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Quess Corp Ltd
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Ladies and gentlemen, good day, and welcome to the Quess Corp Q1 FY '23 Earnings Conference Call, hosted by DAM Capital. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Aasim Bharde from DAM Capital. Thank you, and over to you, sir.
Thank you, [indiscernible]. Good morning, everyone, and on behalf of DAM Capital Advisors, I would like to thank you all for taking the time to join us on Quess Corp's Q1 results conference call. From the company's leadership team, we have with us Guruprasad Srinivasan, Executive Director and Group CEO; Ravi Vishwanath, Group CFO; Lohit Bhatia, President Workforce Management; Pinaki Kar, President, Global Technology Solutions; and Sekhar Garisa, President, Emerging Business. As usual, the team will open the call with some opening remarks followed by a Q&A session.
I would now like to hand it over to Girish Kumar Sharma, DGM, Investor Relations, to take the call forward. Thanks.
Good morning, everyone, and thank you for joining our earnings call today. Please note that the results and presentations are already uploaded on our website. Anything we say which refers to our outlook for the future is a forward-looking statement and must be read in conjunction with the risks that the company faces. These uncertainties and risks are included, but not limited to, what we have already mentioned in the prospectus filed with SEBI.
With that said, I will hand over the call to our Executive Director and Group CEO; Mr. Guruprasad Srinivasan. Over to you sir.
Thanks, Girish. Thank you so much. Good morning, and thank you all for joining us today. Let me start by briefly giving you a context to performance of first quarter of this year. The business environment remained positive with service sectors driving major headcount addition. Our matured businesses have all continued to demonstrate growth, driving our consolidated revenues up by 33% year-on-year and 5% quarter-on-quarter basis. The consolidated EBITDA for the quarter was INR 153 crores, and the drop in EBITDA has been due to 3 reasons.
First, product-led segment reported an additive EBITDA of [ INR 22 crores ], a decline of INR 13 crores against Q4. This has been on account of additional Monster cash burn and costs associated with the business, and this is in line to our plan. SG&A cost increase of approximately INR 20 crores, out of which salary cost increase has been INR 14 crores in current quarter due to increase in overall core headcount by 350 by headcount across all verticals.
The third element of this is contract renegotiation in one of our business, which is Asset Management business. One of the major customers, we did a renegotiation on a contract on a forward-going basis. Ravi and I will be sharing more details on these cost matters during the course of the call. The headcount addition has been the best so far for -- and the outlook seems to be very positive going forward. We added over 30,000 associates by headcount in Q1 and ended the quarter at 470,000 by headcount by end of Q1.
Cash generation continues to be strong and OCF-to-EBITDA is at 56%. The slight dip from long -- I mean, from long-term guidance is due to delay in billing from renewed contracts in our BPO business. Our long-term consistent OCF-to-EBITDA conversion target continues to be at 70%. The sales engine continues to perform well as evident with record headcount addition. We acquired 219 new customers in Q1. The cross-sell engine continues to contribute significant, with 32 wins in the quarter with ACV of INR 164 crores.
Now coming specific to platform, starting with the Workforce Management. The platform posted a revenue growth of 4% quarter-on-quarter, 33% year-on-year. EBITDA from operations grew by 29% year-on-year and was flat on a quarter-on-quarter basis due to increasing SG&A costs on account of increments and other general expenses, like travel and other general expenses. Headcount reached 350,000, an increase of 11% quarter-on-quarter and 31% year-on-year. General staffing headcount crosses 300,000 mark, with retail, banking financial segment and telecom being the key driver to this growth.
Workforce Management added 100 new customers in the quarter, continuing to 100-plus client additions streak for 5 quarters from now. Value-added services in General Staffing continues to be at stable 20% across the General Staffing margins. Core to associate ratio stayed almost flat due to strengthening of core team in order to drive the growth for upcoming season. IT staffing and selection continues to grow at 8% quarter-on-quarter. EBITDA growth associated with greater than 10,000 gross margin now makes up to 35% of total associate base against 32% a year ago.
Moving on to Global Technology Solutions platform. This platform has delivered 29% top line growth and 30% EBITDA growth year-on-year after a solid performance in the year -- financial year 2022, attesting to the secular growth momentum in both our BPO as well as our digital IT services business. In our customer life cycle management segment, with a rapid increase of consumer demand in post-COVID world, our growth momentum has accelerated, resulting to 33% growth year-on-year. Both Conneqt and Allsec had an impressive revenue growth during the quarter, with Conneqt crossing the milestone of 40,000 FTEs, that's 40,000 by headcount during Q1.
While Conneqt leveraged on demand in India market, Allsec customer life cycle management story was driven by 30% growth year-on-year in North America market. We have made several business model derivation in CLM, including taking more solution selling approach to service and is driving digitization, resulting in almost doubling our order book in terms of ACV for FY '23, Q1, compared to Q2. In our non-BPO segment, our collection business had a very good Q1, resulting to 35% year-on-year growth.
