This is already seen at the training giant NIIT. By 2004, it had restructured and split into two, separating its software services business into another entity, which it eventually sold in 2019 to Barings Pvt Equity for ₹2,627 crore, returning to focus on its first love , education. NIIT Technologies has been the most profitable distraction we’ve had, says group co-founder and chairman Rajendra Pawar with a smirk.
Circa 2022, and the 41-year-old company that pioneered IT education for the masses in India and reported revenue of ₹949.5 crore in FY21 (PAT 143 crore ) announced that it was once again splitting into two. Why the split? Pawar explains: “We saw ourselves involved in a learning enterprise of two types – they are related, but different.” One is the Corporate Learning Group (CLG), which accounts for 80-85% of company revenue, and the other is the Skills and Careers (SNC) business. “Content authoring, learning engine, testing engine, platforms were common, but used in very different ways,” says Pawar.
“We felt there were two trajectories and two types of things with the NIIT brand. We felt the two companies’ geographies were different, the business strategies were different, and the customer profiles were different,” he adds. .
CLG’s business is B2B and mainly focuses on North America/EU with Fortune 1000 companies as target customers, while SNC mainly focuses on India, China and Africa, and has B2C and B2B customers.
“When we left the tech industry, we had cash in hand and started thinking about using capital and how it could be deployed to grow both businesses,” says Pawar.
After two years of consideration, he says, they decided to run the divisions as two independently listed entities. “We will have two engines running, two boards of directors, two groups of shareholders, except that we will give one share of the new company which will be formed to the existing shareholders (of NIIT Ltd).”
According to Pawar, the process has just started and will take 12 to 18 months – at the end of which there will be two separate companies – NIIT Ltd and NIIT Learning Solutions. “The former will be focused on the individual to build their career and progress, while the latter will help organizations improve business results using learning. We are reworking everything in NIIT Ltd to re-engage at scale with a new model and new methods. What helps is that brand awareness continues to be very high,” says Pawar.
It’s all about talent
When NIIT was started in 1981 as an IT training company, founded by professionals Rajendra Pawar, Vijay Thadani, P Rajendran and Arvind Thakur, it was a pioneer in its field. Aptechs and others were launched much later, but NIIT remained stable. The original proposition was that there were plenty of bright young graduates but not enough jobs, even as the IT and IT field was just beginning to emerge in India, which would need of talent. “So we said if you have a college degree and you don’t have a job, we could train you and connect you with jobs of the future. So we were sort of anticipating these upcoming jobs,” says Pawar.
Of course, NIIT’s model and target audience continued to evolve – as computers became ubiquitous, it launched basic courses for housewives and the elderly, began training working professionals in sectors like banking and retail, by equipping them with IT skills. It has also diversified into software services. Pawar explains that they did this by taking inspiration from medical education, which seamlessly combines academic knowledge and practical training. “NIIT Technologies was very helpful to us as it gave practical knowledge to the people we were training.”
Now that the distraction – as it calls the IT services company, overseen by Arvind Thakur – is eliminated, the focus is on growing the learning solutions business. And it’s back to thinking seriously about talent and jobs. Even though NIIT today is led by a professional CEO, Sapnesh Lalla, Pawar and Thadani (both 71 years old) are quite active – although much of their time is also spent on their passion project, the NIIT University in Neemrana, Rajasthan, with P Rajendran (69).
As Pawar says, there is a huge shortage of talent, both at entry-level and mid-level, due to the transformation the world is going through. People in all functions need to be tech savvy. And all businesses now need good cybersecurity, good IT networks and knowledge of digital tools. The opportunity for a training business is immense.
The global corporate training market generates $400 billion in spending every year and is a significant market. Pawar says NIIT’s corporate business currently ranks among the top five in the world and expects to grow at a CAGR of 20% with margins of 20%. “We have a very good science that we have created and acquired some of it and a good track record.” At the end of 2021, it acquired RPS Consulting, a firm that offers training and certification training in IT. The idea, says Pawar, is to grow the CLG business to half a billion dollars, by which time it expects to be among the top three in the world.
It’s true that NIIT has evolved over the past 40 years, but as analyst Kashyap Kompella, CEO of RPA2AI points out, despite being a pioneer, it hasn’t aggressively pursued emerging edtech opportunities, the ones Byjus, Unacademy, and Upgrad did, commanding the valuation in the billions (Byjus $22 billion, Unacademy $3.4 billion). “It has enviable brand recognition, scale, infrastructure and trust. But you also wonder if they missed the latest edtech wave and passed up opportunities to create more unicorns of the NIIT family,” says- he.
Perhaps the split will allow NIIT to sue them as well? But Pawar says they are pretty clear about where they want to play and where they don’t. “We won’t get into the tutorials and test prep space, where a lot of the edtech action is,” he asserts.
The third quarter of fiscal 2021-22 was good for NIIT. CLG’s business grew 36% year-on-year, while SNC Group grew 144% year-on-year. While the RPS acquisition contributed some of the growth, the company said in its filing that strong customer expansion also played a role.
The market has rewarded the announcement of the split: the share price has increased by 50% since the announcement. “Separating the verticals of corporate learning, skills and independent business careers is a good move to unlock value. Enterprise learning and B2C-focused skill segments fit different drummers – customer needs, capital needs, marketing strategy, product focus, the whole playbook is different,” says Kompella.
However, while he believes managed learning services is a stable market opportunity, B2C skills and careers are hyper-competitive and crowded and NIIT should bring fresh thinking to the space. “The pandemic has upended the enterprise L&D space and customers are realizing the need to invest more in making employees more productive and engaged. As a leader in the field, NIIT can hope to capitalize on changing trends and continue to grow its revenues and profits,” says Kompella.
On SNC, he says, while NIIT has strengths such as a strong brand, good placement history and strong balance sheet, B2C has premium and volume segments, and they need to create differentiated offerings for both groups. . “Digital and AI technologies have enabled several edtech innovations around content personalization, content delivery and have dramatically improved user experience, and NIIT has some catching up to do on these fronts,” he concludes.
May 09, 2022