Quess Corp Ltd
NSE:QUESS
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
474.85
864.35
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Quess Corp Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to Quess Corp Limited Q4 FY '22 Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Vidit Shah from IIFL Securities Limited. Please go ahead, sir.
Thank you, Peter. Ladies and gentlemen, good morning, and thank you for joining us on the post results conference call of Quess Corp. It's my pleasure to introduce the senior management of Quess who are here with us today to discuss the results. We have with us Mr. Guruprasad Srinivasan, Executive Director and Group CEO; Mr. Ravi Vishwanath, our CFO; Mr. Lohit Bhatia, our President of Workforce Management; Mr. Pinaki Kar, President of Global Technology Solutions; and Mr. Sekhar Garisa, President of Emerging Businesses. We'll begin the call with opening remarks from the management team and thereafter, we'll open the call for a Q&A session.
I'd now like to hand over the call to Mr. Girish Sharma, DGM Investor Relations, to take proceedings forward. Thank you, and over to you, Girish.
Thank you, Vidit. Good morning, everyone, and thank you for joining our earnings call today. Please note that 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.
Thank you so much. Thanks, Girish. Let me start by briefly giving you an overview of the business. The business environment remained conducive barring a small pause in January due to Omicron wave. Our major business have all continued to demonstrate exceptional growth, driving consolidated revenues up by 26% year-on-year and 3% quarter-on-quarter basis. We achieved the highest ever revenue of INR 13,692 crore and EBITDA for the quarter of INR 185 crore, once again, signifying our execution capability. Our headcount grown larger where we have closed the year about 473,000 employees on board. These are our FTEs, growing at 4% quarter-on-quarter. Please note, this number does not include an additional 13,316 who are pay-rolled in the month of March, but not on our roles by end of the month.
Our EBITDA from operations grew by 3% quarter-on-quarter. Our focus on cash generation continues to remain top priority with OCF-to-EBITDA conversion at 82% for FY '22. However, our long-term OCF-to-EBITDA conversion target will continue to be at 17% going forward. Our sales engine continues to perform well. We acquired 307 new customers in Q4 versus 249 in Q3 '22 and 142 a year ago. FY '22 saw our cross-sell initiative across gradually maturing into a sales culture. It just does not remain as an activity within I mean, every business, leveraging our service platform to offer solution to our customers. We generated 70 opportunities across business, 38 existing accounts and 32 from new accounts and generated a potential ACV of INR 532 crores. While those highlights at the company level, I would now like to take you all through platform-wise updates.
To start with, let's look at the Workforce Management platform. The platform posted a revenue of 4% quarter-on-quarter growth and 28% year-on-year. EBITDA from operations grew by 17% quarter-on-quarter and 20% year-on-year. The major highlights are as follows; our headcount across Workforce Management crosses 300,000, an increase of 4% quarter-on-quarter and 19% year-on-year. General staffing headcount crosses 285,000 with the growth coming from retail, PFSI, logistics and telecom. And these are the major drivers of our headcount growth in the year. General Staffing added 71 new customers in the quarter and the logo added throughout the year about 218 logos the platform has added. And the service continue to grow at -- accounted for about 20% of gross margin.
Our sourcing efficiency reached a new level, and we have hired 10,000 people internally in a month for the first time, which also kind of -- which also demonstrates the kind of efficiency that we have built in terms of our hiring engine, which is one of the critical event into our platform. Core to associate ratio stayed almost flat due to strengthening of our core team in order to drive growth. IT staffing continues to grow. Q4 EBITDA grew by 33%. Headcount greater than 10,000, gross margin now makes up to 33% of our total associate base against 28% a year ago. With loosening of restrictions in Singapore, our Singapore IT staffing businesses saw an increase of 8% in headcount quarter-on-quarter in Q4.
Moving on to global platform, GTS Technology platform, which has delivered 20% year-on-year top line growth and a very impressive Q3. GTS has 4 service components in it. First in Customer Lifecycle segment, with the rapid growth of Indian consumer demand, a lot of investments are being made are being directed towards virtual interactions due to pandemic post COVID. Our CLM business has grown 30% year-on-year. Both Conneqt and Allsec has had a very impressive revenue during the quarter with Conneqt crossing a milestone of INR 300 crore quarterly revenue in Q4. We have made several business models, innovation in CLM, taking more solution selling approach to our services and driving digitization result in our non-voice CLM revenue, which grew by 61% year-on-year.
Second, on non-CLM BPO. The collection business had a very strong Q4, an impressive revenue growth of 13%, along with domestic F&A continues to be a robust pillar of our non-CLM business. This results of -- I mean, this is a result of our Conneqt management -- strong Conneqt management team focusing on productizing and digitizing these 2 services -- service lines over the last few quarters. We are positive about the future outlook on back of strong order book that this team is on.