This is a testament to our solution-centric approach resulting in platformization, our collection business using digital tool. This, along with the domestic F&A business continues to promote of our non-CLM business, delivering 29% growth year-on-year. In platform-based business, outside HRO in the domestic market grew by 22% year-on-year, with the number of payslips processed by Allsec growing 18% year-on-year. The segment saw a margin decline as salary costs went up by INR 3 crores in BPO business.
Moving on to OEM platform, where growth has returned with our top line growing by 24%. To start with, the business saw a 25% revenue growth year-on-year. During the quarter, we saw a muted sectors like IT/ITES and education coming back to an extent. While our focused sectors have continued to increase in demand, the business added 23 new logos during the quarter. There has been a contract renegotiation with one of our top customers in health care and education sector in this quarter. While we have extended our relationship for 3 more years, this comes with our margin mark-to-market levels during the competition and market dynamics. This has resulted in slight downward in existing margins.
The experience, however, gains in health care and education sector has proved to be invaluable and our foray into these sectors has seen a dramatic increase in revenue, with incremental annual revenue of INR 100 crores post such acquisition. IFM continues to make strides on efficiencies. Process digitization has taken our core to associate up to 91 in Q1 FY '23 from 84 a quarter ago. And our cost to serve is down to 4.6% in June from 5% of revenue in June '21.
Our security business continues to grow in Q1, with revenue and headcount growing by 29% and 27% year-on-year. The business added 15 new customers in Q1. We see a lot of traction in electronic security solutions. This enables higher security footprint with greater efficiency to our customers. We foresee the trend catching up from our traditional manguarding towards Mantech combined with hybrid security offerings.
Let me move on to the product business, where we continue to make significant process -- progress, sorry. Monster continues to post impressive numbers with sales and revenue growing up by 57% and 53% year-on-year. The candidate traffic and engagement saw significant for the 6-month active candidate base, growing by 17% quarter-on-quarter. And traffic on platform growing at 24% quarter-on-quarter, crossing to 35 million in Q1.
Customer acquisition continues to be strong with more than 3,000 new customer contracts signed in Q1. We launched our Recruiter Search in this quarter, and the feedback has been overwhelmingly positive, with CSAT score of over 95% as voted by more than 1,100 customers, and 71% on quarter-on-quarter basis. Our new product trend, we have done a beta launch for our early career platform, with 450-plus organizations already on board. The platform will help students in getting paid internships, scholarship, access to top companies and core subscriptions. Strategically, it adds a lot of value to our core platform by organically contributing to pressure candidate acquisition.
Coming to our blue collar job platforms. QJobs saw the total candidate count reaching 5 million in the quarter. The new job openings hosted on platform increased by exceptional 32% quarter-on-quarter to 3 million. The NPS continues to be amongst the best in the industry. WorQ won its first direct external customer, a significant milestone in its product journey. The cash burn in this segment is as per our expectation, in line with our prior communication to investment community.
So that was an overview of the business. As we move forward, our focus continues to be on adding headcount, driving cross sales, gaining market share in operating asset management segment. Let me close by saying we are on close to our plan and very optimistic about FY '23. On the basis of feedback from our customers, we will continue to focus on our joint goal of attaining a sustained 20% ROE while growing OCF at 20% CAGR.
We thank you, the analyst and investor community, for a great support to us and our institution. Ravi, over to you.
Thank you, Guru. Good morning, everybody. I hope you and your families are doing well. Overall performance. Our Q1 performance has been on track for most of the quarter across all of our businesses. In the past quarter, we were navigating to an uneven operating environment. While hiring in the services segment continued to be high, the IT segment saw a slowdown globally. This has had its impact and effect on our numbers as well.
Before I get down to the details, I would like to reiterate that we have changed the reporting segment from Q1 FY '23. Firstly, with the fund rate Monster and the interest shown by external investors in some of our other technology-led initiatives and with a view to show accurate business performance, we have separated these businesses into a fourth segment called Product Led Businesses. This segment will include erstwhile emerging business with Monster.com, Blue Collar Jobs, QJobs and QDigi. Previously, these businesses were reported under the Global Technology Solutions segment.
We also used the opportunity to realize some of the other businesses to better represent their activities and reporting segment. Accordingly, the Canadian staffing business, previously reported under Global Tech Solutions is subsumed under Workforce Management. The changes in the reporting structure have been instituted in order to create a clear demarcation between the mature businesses, which are cash generating, from the businesses that require cash infusion. And all of the overseas staffing businesses are now reported under Workforce Management platform. This is something that we've been alluding to for some time now.
Let me now walk you through the financial performance of the company. Our overall revenue in Q1 grew by 5% compared to the previous quarter and grew by 53% on a year-on-year basis. All the segments posted healthy growth numbers with Workforce Management, Global Technology Solutions, Operating Asset Management and the Product Led Businesses growing by 33%, 29%, 29% and 109%, respectively, on a year-on-year basis.
