesh Lalla
Yeah.
Kunal Tokas
All right. Okay. Thank you for the opportunity. And my first question is about AI. You’ve talked a lot about how AI has made the environment and the outlook very uncertain. But my question relates to the downside is that AI can push your business. So which sub segment of your business? And I am just. If I just read off the corporate training landscape chart that training industry has, it has a whole chart of different sub segments which in it caters to. Which sub segment do you see will be the most affected negatively by AI? Whether it will be learning management systems or tools or assessment and evaluation part.
Sapnesh Lalla
So I would say the following. I think AI and this is in line with what we’ve said in the past, AI is going to very fundamentally change how learning gets consumed and delivered. And organizations who do not build on that capability are likely to get left behind. And so the organizations who stay where they are and don’t move with the times are likely to get left behind and the future is likely to be uncertain for them. And for that reason we are investing disproportionately in AI so that we can take advantage of all the opportunities that AI has to offer.
Kunal Tokas
Do you think that the current business model definitely follows of being a comprehensive service? So either covering all of the different parts of LND can fundamentally change in a few years because of AI? And what, what probable shape do you, do you think it will take? And, and, and the corollary. Complete. Okay. We also think there might be a regressive trend towards in house LND because of the efficiency that AI can give. One of the reasons one of the main support pillars of this industrial circuit, the in house LND teams are not cannot compete with outsources like NIT with their aggregate comprehensive experience all over the globe. Do you think that can be a regressive trend that affects your business?
Sapnesh Lalla
So I would say a couple of things. One, it’s not a question of can LND will transform in a very significant way with the use of AI. It’s a question of time. It’s like when the automobile started replacing horse drawn carriages. We knew that the world would move towards automobiles. There were still a few people who were interested in using horse carts, but that changed over a period of time and the motor replaced the horse. I think exactly that’s going to happen. With respect to lnd, what AI does do is enable LND to be far more efficient, effective in their mission to provide great learning to their stakeholders.
Organizations who are currently in sourced will have a very hard time investing in AI as it pertains to L and D because there are going to be a number of other businesses that are going to be in line for investment in AI. For example, the organization that do capital allocation would first look at customer service, would first look at R and D, would first look at acquisition of customers or production of goods and services rather than investing in L and D. And so it’s quite likely that as time goes on and AI starts to play a more significant role in house lnd, organizations are likely to get left behind to a point where they might become irrelevant.
And I think that’s our opportunity where, given the investments we’ve made, organizations will be able to see the starkness of the difference between what they are able to do on their own and what they are able to do with a partner such as nitrogen.
Kunal Tokas
An extension to that question would be with AI bringing in more efficiencies and helping people do much more with less. Do you think a differentiation between players, between NIIT and competitors? Will it narrow or will it grow even larger?
Sapnesh Lalla
I think it will grow faster. It will grow larger. And like I pointed out, in this race, there will be folks who get ahead and there will be folks who get left behind. My bet is that NIIT will be way ahead. And at least that’s something that we are hearing from our customers as well as from.
Kunal Tokas
That is good to hear. So, and just the last question, you spend considerable time obviously thinking about AI and dealing with it. What. What have you seen your competitors do that you think is wrong? And what is NIIT doing different?
Sapnesh Lalla
Let me request Raji to take that question. Chairman.
Rajiv Arora
I think good conversation here. So let me just make one or two points. I think where we differentiate ourselves since the time we started in 1981 is two things. One, we’ve had a singular focus or the central philosophy, which is that whatever we do is learner centered, objective driven. Objective. Now the word is outcome driven. From 1981, that’s been our focus. And we don’t see that in every other organization. People work on many objectives. But this core principle holds in everything that the group does, and it does.
That’s one constant factor more and more and more balanced design. Second, and this is perhaps more important, everybody talks of the technology in learning, but not all players have been focused on the science of learning, the pedagogy, the psychology. That is one thing which differentiates us even more than most others. Because at least in the last 10 or 15 years, the thrust has been on using technology in learning, but not being aware of the underlying science of learning that is foundational. So when we look at AI, to us, it’s not the technology that’s important. Yes, it is.
And technology tends to give a benefit of productivity in most things. We are looking at the cognitive sciences breakthrough that AI can do. And mind you, even some of the things that we are talking of and Others are talking of are not new, but breakthroughs have been very limited. I don’t know whether you talked about the first rating that we have. Okay, so yeah, so there are ratings which talk about this dimension of usage of AI in effectiveness of learning, not the efficiency of cutting cost and delivery. Because unlike many other productivity things that it does, it cuts cycle time, it reduces, increases productivity.