The third platform, the third one -- the third element under GTS is the platform-based services. The number of payslips processed by Allsec platform for the quarter has grown by 25% in Q4. Our Insurtech platform business in U.S. has also had an impressive year-on-year growth. We will continue to invest in both sales and technology capabilities in this platform area. We hope that this will help us to expand our margin in GTS further over time. The fourth element under GTS is IT services. Our domestic IT services business saw a growth of 53% year-on-year as our strategic initiatives in building our infrastructure management service business in India and Canada have started giving good results.
Next, moving on to the OEM platform, where the growth has returned with top line growing by 24%. To start with, IFM business saw a muted growth due to slowdown caused by Omicron wave. We have continued to reduce our dependency on IT industry and aggressively focusing on adding customers in new segment and in other segments and other platforms. The business continues to make strides on efficiency. Process digitization has taken our core to associate ratio up to 84 from 70 a year ago. Our cost to serve is down to 4.4% from 5.4% from the same period. Our security business has witnessed a recovery in Q3 with headcount growing by 17% year-on-year. The revenue grew by 21%, and the business added 38 new customers in Q4. As a measure of abundant caution, the segment also took an approximate INR 11 crore provision under regular business activity in Q4.
Let's move on to Emerging business, where the last quarter had witnessed significant progress. As most of you know, Monster, our online talent platform raised capital up to INR 137 crores at a valuation of close to USD100 million to fund its aggressive growth plans. We have received first tranche of funds and have started deploying the funds from Q4 onwards. Fund raised will be utilized primarily for product development, user acquisition and marketing. Monster turnaround continues to be impressive and the company ending the year strongly with sales showing 13% quarter-on-quarter growth in Q4 and about 70% year-on-year growth on full year basis. The new customer acquisition broke new ground with over 3,000 plus new customer contracts in Q4.
Key business metrics like active candidate base is up by 100%. Recruiter searches are up over 144% year-on-year. Value of renewal rate is up by 80%, continue to grow very strongly, giving us the confidence that the business is poised to disproportionate growth going forward. Overseas market like SEA, Middle East that contributes to about 40% of the business, continued to lead growth, which also contributes to better margin profile for the company. We are excited about the potential in this talent management business and Monster's right to win in this exciting and fast-growing market. Our disruptive approach on product-first culture and attractive ESOP plan continues to help us to hire exceptional talent at all levels and the future looks bright.
Moving on to QJobs. We are firmly on path to build the India's most efficient blue-collared platform. We had a breakthrough quarter where we added 500,000 candidates per month on to the platform. Crossed 2 million active jobs and 5,000 logos of recruiting companies. We are now committed to nurture the platforms to scale and make QJobs the gold standard for in this category. Last but not least, I want to highlight the progress made on Quess on ESG front. In FY '22, over 93,000 employees hired by us enjoyed the first time social security benefits. We made progress on diversity with women constituting to 29% of our core workforce, up from 26%.
We disposed almost over 10,000 kgs of e-waste and 10,000 kgs of paper waste, repaired about 1 million devices, hence prolonging usage of its life. As a responsible corporate citizen, we are a firm believer in giving back to society. In FY '22, we renovated infrastructure for 74 schools, benefiting 14,000 students and teachers. 15,000 students and teachers were provided drinking water facility. We signed an MOU with CMC Vellore to provide a CSR grant of INR 15 crores over a period of 4 years towards building a 350-bed pediatric hospital.
So, that was an overview of the business. Let me close by saying we are very optimistic about FY '23 on the basis of feedback from our customers and we will continue to focus on our joint goal of achieving and sustaining a 20% ROE, while growing OCF at 20% CAGR. We thank you, the analyst and investor community for your support and I mean in support to us. I also take this opportunity to thank all my colleagues at Quess and Board for a great support in my first quarter.
Thank you so much, and Ravi, over to you.
Thank you, Guru. Good morning, everybody, and hope all of you are keeping well. Before I get down to talking about the numbers, I must say that I've never felt more optimistic about the operating environment as we currently see and notwithstanding the delay in implementation of the labor codes. This is also a validation of the formalization -- that the formalization of the Indian workforce is actually gaining momentum. The sentiment we are seeing is strong across all our business platforms, though we could be performing better in the Operating Asset Management segment.
Let me now walk you through the financial performance of the company. Our overall revenue in Q4 grew by 3% compared to the previous quarter and grew by 26% on a year-on-year basis. All these segments posted healthy growth numbers with Workforce Management, Tech Solutions and the Asset Management platform growing by 28%, 22% and 24%, respectively, on a year-on-year basis. Our EBITDA from operations in Q4 improved by 18% on a year-on-year basis and 3% on a quarter-on-quarter basis to INR 285 crores. The EBITDA growth has been slower than revenue growth due to the following reasons; our growth in the Workforce Management platform, led largely by general staffing business has been faster compared to other businesses. And as we all know, the margins in the general staffing business is much lower than the others.