Our EBITDA from operations in Q1 FY '23 improved by 4% on a year-on-year basis to INR 153 crores. The quarter-on-quarter decline in EBITDA margin, though planned, is due to the following reasons. The Product Led Businesses vertical has seen an incremental EBITDA drop of INR 13 crores. This was expected and is in line with our prior communication. Our core headcount has increased by 350 in Q1 against Q4. In addition, increased costs on the -- in addition to the increased cost on this account, salary increments for existing people have been higher than usual as it was low in the previous 2 years.
One major customer contract in the Facilities Management business, which Guru spoke about, has been renegotiated. The estimated impact on the EBITDA on this account has been about INR 7 crores for the quarter. Our operating cash flow through operating EBITDA conversion was 56% for Q1, which is slightly lower than our long-term guidance. The year-on-year drop can be attributed to one of the large subsidiaries, where some of the contract -- the customer contract renewals impacted cash generation. The same is now complete and will be back on track from Q2 onwards. We are confident that we will be able to achieve the 70% target that we have set for ourselves for FY '23.
Now moving onto the segment-wise updates, starting with Workforce Management. The Workforce Management segment has shown a 33% revenue growth driven by general staffing at 34%, but boosted by Comtel, which is our Singapore subsidiary, at 38%, our IT staffing at 33% and our selection business at over 300%. EBITDA has grown by 29% year-on-year, largely driven by General Staffing, Selection Business, and the Singapore IT staffing business. However, the EBITDA has remained flat on a quarter-on-quarter basis, mainly due to higher salary costs in quarter 1.
Coming to Global Technology Solutions. The segment has showed a 29% revenue growth year-on-year, given the Conneqt at 33% and boosted by Allsec at 33%. The segment continues to maintain the momentum that is set for itself over the last couple of years. EBITDA has grown by 30%, largely driven by Conneqt, a 33% increase; and the Insurtech platform, with over a 90% year-on-year growth. On a quarter-on-quarter basis, EBITDA has dropped by 6%, again, chiefly largely due to the general slowdown in IT and BPO segment that we have seen in the economy, and increase in salary costs on account of focal increases.
Moving on to the Operating Asset Management vertical. The good news is that revenues have increased 28% on a year-on-year basis, driven by the Integrated Facility Management and security business. However, quarter 1 FY '23 margins have declined both on a quarter-on-quarter and year-on-year basis. The quarter-on-quarter decline has happened due to the contract renegotiation of the large customer that we spoke about earlier. The contract has been renegotiated at a market price, and the quarterly impact, as alluded earlier, is around INR 7 crores. The path for Q1 FY '23 is at INR 68 crores, which implies an effective tax rate of [ 15% ]. This is in line with our guidance of having the effective tax rate between 15% to 18% going forward.
Our trade received -- coming to the balance sheet, our trade receivable DSO is at 32 days as opposed to 30 days at the end of Q4 last year. Our UBR DSO is also at 27 days versus 26 days as of last year. Our net debt position is at INR 59 crores versus a net cash of [ INR 416 crores ] and we booked the DSO and the net cash positions are largely on account of the impacted cash generation, as I spoke about, in one of our subsidiaries, which have now cleared, and we hope to get back to the normal levels from Q2 onwards.
Corporate structure simplification, this is a matter that is acute focus at our end constantly. We endeavor to simplify the structure on an ongoing basis. We started with the merger of our wholly owned subsidiaries, MSX India, Conneqt and Greenpiece landscape in last year, and these have now reached the final stages with the National Company Law Tribunal In Bangalore. We expect orders in this regard to be passed before the end of the current financial year -- the current calendar year.
We also have announced the merger of our wholly owned -- our subsidiary, Allsec, in which we own a 74% stake. And we've also been looking at consolidating and simplifying some of our overseas subsidiaries during the current financial year. Income tax. For the -- during the previous call that we had during May, we had spoken about the receipt of a draft assessment order, and the draft assessment order has been objected to by us before the Dispute Resolution Panel of the income tax department and the hearing is awaited. Under law, the Dispute Resolution Panel has a 9-month timeframe to pass an order in this regard. And that order is expected to be passed before 23rd of March '23. The special audits for the subsequent financial year, '18, '19 is currently ongoing and is on line similar to what we have seen in the previous year.
We would like to thank you all for your continued support. And I would now like to open the floor for questions. Thank you very much.
[Operator Instructions] The first question is from the line of Vidit Shah from IIFL Securities.
Could you just give some details regarding the cash burn that is happening in Monster and specifically the Product Led Businesses. So what are the nature of these expenses that are being incurred? And how do we see this spending for this year where we have raised around INR 100 crores, INR 130 crores of cash. So do we see this reversing or stopping in FY '24? Or do we expect these to continue for the next couple of years?