Learning is not just about. You can’t compress learning and say you learned 50 times more, more or 10 times. It doesn’t work that way. It is how a learner imbibes, absorbs and translates into demonstrable skill. So in that we see that AI already in all the work that we’re doing and research that we’re doing is showing capability. And I think on these two dimensions is where the intensity and focus that we’ve had has kept us ahead. And we expect that AI will give us a leg up further because we started with this early. I don’t know if that answers your question more comprehensively.
Kunal Tokas
It does very well. That was very comforting to hear. Those are my questions. Thank you and have a good day .
operator
Thank you. The next question is from the line of Nihar Shah from Newmark Capital. Please go ahead.
Nihar Shah
Sapnesh, thank you for the commentary on the performance. I had a question which is very. Similar to the previous one, but just maybe more from an example based. You know, you mentioned in your opening remarks that you started using AI for certain solutions for your customers. Can you give us some flavor of. The kind of work that you’re doing within that which will help us better understand your AI capabilities and the opportunity therefore that’s available? That’s all from my side.
Sapnesh Lalla
Thank you. Sure. I try to, you know, there is a lot of research that shows that if you have a personal coach. And. If you have ability to connect with your personal coach, often your performance, irrespective of what area of performance you’re trying to improve, you are able to do better. And you might notice that elite athletes who can afford not one but several personal coaches rely on personal coaches to improve performance. And that’s not just unique to athletes. Leaders do that, politicians do that, folks across many sectors or segments of society do that. And they do that because they believe that personalized coaching is very, very helpful and it could be transformative. Now, the reason why everybody cannot get personalized coaching is because it’s very expensive.
Imagine everyone having an expert coach. If you think about it today, it’s very hard for anyone, any business leader to imagine that they will be able to provide everyone in a pivotal job role with the coach that’s possible. And that’s one of the use cases that we’ve implemented with a large customer who is significantly ramping up and upskilling their consulting team. And as part of that engagement, not only are we running a consult school training program for them, but in addition offering them an expert coach who can provide reflection sessions, who can provide coaching during their performance, who provides coaching as they do role plays when they are practicing their pitches and they’re practicing the solutions that they would provide to their customers.
So one of the things which we are really excited about is the ability of AI to remove this constraint where we’ve always had fewer coaches than needed, fewer teachers than needed, and that’s the reason why you have one teacher teaching 30, 40, 50 folks. I think AI enables us to remove those constraints and bring high caliber coaching, high caliber training, personalized training to everyone.
Nihar Shah
Got it. That gives us a good flavor. Look forward to hearing your thoughts in the future quarters as well. Thank you.
operator
Thank you. The next question is from the line of Pranaya Jain from Banyan Trika Advisors. Please go ahead.
Pranaya Jain
Hi sir. Thank you for taking my question. So the first question is that when we look at our professional and technical outsourcing costs, this number has been trending upwards at a very sharp rate. While our employee expenses as a percentage of sales have not grown at such a fast rate, it has in fact come down. So under what circumstances do these numbers go and do they go up in tandem or is there like, like an inverse, like inverse relationship between these two numbers? If you could throw some light on this question and then I have a couple of other questions also after this.
Sapnesh Lalla
See, whenever there is uncertainty, we try to create variability in our business. One of the key efforts to improve profitability has been to improve utilization and creating higher variability enables us to do that. And that’s what you’re seeing. So we are using more variable services to deliver to our customers rather than adding headcount to because of the uncertainty that we see in the market. As this uncertainty subsides, we will see more in our own headcount.
Pranaya Jain
Got it. That’s helpful. Second question is around the technology and telecom sector of ours. So while we have seen a lot of news reports which are, you know, mentioned that there are layoffs happening in these segments, we are growing this segment at a fast pace. So just wanted to understand what exactly is happening when it comes to our customers.
Sapnesh Lalla
You know, if you look at why is it that there are layoffs? There are layoffs when an organization realizes that the people that they have are not able to do the job that organization wants them to do or not able to do the job well enough for them to continue with them. That’s the reason why they take that last ditch choice to lay off a person. Nobody sets out hiring people with the objective to lay them off after a few years. So it’s a hard choice for most organizations. And the reason why they end up making that choice is because the skills that those folks possess are not in line with the skills that are needed.