There has been increased SG&A costs due to increased business activity coming back and our own investments in digital assets. The third reason being lower margin in my Operating Asset Management platform, driven by delays in offices reopening completely and ECL provisions of INR 11 crores during the normal course of business. Our operating cash flow to operating EBITDA conversion was 85% in Q4 and 82% for the entire year, comfortably exceeding the target of 70% that we have set for ourselves.
Let me move on to segment-wise update. Starting with Workforce Management. Our general staffing business continued to grow over 25% on a year-on-year basis and crossed the 285,000 headcount. Workforce Management segment has showed 28% revenue growth, driven by general staffing 29% and bolstered by our IT staffing 62% and the selection business at 453%. EBITDA has grown by 20%, which is INR 15 crores in absolute terms, largely driven by selection, Comtel which is our Singapore subsidiary, IT staffing and Middle East. Coming to Global Tech Solutions, the segment has shown a 22% revenue growth year-on-year, driven by Conneqt at 26% and bolstered by Monster at 36% and [ Wiki-Care ] at 37%.
EBITDA has grown by 14%. That is about INR 10 crores in absolute terms, largely driven by the Insurtech platform, Allsec and Conneqt. Quarterly EBITDA has seen a decline as Monster cash burn has commenced post capital raise and is as per plan. The impact of Monster on Q4 was approximately about INR 10 crores. We plan to start reporting digital assets separately from Q1 '23 to give a clearer picture of the emerging business versus existing businesses.
Moving on to Operating Asset Management. While the revenue has been flat on a quarter-on-quarter basis due to delay in offices opening up completely, it has grown 24% on a year-on-year basis on the back of facilities management and security business. Our Q4 EBITDA as explained earlier, our Q4 EBITDA has seen decline due to increased provisions of INR 11 crores, which have arisen in normal course of business. The profit after tax for FY '22 is INR 251 crores, a 241% increase over last year. The reported PAT for Q4 '22 is INR 77 crores.
Balance sheet updates. The company has been relentlessly focused on cash collection. As a result, we achieved net cash position of INR 16 crores in Q4 '22, against a net debt position of INR 108 crores in Q3 of '22. The DSO has also been stable throughout the year. On the corporate structure, our focus on corporate structure simplification continues. You will be seeing a lot more action on this front through the year during FY '23. Income tax, let me give you an update on the current income tax position.
As disclosed earlier, the income tax department conducted a survey operation at the company's premise during July '20. The queries during the survey were largely for the financial year 2016-'17 to 2019-'20, and primarily related to the manner in which we had deductions of the Section 80JJAA and depreciation and goodwill were claimed by the company post acquisition/merger. Post this, a special audit was initiated by the IT department for FY '17-'18. And following the issue of the special audit report, the department has now issued a draft assessment order. The draft assessment order indicates that the entire 80JJAA reduction claimed by the company has been disallowed. This is consistent with what the IT department has done with our peers as well.
Depreciation on goodwill arising on mergers and acquisitions has not been allowed. Further, receipts the nature of reimbursement of expenses from customers reduced from revenue that were generally accepted accounting principles and standards have also been added to the taxable income. After the process laid out under Section 144C of the Act, the company has 30 days to file objections with the Dispute Resolution Panel. The company intends to vigorously contest its position and the interpretive stand of these sections on merits, including judicial precedent and believe we can strongly defend its position through the legal process as defined under the act. Based on the initial prima facie internal assessment, the company has disclosed a contingent liability of INR 16.6 crores, excluding interest in penalties if any. This estimate will be updated as developments unfold in the future. Assessment of FY '19, FY '20 return is currently underway, and we will update you as soon as there's any material development in the matter.
Once again, I would thank you for your continued support all through these years. I would now like to open the floor for questions. Thank you.
[Operator Instructions] Our first question is from the line of Mukul Garg with Motilal Oswal.
So, just a couple of questions from my side. The first one was on the impact of Omicron. If you can just share how much the impact played out for the 3 verticals during last quarter? Because when if you look at the commentary, it has consistently remained very positive on demand. So, if you can just kind of help out whether the quarterly weaker growth compared to Q3, how much of that was on account of Omicron? And also, if you can just help with some thought on how should we think about FY '23 compared to FY '22, the growth will obviously improve, but can it be very meaningful?
Sure. Sure, Mukul. First and foremost, the wave was slightly short and anticipated. So, that's a good start for us in Q4. We thought it would extend beyond January, but I think it limited to by and large to January. So, we lost a month and net to net, we got about 2 months to operate. I mean with regard to our Workforce Management, it did not really impact to a great extent. I mean, we had a marginal growth there if you look at about 3%. But this hit, however, continued for our OAM platform. Companies that were about to IT/ITES who were supposed to resumed work and expansion were to happen, that did not really take place. So, I would -- which is why you see a very flat growth there.