Thanks, Vidit for the question. As you know, we've laid extra capital into Monster last year, with $20 million, and this was an explicit intent to spend and invest behind 2 key areas. Over the last 2 years because we haven't come up with a new revamped product, we haven't invested in marketing as well. So most of the money is going into product development, where we have a very, very clear hypothesis on what the future of WorQ and future of Recruitment Platform should be, and the product development is in line.
We've made one significant improvement in product this quarter, and Guru has mentioned about the impact of it. We've also launched our Nurture [indiscernible] which is an early in career platform. So there's a lot of work happening on the product. We will also start spending -- we've also started spending money on marketing and [indiscernible] user acquisition perspective. And our P&L looks very similar to talent platform Penta you would see elsewhere too. So what we expect to happen is we will continue investing in the manner that we have given guidance of in terms of about INR 110 crores of spend this year that you would see in terms of EBITDA. But all of this money is coming in from the investment that we've raised.
As per the current plan, we expect that the capital that we have in the bank would suffice. In case we see opportunities going forward to either accelerate the growth or expand the product, we will go in for further fund rate. But we're extremely comfortable and everything from the product engagement metrics, the product, the financial metrics, as well as plans are in line with what we stated about 5 months back.
So how much money -- sorry, go ahead.
Just to add, Vidit, I mean the indicators are really in the right direction. And as per plan, we are -- we have a plan to -- how to spend this cash that we have raised. The key indicators, if you look at revenue, is growing aggressively at 53%. Then our first year results, if you look at on the platform has gone to about $9.8 million from where will use to be about 3 million such as a year before. So definitely, the product is starting around and it is going in the right direction at the moment with more in such as assessment and career management and et cetera, on to it. So the Sekhar and team are in right direction there.
Got it. Understood. So how much money do we expect to be pumped in to get the product ready and then the balance, I'm presuming of the INR 110 crores will go into marketing with? So what I'm trying to understand is when does the casual start slowing down? I mean once the product is ready, I'm presuming you would see that expenditure at least come off from the losses that the segment [indiscernible]
Yes. So Vidit, as you know, in terms of SaaS business, there is a threshold revenue beyond which the spend will not go up, and you will start seeing significant improvement in EBITDA margins. The product investment, which is majorly in terms of putting the right thing together is already in place. So we are going to have a major product release in next quarter and the subsequent quarter, and that pretty much gives us -- gets us to a point where we believe that we will have a market-beating product in place. The marketing spend is going to be around. And as you can imagine and you can -- you also know from our operators, that the marketing spend will remain to keep make sure that the candidate engagement and the acquisition is healthy. But once we start tipping over a certain revenue point, you can safely assume, it will start reflecting the SaaS economics, where the EBITDA margins will grow up very sharply. So it's all as per the regular business plan that we've submitted. It is tracking as per any SaaS business model that you think. We are currently in the investment phase in this year. From next year, you will start seeing the benefits of this investment.
Okay. Got it. My second question was on this renegotiation that has happened in the OEM business. Like what are the market factors or industry factors, which has caused these margins to decline? And thus, we have to take an M2M with it while we renegotiate these contracts. And are any of these contracts further up for renewal where we can see further downward renegotiation in terms of margins of contracts going forward?
Sure. Thanks, Vidit. So let me take this. See, this is specific to a large strategic contract that we had signed 3 years ago, okay? I mean it was a very strategic sign in terms of health care and education that we had signed. And it had -- the constitute of this agreement was that we'll have a lock-in period of 3 years, and after 3 years it will be opened -- I mean, of course, there are some level of commitment in terms of gross margin that we will achieve this in 3 years as part of this contract. March -- 31st March 2022, is when we came out of the lock-in period. And as part of the commitment, we have realized 86% of the commitment which has been structured as part of the deal, and we have balanced 16% to go. Which -- with this, what happens is that the deal will be open to mark-to-market kind of pricing. We have to participate in RFP and run through it to renegotiate and rebid.
So when this happens -- when this happened, it has -- of course, we're running in line to the market operating prices. So we have renegotiated the contract and got a lock-in for next 3 years with the revised pricing. So that's now going to run for next 3 years. And then slowly, we continue to mine more subsidiaries of the same customer going forward. So anyway, I mean it will not change further, but this is specific to a strategic contract that we signed.
But could you just shed some light on the factors that have led to declining margins? Or is there increased competition than there was 3 years back, given that -- I mean my understanding was that during COVID, we would have seen a lot of smaller fragmented players going out of the industry, and margins to be then more competitive -- less competitive.
You are right. In fact, if you look at our headcount in OEM, while we have renegotiated one contract in terms of the pricing recorrection there, our headcount is at 84,000 almost, right? So which means we are gaining a lot of programs, a lot of projects from the smaller and regional partner as well. So that's a kind of consolidation that is happening in this segment. So that benefit will also start coming in from the subsequent quarter to us.