And I think that’s really our opportunity. We are able to provide our customers with a choice where as the rate of change of skills change rapidly, we are able to reskill and upskill their employees so that they continue to be relevant. And so my feeling is that the rate at which the technology, that technology is changing creates a great opportunity for us for reskilling and upskilling employee basis.
Pranaya Jain
Understood. That’s again very helpful. Third question is on so like we have been gaining certain projects which are related to artificial intelligence. So are these margins similar to where we operate at on a consolidated company level or are the margins higher here or lower?
Sapnesh Lalla
It’s a little early to comment on margins of AI projects but for what we have done they are in line with our expectations and the typical margins sometimes higher because at times it is involved. But I would say it’s a little early judgment on margins that we are seeing on AI related projects.
Pranaya Jain
Got it. Just one final question on the effective tax rate that we should take into account going forward.
Sapnesh Lalla
I think I’ll let Sanya comment on effective tax rate though what you saw was elevated. But I’ll let Sanjay’s comments on it.
Sanjay Mal
So our typical tax rate will be more in the range of 36 to 37%. If there is any movements and withholdings and stuff like that, that adds to the effective tax rate. And so you should take it anywhere between 27 to 28% on an overall basis for the year and 26 to 27% for the plan to continue with the lockdown. Because we have this inorganic agenda continuing and there will be an impact of even this, this acquisition of MSP which will also have certain cost which will not be tax.
Pranaya Jain
Got it. Thank you so much and all the best.
operator
Thank you. The next question is from the line of Shankar Narayan from I thought pms. Please go.
Sankaranarayanan
Good evening sir. My first question is regarding the acquisition of mst. So with regards to learning and development spend per employee, is it same compared to other industries or this industry have a higher spend on learning per employee.
Sapnesh Lalla
I’m assuming your question is related to the industry and automotive space. And in the industrial and automotive space, the spend per employee tends to be higher than average. So the average tends to be about $1,100 per employee per year. The spend across industrials and automotive tends to be higher than average.
Sankaranarayanan
Got it, sir. In terms of wage hike, when are we planning to do the wage hike? When can we expect in the upcoming quarters?
Sapnesh Lalla
We announced the wage wage increase as of first of July of this year.
Sankaranarayanan
Got it, sir. In the second. Got it, sir. My last question is regarding our tech and telecom vertical. So you have spoken that in spite of layoffs, we are getting good traction from this vertical and in management consulting as well. We are seeing a little quarter on quarter improvement. Can we assume we have started seeing recovery in those verticals?
Sapnesh Lalla
I mean, you’ve seen improvement quarter on quarter on the second telecom. It’s part of our strategy to focus on that vertical just for the reasons that I described earlier. We are also starting to see improvements as compared to previous year in the management and professional services sector. And I think we should continue to see improvements on that.
Sankaranarayanan
Got it, sir. And most of the bad things which have happened in management consulting and professional services is getting bottomed out. That’s what you’re saying, sir?
Sapnesh Lalla
We expect so, but given the uncertainty, it’s hard to predict. But at this point in time I would say I expect so.
Sankaranarayanan
Sir. Any thoughts on aviation narrow space vertical, sir?
Sapnesh Lalla
I think we have a strong position in that vertical. That vertical is part of a larger vertical which we now call industrial. So we’ve got energy, aviation, mining and commodities. Now automotive combined into the industrial vertical. I think over the next few years we should see growth as we start to add airlines, as we start penetrating into airlines going beyond the industrial side of aviation and air force space.
Sankaranarayanan
Got it, sir. And just a follow up question from the previous participant. So in terms of managing the professional and technical outsourcing expenses, is it like when we are seeing certainty in the environment? That’s when we will slowly, gradually we will convert our variable cost into fixer cost through increasing our own workforce. Is this the right understanding, sir?
Sapnesh Lalla
Yeah, that would be the right understanding.
Sankaranarayanan
Thank you, sir. Best of it. Thank you.
operator
The next question is from the line of Deepak from Sundaram Mutual Fund. Please go ahead.
Deepak
Yeah, thank you for the opportunity. Am I audible?
Sapnesh Lalla
Yes.
Deepak
So my first question is regarding our vision of this MST Group. So in the press release I Mentioned that in the calendar year 2024 they clogged in revenue of around 17 billion euros and net of pass through expenses it was around 10.6 million euros. Just wanted to understand what is this. Pass through expenses we are referring to.