But having said that done, I mean, now we are experiencing. Our mandate level with Workforce Management is extremely high and we are having anywhere between about 18,000 to 20,000 open mandates there. Things are quite positive, that's the way we are seeing. And we are also -- the hiring quantum has gone well between BFSI, logistics supply chain, telecom opening up around -- a lot of buzz around 5G, manufacturing segment doing extremely well. So, our demands are coming from these quarters. Plus for Q1 and 2, we would see some level of growth coming in from OEM as well. So, that's the outlook currently what we have.
Mukul, if I may add to what Guru said, we always consistently held a view that we are one of those few companies who can probably say that we will maintain a growth rate between 20%, 25% for the next 10 years. And I think we continue to live by that and that's something that you can hold us on.
The second question was on the taxation part. The overall tax rate for FY '22 was about 28%. And that obviously, as you guys disclosed excludes the 80JJAA claim, which you have done for about INR 200 crore. So, a) how should we look at what really led to the higher taxation this year? And second, how should we think about the tax policy going forward, especially given that the income tax department is, is obviously aggressively pushing back? And would you like to take any buffer there?
Okay. Let me -- as far as the -- as far as going forward, as far as the deduction in the Section 80JJAA is concerned, I don't think our stand as far as the reduction has changed whatsoever, no matter what the department may be saying because we do legitimately believe that the stand taken by us and by the industry is absolutely on track, is actually absolutely correct. So, I don't think there would be any change in the position in which we have taken it, point number one.
Point number 2, so therefore, we will factor for 80JJAA in all our -- going forward as well. The tax for the current year has been slightly -- slightly more on account of the tax that we had to incur in Manila where the foreign tax rate that we had to write off that we incur in Manila when we declared dividends from Manila when we got the money from Manila into India. That was a one-time tax charge that we had to take. And thirdly, I think we have been a little more conservative on the deferred tax asset creation as well in the current year, which has led to a slight increase in the tax rate. Going forward, pending certain corporate restructuring, et cetera, I would say anywhere between about 15% to 18% would be an appropriate tax rate for us to take going forward.
Thank you. [Operator Instructions] Our next question is from the line of [ Sanjay Awatramani ] with Envision Capital.
Sir, you've given this 15% to 18% of tax rate. So, this will be from FY '23, I mean this year itself?
Yes, it will be from FY '23 onwards, yes.
And this 20% to 25% growth, which you have mentioned, this is for revenue and profits, or what is this exactly, 20% to 25% for next 10 years?
That's the revenue growth, revenue.
Revenue growth, right?
Yes.
And anything on margins? I mean, if you can help us with that?
I mean I'm going to refrain from commenting on margins. So, you can probably estimate what the margins could be because we are -- we work towards improving our operating dividend on a year-on-year basis.
Our next question is from the line of Raghuram NS with EurIndia Funds Management.
This was a question for Ravi. Ravi, you just mentioned part of your opening remarks saying that going forward, you will -- we will see more, what do you call it simplification of the corporate structure of your various subsidiaries in under Quess. Can you please elaborate on that? Is there anything that we should be expecting as to what will unfold?
We currently have merger of -- see 4 of our wholly-owned subsidiaries, which are currently under waive the NCLT. That's something that's currently in the process. We are evaluating simplification of corporate structure of some of our overseas subsidiaries that we have. We definitely want to simplify that. We will not be able to comment on anything else apart from this at this point of time, Raghu.
Okay. Because this has been one of the questions that have been obviously on the investor, you can say to do list for a long time. So, at some point of time when you guys feel it appropriate, I think you should come out with a overall kind of, okay, you want to have 2 subsidiaries or 3 subsidiaries or you will say that 1 company will be the main company for every operating, you can say, stream that you have, like what you have for GTS or what you have for WFM or OAM, those kind of things.
Sure. I mean, like good idea, we'll definitely consider that, Raghu. Thank you.
Our next question is from the line of Sidhant Mattha with B&K Securities.
So basically, my question is to Ravi. So, we could see some pressures in OAM margins as you alluded to that 11 CR provisions taken for the normal course of business. So, you have a food business, which is a very high-margin business and we are seeing schools and everything going back to normal. So, what -- so like what expectations are there from the food business because it's a very high-margin business and especially because it drives the OAM margins also? So, that was my question.
You're absolutely right, Sidhant that the food business is definitely a high-margin, business for us. Q4, again, it was slightly impacted with Omicron wave because some of the schools and colleges really opened up only in month 3, not in the first 2 months. So, it was -- it was actually, it did impact us considerably, in fact, in Q4 and in -- and even during the year, we do believe that the food business should come back quite strongly in FY '23, which is a high-margin business for us. And some of the provisions that we took are -- our is a normal course of business with regard to certain other dues around which we've had some delays in collections actually. So, we -- so I think we should be able to put this behind us and get back to doing business as usual going forward from Q1 onwards.