Okay. Fine. And just one last question on what -- how do you see the market in the big General Staffing business in terms of growth -- headcount growth? I mean we've added around 48,000 headcount in WFM, could you just break that down into how much have we added in General Staffing? And is such strong growth likely to continue amidst the current challenging economic environment?
I'll take start and get Lohit to add more to it. So I mean Workforce in overall had a fantastic quarter as that's our kind of signature platform as well. And teams are quite aggressive there to convert more, sign more deals and more transactions happening. So we did almost about -- I mean, we -- in a quarter, we added almost about 90,000-plus associates on board. And out of which, we are -- there is also an attrition, and net add has been close to about, say, 30,000. So that's the kind of number the platform added. Which means -- which also reinforces the kind of capacity that we have built in terms of the hiring program across. That's one of the key element as far as staffing is concerned.
And coming back to the outlook, I mean, India will definitely remain the fastest-growing economy the way things are going on. And the movement from informal to formal, which is expected to move from a 20% to 30% by 2025. So these are -- there are good indicators which we are still seeing. I mean,while there are interest rates going up and the other parameters around, we are still -- I mean, as far as up until Q2 and Q3 is concerned, we are still quite positive and optimistic. Lohit, you may want to add to this.
So thank you, Guru. Vidit, I think that's a great question, and the trajectory was starting to be built last year itself. You would remember in the last 2 to 3 quarterly calls, we've been saying that we are deeply investing in construction, manufacturing and apprenticeship program, and overall, general staffing along with the technology-enabled tools that we have. This investment almost has been in the last 12 months to doubling our sourcing team, also to double our sales team. That is clearly visible by 97 new customers, which have been added just in this single 1 quarter.
Secondly, to your point on 48,000 people getting added, the slight change there is that 18,000 of those are FMS. Last financial year, we had taken a decision not to report FMS with our quarterly numbers. After almost a year, we studied entire global and Indian staffing markets and felt that there is no change as far as the industry reporting is concerned. Industry takes the FMS also while reporting headcount. So this year, we've added that back. Like-to-like if you're seeing, our growth on net addition basis has been close to 30,000. Including FMS, it is 48,000. So that is one point I think you must keep in mind.
At 30,000 also that makes us one of the fastest-growing ever in the last 15-year history. And I think the important aspect is the digital processes that we put into place, whether it is BOP, whether it is QJobs, whether it is WorQ application, along with the size and scale of our operations, physical operations, together has given us this kind of a trajectory and growth.
Understood. That seems very promising. Just one last data point. Out of the 30,000 headcount, how much would have General Staffing added?
Total is about 31,500, of which General Staffing alone has added around 30,000. So 95% has come from General Staffing.
[Operator Instructions] The next question is from the line of Sandesh Shetty from Jamnalal Bajaj Institute of Management Studies.
Am I audible?
Sir, please increase the volume of your device.
Am I audible now?
Yes, sir. Go ahead.
Sir, first, congratulations on a good set of numbers. And sir, I just wanted to ask you on the Trimax. So any update on Trimax? Or are we done with it or how is it?
Okay. Yes. So see, I mean, as we communicated earlier, we prorated the contract in Q3 last year to Quess. And the way we are currently is we are in the O&M phase, and the project comes to an end in July 2023. And we are currently managing the O&M. Our implementation phase is completed. And I mean, we have also a good track on our collections with that account. So this should come out of this by, say -- I mean, end of Q1 of next year.
And sir, one more thing on the training business, sir. So we were planning to scale down on the government business. And what's the status on that and the strategy going forward with the training business now that businesses are opening up and there might be an opportunity there.
So we continue to focus on the same commentary what we had said. We are working. And just to give you little numbers, so we had 92 centers by early mid-March, and we have closed down 42 centers in Q1. We are left with 50 centers now, out of which, again, we have planned closure between Q2 and Q3. So I mean, there are 2 strings to this. One is, of course, wherever we have completed the obligations, we are bringing those centers down completely so that it adds back to our cost. And that's the planned activity as we committed we are doing. And wherever there are obligations to be met there, we'll have to fulfill, and that will continue to run. And I think between '23 and '24, that financial year is when slowly will start coming completely out of it. But it's a top priority for us, and there's a clear monthly drive on this that we do it internally.
Okay. And one last question, sir, on the tax issue. Sir, so for the current year, are you able to get to the tax credit that you were getting earlier? Or has it been stopped? Or if you can give some color on that.
We continue to take the tax benefits for the current year as well, Sandesh. I mean there's been no change in our stand. So we will continue to get the benefits of -- we continue to take the benefits of 80JJAA as we've done in the past.
[Operator Instructions] Next question is from the line of Nikhil Gada from Abakkus Asset Manager.