Sapnesh Lalla
So just like in our business, we have part of our business that we call strategic sourcing where we buy training from third parties on behalf of our customers. They do that as well. And as we’ve mentioned to you in the past, when we buy training on behalf of our customers, we treat the pass through expenses differently as compared to service delivery revenue. Pass through expenses are treated as gross, but not they don’t make part of the net revenue that we report. And while it shows up in the balance sheet as receivables and payables, but it’s not treated as revenue given that it is not creating a margin.
Likewise MST at the same time style of business where they buy training from third party vendors on behalf of their customers and we keep that as pass through and that’s why there is a netting.
Deepak
Okay, so what gets consolidated is the net of pass through expenses.
Sapnesh Lalla
Yes. Yeah. There the expense and revenue happens to be the same.
Deepak
Okay. And secondly, just double clicking on this telecom and technology vertical which seems to be doing very well for us. And you explained in one of the earlier participant answer also that you know, it is because of the rate of reskilling which we are seeing and telecom sector that more opportunities coming to us. But could you give us example exactly what kind of reskilling are we talking about? Is it technical in nature or is it non technical in nature? Some example would help us understand it better.
Sapnesh Lalla
They’re mostly technical in nature, you know. And this part would be similar in professional services form as it is in case of technology firm. Especially if the technology firm is in the business of providing services, their product is the person who they use to implement the services. And with the change in technologies, that product needs to be refurbed every few months. So as there is more adoption of cloud, cloud skills are needed. As there is more threats with respect to cyber security, more cybersecurity, trained professionals are needed. As organizations move from one technology to another, retraining is needed.
As technologies go from one version to another, changes are there in certifications and therefore retraining. So a very large majority of what we do for tech and telecom companies tends to be technology training. Though I would say that we also do non technology training, like I mentioned earlier, implementing consulting training for a company, that company happens to be a large among the largest Technology companies globally so largely. But some non tech training as well.
Deepak
Okay, so someone, let’s say if someone is upgrading its software and you need people to understand how to use an upgraded user interface. So that is where we come into the picture and train them. This is the new software and this is how you have to use it. Something like that.
Sapnesh Lalla
That’s one way of looking at it. Using, implementing, configuring, installing all of that.
Deepak
Okay. Okay. Thank you for the clarification, sir. All the best. Thank you.
Sapnesh Lalla
Thank you. Pretty close to the bottom of the hour. So if we have the last few questions. One question.
operator
The next question is from the line. The next question is from the line of Shrata Agrawal from AM Securities. Please go ahead.
Shradha Agrawal
Yes sir. I just love one question. You’ve indicated that the guidance already. Guidance stays at 10% cc for FY26. So including MST for 3 quarters how should we look at the full company’s growth number in constant currency?
Sapnesh Lalla
I think MST on an average would add 3 to 4 percentage points to our growth depending on any. I mean any quarter that you look at.
Shradha Agrawal
So 13 to 14% for the company’s growth number is what regarding to.
Sapnesh Lalla
For 3/4, 3/4. So for every quarter post acquisition, Every full quarter post acquisition.
Vijay Kumar Thadani
So 75% of. Let’s say 10%, seven and a half.
Sapnesh Lalla
For every quarter that they are with us you can assume having 3 to 4 percentage points to the yoyo of that water.
Shradha Agrawal
So from a full year perspective.
Vijay Kumar Thadani
Organic guidance. I said 10% is the organic growth guidance and.
Shradha Agrawal
Thank you.
operator
Thank you. As there are no further questions I would now like to hand the conference over to the management for questions closing comments.
Vijay Kumar Thadani
Thank you very much each one of you for joining us on this call. Your questions as usual give us many more things to think about. I think we answered most of the questions but if there are any which are left. Sapnesh Kapil. All of us will be very happy to answer. You can contact Kapil Saurabh for any follow up discussions. And we’ll also be very happy to meet in person and explain things.
Sapnesh Lalla
We are going to be in Bombay.
Vijay Kumar Thadani
We will be visiting Mumbai on coming Monday and hope to catch up with. Any of you with that. Thank you once again and wishing you all the best.
operator
Thank you. On behalf of NIIT Learning Systems Ltd. That concludes this conference. Thank you for joining us and you may now disconnect your lines.