So basically, we can assume the margins to go back to pre-COVID levels or there might be some pressures in FY '23 onwards from -- in FY '23 also?
Our intent is clearly to take the margins back to pre-COVID levels as far as OAM is concerned. We do see some headwinds in the particular business, but we are working around it.
Just to add, Sidhant specifically to OAM, I think we also have some our own homework to be done. A) we are shifting our -- for example, there are direct and indirect businesses that we do like -- I mean, indirect is where we work with the larger players as secondary. So, we are reducing exposure to our indirect and becoming more direct. Second, our acceleration in sales has to increase in that business, which we are putting all effort to ramp up our sales team because our dependency from IT sector will have to completely take up, which was almost about 35% of our exposure to IT.
And considering a partial working or hybrid way of working, the things are going to change. So, that is another set of activities that we are working for ourselves plus we are bringing in a lot of digital initiatives, which will enable us to bring our SG&A cost down. I mean these are like site management or site survey where we don't -- we need not deploy too many people, but how can we do it much more efficiently and cost it right and cost it well, much quicker, faster to our customers. So, these are a few things that we are putting together to ensure as and when we step into this financial year, it's going to help us to accelerate this business better. And the second element under OAM is Terrier, which is our security business. We have done some changes in leadership there and that's going to fire well in this financial year. So, there are a few home-works for us to do, which we have already started implementing for this year to embrace well the way market reacts to us.
And my second question is regarding, so during our conferences, during your Analyst Day also and on your calls also, you have mentioned that the GTS business is, basically contributes to max percent of your margins. So, we could see this time that the GTS business, excluding the Emerging business was doing very well, but there was some loss on the Emerging business side on the EBITDA front. So, was there some one-offs here? Or do we expect some because we are increasing our digital investments, so do we expect some loss in the near term?
That's a planned number what you're seeing, Sidhant. It's part of the investment. We have raised capital, specifically for Monster, and we are deploying those funds for marketing and the product development. So, it's a planned activity.
[Operator Instructions] Our next question is from the line of [ Sandeep Baid ], an investor.
My question is on depreciation. I think on a quarterly run rate basis now it is trending above INR 200 crore even if you exclude amortization, while our net block is about INR 500-odd crore. So, if you can give some color on that? And what is it likely to trend going forward?
It should be in the range of what we have declared in Q4. It could come down slightly. I don't think it will actually come off dramatically, actually lower than that. There could be a slight lowering of the numbers going forward, but it will not be very different actually.
So, Ravi, how much is the addition to our gross block every year?
The addition to gross block would be in the of region of about INR 60 crores to INR 70 crores a year. And this is what you see largely is on account of certain leases, large premises leases that were renewed in Q4 and which -- look, this is the Ind AS accounting standards we got to amortize some of those rentals actually.
So, out of the INR 54-odd crores for this quarter, how much would be on account of [ Ind AS 26 ]?
About INR 6 crores to INR 7 crores would be on account of Ind AS actually.
Only INR 6 crores to INR 7 crores?
Yes.
I think INR 50 crores is your normal depreciation as per the old accounting.
Correct. Yes. Exactly. Exactly.
Ravi, so this does not add up. If you have INR 50 crores of normal depreciation, that means about INR 200 crores annually, and you are adding a gross block of only INR 60 crores, INR 70 crores a year. So somewhere, the numbers are not adding up.
No. See, we also have the goodwill, et cetera, which we actually amortize, right? So, we have intangibles, we have fixed assets, all of these put together. All put together...
Right. Amortization of goodwill is separate, which is, I think, INR 8 crores or so, right? That is separate. I'm talking about probably the depreciation in the part, which was, if I remember correctly, is INR 54 crores for this quarter. And if you remove the INR 6 crores, INR 7 crores on account of Ind AS and you're left with about INR 48 crore, which at annualized will be INR 190 crore plus, while your gross block addition is only INR 60 crores to INR 70 crores.
Yes. So, I'm not able to understand the question. So, let me just take it offline with you because this is actually in line with the asset block that we have and it's consistent -- I mean, the incremental amount that we've seen in this quarter is an account of the increased -- the new lease rentals that we have taken. The new leases that we have signed.
Fine, Ravi. I'll take it offline with you.
I'll take it offline with you and we'll just clarify. Not a problem.
And secondly, we were targeting 20% ROE by the end of FY '23. So, I just wanted to check whether we are on track for that?
Yes, we are on track for that. That's actually without [ deferring ] Monster, which is, we would be -- we are on track for the 20% ROE.
So, you're saying that sometime in the second half of this financial year, we should hit that target, is that what you're saying?