So, my first question is regarding this impact on the OEM because of this contract renegotiation. So firstly, could you quantify what would have been the impact on the margins because of this?
Sure. So just to give you a little construct, this particular contract used to give us a top line of INR 382 crores. And post renegotiation and volume drop in some places, in a few of the locations, we have -- the revised number is going to be about INR 270 crores of the financial, okay? So that's the revenue drop. And by EBITDA, it drops from [indiscernible] which is INR 7 crores per quarter. That's the kind of impact. These are absolute numbers.
I understood, sir. So basically, just in terms of understanding the rationale for the contractor as well as for us. As in -- is it because of the COVID or has been something been an issue from the contractor side that we had to renegotiate at a lower pricing?
Not really, though. Because I think the deal was structured in such a way that we had a lock-in for 3 years and then it was open for negotiations. So that's the way we structured the deal.
Understood. Understood. So then now just...
The other way around, Nikhil, we did enjoy a higher benefit for the first 3 years. So...
I understood, sir. I understood. So sir, then in just in terms of now the trajectory in OEM, we used to do a good decent margin of close to 7%, 8% a few years back, and now we're just slowly going down to close to now 5%. And with this revision, do we see this 5% to be the sustainable margins? Or we see going back to the 6%, 7% because now things are opening up and health care and education sector should come back? So how do we see this now?
Sure. So good question. So, a, of course, where we are currently is at 5%. And can it get better from here? Of course, yes. I mean there are multiple things that we are doing in this segment. A, as I said, this segment has been a little in and out for last 8 quarters. And this is the time when slowly the economy is opening up, the sectors are opening up and we are geared up to sign more contracts. We have done a little more restructuring on the delivery team and kind of specialization into verticals, specific verticals to get bucket traction and get more contracts in.
So definitely, yes. With regard to the margin -- can it inch up EBIT? Yes. In a short run, we would see slowly by end of Q4 somewhere coming closer to about 5.6% to 5.7%. So that's the kind of estimation that I can put across based on the order book that we have.
Got it, sir. Sir, secondly, my question on the Monster business, sir. Now that we are sort of seeing a burn rate of close to INR 25 crores on a quarterly basis, and INR I10 crores is something that we have earmarked for this particular year. For '24, once as you said that the business will start throwing some cash, what kind of burn rate do we expect in '24 for Monster?
Sekhar, do you want to...
Yes. So as per the plan, obviously, the burn rate is going to come down substantially next year for the current level of business growth that we have assumed and shared and committed to our Board. However, as you know, this is an area which is growing very, very rapidly, and we're seeing a lot of tailwinds and green shoots. So we should always be open to say if we have to make further investments to go after a much larger opportunity, we will make that decision next year. But as per the current plan, the burn will go down substantially next year, and we will continue to grow.
Got it, sir. And just sir, lastly, on the WFM and the General Staffing business. We have seen now achieving a certain level of scale, especially in terms of the additions that we are doing on a quarter-on-quarter basis. Just on the margin front, I know it optically varies a lot. But do you see these margins sort of being sustainable or we have weakened once again sort of go back to 4%, 4.5% from here?
My -- okay, Nikhil, my only submission for this particular business is -- General Staffing has to be seen based on the kind of the platform delivering a kind of higher ROE than focusing them on margin. Because margin is an element of the wage increase and fluctuation in salaries and all of that. So as and when it fluctuates wherever we have flat fee, our markup does not go up, and we have very limited control on that. But the way to look at the way we drive and look at this business is how much more -- I mean, how can it deliver better and more ROE. I think that's the best measure for this business, and we are doing extremely well on that front. We -- I mean, margin would continue to fluctuate, it's seasonal.
Mr. Gada. May we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Madhu from Canara HSBC.
Sir, now that it's consolidating General Staffing in favor of [indiscernible]. So is there a chance to increase that flat markup because even team leads have been showing a bit softer margins this quarter? And second, on the hiring, I mean such a large number of gross hirings. So however -- can you give us some more view on how it's being handled? How we are leveraging QJobs, et cetera, for this whole large amount of hiring we are taking?
So -- okay, let me -- I think there are 2 parts to your question. First is, let me take the QJobs one. See, the major key driver for staffing is to get the right resourcing at the right time. And for that, the digital penetration is most important, and we have got QJobs where -- I mean, we have called out the kind of numbers that QJobs to fall in. It took 1 year for us to get the first million download, and currently on an average of every 60 days, we are having almost 1 million download happening on the application. So if you want to accelerate and the kind of hiring capacity that we want to create, there has to be a digital backbone. And we have invested on that, I think, at the right time, and we have a great set of team driving that. So that's going to accelerate our hiring.
Having said that, we are currently are in -- I mean, present in few cities and few locations. We are now looking at how do we expand this particular reach across the country. And that's one channel of hiring. And that's focused drive that we are doing. The second one is to have our own streams in terms of having the recruiters. And as you know, Q2 and Q3 are generally season-specific drives that happens. And during this time, we hire more process delivery team, which is recruiters or onboarding or any specific related to the search that we get. And this would be kind of an interim. As and when the season comes down, we'll taper down.
