The US grappling with high interest rates, the upcoming polls and the wider implications of these events on the geopolitics have lead to a lead uncertainty dominating the outlook. These macro issues have weighed-in on sentiments with companies still going slow on “discretionary spends”, says Vijay K Thadani, Vice-Chairman & MD, NIIT Learning Systems.

He said the volume of consumption — which was down due to cuts in spending —was further impacted as businesses continued to explore cost reduction options.

NIIT Learning Systems offers managed learning and strategic consulting services that look at talent, skill and workforce transformation. The company saw a 4 per cent y-o-y growth in revenues to ₹397.4 crore and a 22 per cent increase in PAT to ₹93.6 crore for quarter ending September 30, 2024; but numbers were dragged down by “these weak business sentiments”.

“Ramp-up of new customers was partially offset by compression in consumption,” he said. Businesses — including IT bellwethers, big pharma, energy majors and banking majors — are under-stress as they look to tackle challenges arising out of business-model changes, digital transformation, shift to renewables, among others.

“There is still uncertainty in the business environment and sentiments are weak. This is perhaps the first time we are seeing this. Markets are up. But decision making is slow; companies including big ones in the consultancy segment continue tostruggle with cost optimisation measures still in place,” he told businessline during an interaction. “When we say uncertainty, it is primarily on three counts — the ongoing geopolitical tensions, US elections and their impact and how markets will react to it, and finally changing business models and companies looking to adopt to it,” Thadani added.

For example, Thadani pointed out, Fed, after a 5.25 percentage point of interest increases between March 2022 and July 2023, lowered rates by 50 basis points to address rising worries about the cooling labour market. Uncertainty remains high due to variety of factors including high rates, continuing conflicts, upcoming elections, and their implications for geopolitics, policy, and growth rates.

Outlook

Outsourcing conversations are seeing an increase; and activity is picking up with a number of large opportunities in the pipeline. “Hopefully, in the coming quarters, there will be improvements in business sentiments. Companies are keen to join the Generative AI bandwagon, among other factors.... Revenue outlook is good specially towards the Q4FY25 (Jan–Mar) period. We expect to grow faster in the last six months of the fiscal than the first half,” he said.

NIIT Learning Systems saw a 5 per cent rise in revenue in H1 on a y-o-y basis and the company’s guidance is for a “7 per cent-plus” growth in topline for the full year.

Revenue visibility has improved to $368 million, with the company looking to continue with its 100 per cent renewal and retention and expansion of contracts.

Thadani explained impact of global system integrators has been marginally positive for the quarter; while GCCs (global capability centres) continue to drive numbers. This apart, segments like banking, life sciences and tech have done well as against consultancy and professional service verticals — with the latter two continuing to be under stress. “Margins will be around the 24 per cent mark, in line with our yearly guidance of 22-24 per cent. We are well covered on that,” he said.