Yes. Because like, again, like I said, Monster would be -- we raised capital in Monster for increased expenditure on product development, sales and marketing for the year. Those expenses, is excluded, we will be able to get to the 20% ROE number.
And lastly, any update on fundraising for QJobs? I think you were working on that.
Let me get Sekhar to -- Sekhar?
So, we continue to work on that. We had a fantastic year for QJobs and the blue-collar asset platform in terms of performance and we have some interesting harmonizations happening with prospective investors. So, we'll keep you updated on that. We have a lot of inbound interest, but the process is going as coastline.
Our next question is from the line of Nilesh Jethani with BOI Mutual Funds.
Two questions from my side. One, on this 80JJAA. So, want to understand how did we arrive at this INR 16 crore contingent liability? And what was the 80JJAA benefit which we availed in FY '17 to FY '20?
Sure. The INR 16 crore of contingent liability was arrived at on the basis of what we call a PBR study of the draft assessment order. The PBR is basically where you do a probable, possible remote assessment of the different items that are -- I mean, that it consists of. And basis that on a conservative basis, we felt that INR 16.6 crores is probably where liabilities, et cetera, that might come on -- that might be -- that might come up. This is, again, a very, very conservative estimate and we have to probably -- this is something that we have probably done. And from '16-'17 till 2021, the total 80JJAA claim of the company is in the region of about INR 700 crores.
So, INR 700 crores and which we claim from FY '16 to FY '20, so broadly on percent basis number will work out to be much larger than the INR 16 crore number?
No, this is only for the particular year for which the assessment order has been received. Even here, we do believe that the claim -- our claim is absolutely valid and legitimate and have been backed by legal opinions of experts in the field.
Because when I see our estimated tax rate -- effective tax rate, so for seeing '17, this works out to be in the range of 30%, 34%, it's only in '18, '19, '20, where '18-'19 tax rates are in the range of 3% and 10%, even if I include these 2 years' number, then also number tax paid expected comes out to be a much larger number than INR 16 crores. So, just wanted to understand the number seems to be too conservative to be included as INR 16 crores in contingent liability. Is the assessment right?
No, because -- so the way to look at it is the total liability, we do have MAT tax payments in those years also, right? You've not considered the MAT tax that we have paid. So, after adjusting for the MAT tax payment of INR 41 crores in '17-'18, the differential amount is about INR 16.6 crores.
Second question was on the investments into Monster. So, when I see our GTM business, EBITDA, ex Emerging businesses, the number is pretty high. But when we reported on a consol basis, when we include the Emerging business, which is Monster, QJobs, et cetera, the number seems to be slightly lower. Say, on a quarterly run rate, sometimes it is INR 8 crores also effective Q4. So, want to understand how should we look at this expenses going ahead? Any guidance on this or any color on this? What are we intending to expand on the Emerging businesses to understand the steady state margin for the GTM business going ahead?
You're absolutely correct. Like I said earlier, we will be reporting Emerging businesses separately from Q1 onwards. And I mean so that should give you a clear picture of what the cash burn or what the burn is in such businesses and how the existing businesses are performing on a regular basis.
Yes. I want to understand what the burn would be. What are the incremental expenses would be per quarter per year going forward into Emerging business? Any color on that?
I can talk about the burn that we had for Q4 was about INR 10 crores. For the total year, I mean, for FY '23, we expect the total burn to be -- I mean, including ESOPs, et cetera, to be in the region of about INR 110 crores to INR 120 crores.
[Operator Instructions] Our next question is from the line of Rushikesh Bhise with MoneyWorks4me Financial Advisors.
Congratulations on the wonderful numbers. I just had a question that in this for one quarter, we have seen a change in the management, wherein we see, wherein you saw the CEO resigning. So, I just wanted to ask, is there any change in the strategy by the new management that has come in? With a new CEO, is there a new strategy that is in place? Or is it more or less the same?
So Rushikesh, thanks for bringing this up. So I mean, we had set our goals under 3 elements of Quess, starting from customers, people and investors. So, there's no change. We are -- whatever we have committed 20% ROE, our OCF growth remain same. And as part of our investor meeting, again, on 29th, we have reiterated the fact. So, I mean there is no change in strategy or there is no change in goal. All of that remains same. So, we are -- I mean at the moment, what we are doing is, a, we are continuing to stay committed on all the parameters that we have put across plus incrementally, we are working on the growth. In Workforce Management, we are setting up the growth plus we are setting up the new future kind of streams like manufacturing where we are penetrating more. Construction is another area where we are putting our efforts. So overall, strategy remains and we are continuing to focus on our growth.
[Operator Instructions] Our next question is from the line of Vidit Shah with IIFL Securities Limited.
Just wanted, if you could share some light on the margin expansion and growth plus management. I mean, the margin expansion has been healthy year-on-year, but even quarter-on-quarter, it's better than what we had anticipated. So, what exactly has been the driver of this improvement?