So coming back to your first part of the question, when we hire these set of people, a, that adds to our SG&A. And hence, the margin also slightly fluctuates there because it's going to add to our SG&A cost for an interim. However, it delivers exponential result to us as our hiring volume quantum goes up during the season. So does that answer your question?
Yes, sir.
The next question is from the line of Nitin Padmanabhan from Investec.
Yes. Thanks for the opportunity.
This is the operator, Sir. We are not able to hear you. Please increase the volume of your device.
So is this better?
Nitin, Sir, we are not able to hear you. Please speak a little bit louder.
Now, is this better.
Nitin. Yes, we can hear you now.
You can hear me. Apologies. So the question was around margin. Now do you think that the overall margin that we have today is sort of the bottom and we can sort of -- it can only increase from here on? Now the reason I ask this is because even if I look at Workforce Management, I'm considering we have anyway doubled the sales force and our core costs have all gone up, there should be an operating leverage on a going-forward basis. And also salary increases should -- as you have revenue growth, you don't have any further ending, so it should sort of cover up. Second, on the GTS business as well, if you could give some sense in terms of how you expect margins to sort of pull through from here on, both alluding to the same point that do you think margins have sort of bottomed out from where it is from an annual perspective for this year?
Thanks for the question. You're right. And you're right that the margins for Q1 have actually dropped largely on account of the focal increases that kicked in from April 1 onwards, and the benefit of this will be seen throughout -- through the rest of the year. I mean you're absolutely right. We will start seeing clawback in margin, both on Workforce Management and across all the 3 segments. I mean, I'm not talking about the Product Led Businesses right now. But across Workforce Management, Operating Asset Management and Global Tech Solutions, we will start seeing margins inching upwards.
As Guru spoke -- as Guru alluded to this fact earlier, I mean, we will also see an upward shift in the margins of the Operating Asset Management vertical -- segment by Q4. And the same applies to Global Tech Solutions as well. Our margins have been impacted due to the focal increases. And we will again, I mean -- and we will see the benefit of this between now and the rest of the year. Because Q1 is a year where typically the margins actually drop compared to the previous quarter, which is Q4. Q4 is one of the better quarters in the GTS segment, with some of the collections and tax processing [indiscernible] kicking in and giving us higher margins. So we will see better margins across all the operating segments of Workforce Management, Operating Asset Management and Global Tech Solutions going forward.
Sure. I have just 2 quick ones, if I may. The second one is on the products business. Do you think the current run rate in terms of burn sort of continue for the rest of the year? Or do you think there could be some sort of scale-up for the other platforms as well, and that should sort of, in the interim, maybe sort of dampen down overall margins, at least in the short term? But do you think that there'll be volatility? Or there should be a steady run rate from here on?
NItin, at the moment, I think it will be at a steady ramp. We are not anticipating anything major deviation at the moment.
Right. And the last one was on the IT staffing business. So you alluded to some weakness there. So just wanted your sense in terms of what exactly are you seeing in the market? And how do you see that sort of evolving on a going-forward basis for that business?
So I mean, again, 2 aspects. One, demand has been there definitely because we -- I mean our exposure to start-ups is very low. And since we work with product and engineering and product services companies, our demand has been quite stable. I mean there are -- if I were to say we are doing little portfolio reshuffle there in terms of churning down the low margin and bringing in the high margin, which is where the impact of headcount will -- is not coming in, but at the same time, our EBITDA growth between quarter-on-quarter is extremely high, so it's growing almost at 38%.
Just to give you, for example, greater than 10,000 per person margin for us, it covers almost about 35% unlike it used to be about 32% year ago. So a, rebalancing; second, working on higher mandate. Plus our professional staffing in international is doing very well. Singapore has turned around in Q1. After long couple of quarters that it was quite stable, now it has turned around extremely good. I mean demands are coming in. And we are quite confident the way it is going on, and it will continue probably for the next 2 quarters.
Guru, if I may add to that.
Lohit, please.
Yes, Nitin, so if you really look at the situation in the IT business, what Guru has rightly mentioned, is that the noise has only been coming from the startup space. There are about 15,000 jobs which are lost, but India has -- between the IT industry itself has about 5 million people, so that's just a drop in the ocean from that standpoint. We don't have too much of exposure there. Within the services segment, there has been -- and Ravi alluded to that, that the margin pressure on the services company has also been showing in Q1 because of their wage increases and other SG&A costs going up.
However, our portfolio today is very, very vast. We do in the IT close to 2,000 fitments a month. Now of that, today, 60% of the fitments are going into the permanent IT recruitments and 40% are going into the staffing. And that mix that we carry in our Professional Staffing India business of being able to provide talent both for staffing as well as talent for permanent recruitment. Actually, it places us very, very beautifully in front of a customer, because irrespective of their requirement, we can offer for both stages of employment.
