Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quess Corp Ltd (BOM:539978, Financial) achieved a milestone by crossing a headcount of 609,000 employees, marking significant growth since FY21.
- The company reported a consolidated revenue of ₹5,179 crore for the quarter, reflecting a 9% year-on-year growth.
- EBITA grew by 16% year-on-year to ₹196 crore, with a margin expansion of 23 basis points.
- The company reduced its gross debt by ₹117 crore, achieving its lowest gross debt levels at ₹253 crore.
- Quess Corp Ltd's workforce management platform added 128 new clients, contributing to an overall annual contract value of ₹100 crore.
Negative Points
- The EBITA growth in the core segments like OAM and GTS was only in mid-single digits, indicating slower growth compared to the overall EBITA increase.
- The core-to-associate ratio has shown a steady deterioration, raising concerns about operational efficiency.
- The IT staffing segment faced headwinds, particularly in Singapore, due to visa restrictions affecting headcount growth.
- Margins in the operating asset management platform declined year-on-year due to investments in sales and leadership.
- The product-led business, Foundit, reported an EBITA loss of ₹15 crore in the first half, with challenges in achieving breakeven as initially planned.
Q & A Highlights
Q: The consolidated EBITA growth is 16%, but the growth in other segments is mid-single digits. How do you see the trajectory once the PLB business turns positive? Also, there has been a steady deterioration in the core to associate ratio. What is happening here, and how should we think about it going forward?
A: The product-led business is on track to break even by Q4, which will improve overall EBITA percentages. The core to associate ratio is impacted by investments in sourcing and verticalization, especially in workforce management. We are confident these investments will yield results and improve ratios as we move forward.
Q: This quarter's headcount addition was lower than usual. Was this due to a base effect from Q1, and how should we anticipate headcount trends in the second half? Also, GCC contribution in IT staffing seems to have declined. Can you explain this?
A: The delay in the festive season hiring impacted Q2 headcount additions. We expect manufacturing mandates to pick up in Q3. Regarding IT staffing, while GCC contribution to revenue is 68%, 74% of new business is from GCC, indicating a positive trend.
Q: Last quarter, you indicated margin improvement in Q2. However, the improvement was marginal. Can you break down where we missed on margin improvement, and do we anticipate a similar trend in the second half?
A: Q3 and Q4 are typically better for margins due to seasonal factors in high-margin businesses like food and telecom infrastructure. We expect margins to improve towards 4% in H2, driven by these factors.
Q: Can you explain the reclassification between employee trust and finance trust? Also, how is generative AI affecting your BPO/BPM business?
A: The reclassification is a change in accounting policy with no impact on profitability. Regarding AI, we see it as an opportunity and are launching a new offering, Pulse.AI, to enhance customer service and cost savings.
Q: With the government's focus on job creation, how do you see this impacting your business?
A: We have participated in industry consultations with the government. The focus is on moving from informal to formal employment, and we expect to benefit from these initiatives once detailed guidelines are released.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