So one of the -- Vidit, one of the key driver there is our selection business, while overall technology business is doing well. As part of the great resignation, we have seen a fantastic traction coming up in our selection business, which has grown phenomenally well and adding to our -- I mean, boosting up our margin. In fact, just to give you, whatever we use to do annually in terms of EBITDA for that business, we have done it in 1 quarter. So, that has driven the margin expansion there.
Lohit, do you want to pitch in there?
So, I think in this 4 things that you'll have to see as far as WFM is concerned, whenever you see a margin trajectory. I think the first is where is general staffing going. I mean, general staffing -- saying that we are putting immense focus on our value-added services. Today, value-added services, good to report that in Q4 FY '22 that we exited is already at 20%. So, while [indiscernible] revenue and low-margin business overall, but that continued to give us better bottom line.
The second thing is like Guru rightly said, we immediately realized about post the first year of COVID, there is a huge amount of tech spend happening. And we refocused both our IT staffing team to as well as our IT selection and recruitment business. And under the 2 leaders, Kapil and Vijay, we've had immense growth there in that business as well. In IT staffing, we've expanded on the higher-margin digital and niche segments, which today contribute 33% of our entire high-margin product as well as like Guru, also rightly mentioned that we've doubled our overall EBITDA from this book, which is IT, professional recruitment and professional staffing.
The third element for WFM always would be the color coming out of APAC. And within APAC, our largest unit is Singapore. As also mentioned in our commentary on the investor deck, Singapore has opened up in the Q4, and that has been good for us. The steady-state growth, both on improving margin trajectory in Singapore as well as new headcount addition and new visas which are being allowed in Singapore is definitely beneficial for us. So, that's overall how WFM trends on these products. And for each of the business units, I think those are important parameters that they are following.
And just staying on with WFM, we've seen like a 4% quarter-on-quarter headcount growth and a similar growth in revenue. So I mean, when can we expect to see some sort of wage inflation kick in? And like how can we -- and what's the impact on margins for associate as such? Like how is that trending this quarter over last quarter?
Wage inflation should not really impact the general staffing business because we follow a cost-plus model. And in most cases, I mean, our margins should be able to -- I mean the margins we earn should to be able to take care of some basic wage revision, I mean wage increases. But if the wage increases are very substantial, we also go back to our customers and see if we can increase in our own fees that they have to pay to us actually.
But just -- I agree that it's a cost-plus model. So, our margins per associate is stable quarter-on-quarter and should we expect similar levels in FY '23 as well? Or will there be some sort of improvement given the strong demand witnessed across?
We always -- we are always constantly working towards improving our margins. Even if it means 100 -- 10 basis points, 20 basis points, whatever it is, I mean, given that we have this low base to work with, we're constantly working towards improving our margins in the general staffing and across all businesses that we actually operate in. And so therefore, you will see some amount of productivity kicking in and margins going up over time. And that's an operating leverage that we actually have developed over time actually.
See, one key indicator there is our core to associate ratio that we constantly keep a tab on. And if you see, we have phenomenally grown well there, we are about 1 to 428. And that also explains the kind of digital intrusion that we are doing into the platform to reduce our SG&A cost. So, the cost to serve would be a focus always.
Our next question is from the line of Shyam Sundar Sriram with Sundaram Mutual Fund.
Sir, my first question is on the -- so you've spoken about client wins in the ISM segment, about 20-odd clients in quarter and 27 new logo addition in GTS per se. Generally as a trend, I wanted to understand how to read these clients win per se, at least in the, say in the context of this OEM business? Should we think of each client can scale to an x amount of headcount per se? What would be that aspiration number for a client that we usually win? Any perspective that you can share?
Sure. Shyam, the way to read this is, a) there is a new contract that we signed. So, when you are putting those numbers, that many number of individual contracts that get signed. Now, the way it works in this industry is the moment we sign a contract, there will be some level of deployment that would be not necessary that we start with 100% from day 1, right? So, there will be partial deployment. And these would nurture over a period of quarter. So for example, whatever we have signed, in 148 contracts last year, they would actually start coming into full blow after, say, 6 to 8 quarters. I mean that's how to be read.
So, we -- I mean the number of incoming contracts will tell us the quality of revenue that is going to come over quarters to us. So, that's how we measure. And of course, there will be a few contracts, which will ramp up quickly and there will be few contracts, which will gradually come into. But these are kind of hard-coded order book for us. So, that's how we read internally.
So, is there any average headcount per contract that we usually look at on a per contract basis?
Not really, would not be because each platform would have its own measurement of this. For example, when it comes to workforce, there will be an average headcount that we would be looking at. But when it comes to facility management, we'll be looking at the number of square feet that we are adding. When it comes to GTS, we'll be looking at a number of seats, customer [ like settlement ], number of seats that gets occupied. So, the measurement is different by business. Would be happy to take you through in detail whenever if we can meet, so.