Also the EBITDA from that business, the Professional Staffing India business, today contributes 30% of the overall EBITDA of WFM, and has just doubled in the last 12 months. So we are pretty bullish. We continue to invest in that. We will continue to hear more things which are happening. And like Guru said that with Singapore and APAC also contributing much better than where they were during COVID, there should be better times ahead.
[Operator Instructions] The next question is from the line of Aasim Bharde from DAM Capital.
So just a couple of questions. So firstly, you did talk about that you've done 4 hirings in Q1. Just wanted to understand, would there be more of that in the coming quarters, so there could be some overhang on margins to an extent? Or is that all behind?
Sorry, Aasim, can you come again?
Yes. So what I was asking is, I think one of the reasons for the margin drop has been that you've made some more hires in your core team across segments, and of course there is salary increments as well. So I just wanted to understand, I guess, the reasoning for core hiring is to broad-base your sales and sourcing efforts. Is there more on the hiring part on the core side? That's what I wanted to ask that what we can expect in the quarter ahead.
Yes. I mean, okay. See, I think one important element for us in terms of the growth is adding the right layer at the right level. So we did hire a lot of resources starting from -- for a couple of businesses at a leadership level, and we are strengthening sales, we are strengthening operations, we are strengthening on our technology. So these are a few, I would say, have been a little on the higher-end hiring that we have done to ensure that we get the right support to grow as we move on into the financial year. And the second set of hirings are for front line, such as recruiters and the support and back office and et cetera. So these hirings have been done, and it may not -- it cannot largely increase in coming quarters, but there could be some hiring that we will continue to do, but it will not be to that quantum. So that's the kind of outlook on hiring.
So basically, whatever hiring you still do, it should not really temper your margins. That's the reason, right?
It should not. Second thing that we did also, I must call out, we -- I mean this generally April is our performance appraisal cycle. And in line to earlier 2 years, that is '21 and '22, where the overall increments and sentiment around increments were slightly low because of the enrollment around. We have seen a little more -- I mean, for the sake of putting the right -- not liberal, but we were happily liberal to give good hike to our own employees and good variable payouts, and probably we also recast a few thresholds because it was a tough situation that everybody supported us to work and deliver what we had to deliver in -- despite of being a tough times around. So we took that call to do that. And that has come in, and I'm sure that will stabilize, plus the hiring. So there is no -- with regard to hiring, there are no major hiring. We are almost done.
Got it. Sure. Secondly, I just wanted to get your comments on the slowdown in the IT hiring space globally and in India. Should that ideally drive higher demand for temp staffers? So ideally for Quess, it should not exactly be a negative?
So can I comment there, Guru?
Yes. Go ahead.
This is Lohit again. Yes, so as far as IT demand is concerned, as an organization, we sit on 3x our monthly capacity to hire. So I don't think so currently, from that standpoint, that we can say that there is an issue. Having said that, I think what you rightly mentioned of U.S. right now, we don't have a very large practice there as far as U.S. IT is concerned. But you must also notice from U.S. a very interesting data point which is coming out, that the tech talent and the niche segment hiring, the talent shortages still continue to be there.
So while companies may be saying that they are cooling off on some of the hires in numbers that they have, at the same time, they're also reporting that the talent that they need is not easily available for the niche segments. So I think it's a bit of a paradoxical situation at the moment. Not so worried about Asia Pac and India at all, because like I said, we set up anywhere between 2.5 to 3 months of our hiring capacity at the moment as open [indiscernible]
Got it. That's actually good to know that, that kind of pipeline you guys are having. And just lastly, maybe just a question to Ravi. So just a follow-up on the tax thing. You did say that you will be taking the benefit of 80JJAA this year. I just want to -- just curious, like have you received any tax certificates from the IT department allowing you that deduction?
So if you go back and look at the first year when the section was actually introduced, Aasim, which was, say, the financial year '16, '17 was the first year -- our case was picked up a scrutiny during those years and the assessment is very completed by the tax authorities allowing the deduction. It's only for the subsequent year that they woke up and are raising some objections. So we see no reason why this reduction should not be allowed. And to answer your question, yes, we have been -- I mean, the fact that we have completed a scrutiny assessment of where the deduction has been allowed is a validation of the claim that was made by us for the first year, when this section was actually brought into the -- when the benefit of the section will actually passed on to the service sector as well.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments.
Thank you. So first and foremost, let me take this opportunity to thank each one of you. We keep interacting a lot. We learn a lot. We exchange a lot of information, quite informative. And it's also a learning for us in many ways. Thank you so much for all your support and support to present our institution. So thank you so much. Look forward to interact with you all soon. Thank you.
Thank you. Ladies and gentlemen, on behalf of DAM Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.