Sir, the other question is on the OAM provision, while you did talk briefly on that, there was 340 bps provision. What was it related to? Sorry, I didn't quite fully understand that part.
These relationships are the old projects that we were continuing with some of the industrial and some of the other infra projects, et cetera. When we say infra, this is not Trimax, certain other projects that we are actually operating in where there's been slight delays and out of abundant caution and prudent feet, we have we have considered a small provision in the current quarter.
So, these are -- I mean, typically will not be a write-off. These are kind of expected credit loss that we take. As and when we work on it and recover, this will also be written back soon.
So, this is for some -- for an infra project?
Correct.
Sir, one last question from my side, sir. So, you did give this 80JJAA claims that's around INR 700 crores per se that we have a put in as claims. So, similar to your probabilistic assessment that you have done for FY '18, what would be that similar amount if the claims were to come for the remainder years as well? Just to hazard some -- what could be the maximum amount that can come as claims per se?
We haven't done that exercise, Shyam. We'll probably get it done and probably share that with you sometime. We focused our attention only on the draft assessment order for '17-'18 right now.
Our next question is from the line of Alok Deshpande with Edelweiss Financial Services.
First question for Ravi. Ravi, I just wanted to understand this tax assessment a little bit better. What is the real bone of contention here? Is it the fact that reimbursements are getting added to the salaries when the associates are getting paid? Is that what is creating that different perception in interpretation? Or is it -- is there a couple of more dynamics to this whole contribution?
So I mean, the prima facie disagreement that we have with the department is that the department believes that these associates are not our employees. And so therefore, we should not be eligible for the claim per se. I mean that's the prima facie disagreement that we have, and then -- I mean, of course, then you have the other -- the INR 25,000 a month average salary, reimbursements, the second and third year claims and so on and so forth. But the prima facie disagreement is on the fact that they believe that they are not our employees. We have every reason to believe that they are our employee because we are the legal employer in record. We pay Provident Fund, we pay ESI, we take care of all their retirement benefits like gratuity, et cetera. And so we have made out a very strong case, which has been supported by very, very strong legal opinion as well, Alok.
Ravi, but I mean just a fact that you are paying gratuity, provident fund, that alone should -- shouldn't that suffice?
Obviously, they have probably chosen to look the other way. I mean I would say they've actually chosen to look to other way and just stick to whatever they have said, that's it. And this is -- I mean, in a way, I think this has now become an industry issue. And so we will probably take it up at the appropriate forums and get this issue redressed suitably.
And my second question is regarding general staffing. So, you're targeting about 18%, 20% growth there. So essentially, about I think a number between 55,000, 60,000 associates to be added next year or this year rather now. So, can you share some color on what are the sectors that you're most optimistic on in terms of getting these additions this year?
I'll actually get Lohit to answer it. Lohit?
Hi. Good morning, everyone, and thanks Alok for the question. I think what we have to take it in context is Q1 this year, at least after 2 years, has started on a much more positive note. If you remember the first quarter, when we were hit with COVID for the first time, there was a lockdown, there was almost a 13.5% headcount reduction, which translated into some 30,000 [ seasonal ] loss. Last year, during Delta variant, we barely grew because of Delta wave -- in spite of Delta wave, we grew by about 2,000 headcount. This time, Q1 has opened with a lot of robust color from across industries and segments as Guru was mentioning. Some of the ones which we are very bullish about is manufacturing and industries. We doubled the sales team and made a huge investment in the year gone by. In fact, our sales team today is twice the size of the sales team we had just 6 quarters ago and it is 55% more than what we had 4 quarters ago. So there's a huge investment in that.
Second, as Guru mentioned, that there is construction. We are focused on that industry in a big way. The third is telecom, which is already a large industry for us and growing very well for us. The fourth for us is e-comm and logistics, which again Quess plays a huge role in e-comm and logistics, and we are growing significantly there, over 40% in this year itself. The fifth, which we are extremely bullish and we are thankful is that retail is coming back. And if you remember for the last 8 quarterly calls, I was saying we are waiting for retail and consumerism to come back. So, we are very, very happy that retail is also back to the party. So, I think these are the sectors that we would remain bullish on. On a medium to long term, I would continue to personally watch out for manufacturing and industries because that with PLI, with what the government is doing, with lower tax rate in India, all of those things, and labor code, as Ravi spoke about, all of these are potentially very high beneficial segments for the staffing segment.
Just one on this e-commerce. Are you seeing any signs of any pullback in staffing count there, given what's happening in the [indiscernible] winter coming along and all those things?
So, good question. I think you'll remember from our various past years, we've been mentioning that we don't operate too much in the early startups, which are still on prefunding series or angel investment or Series A or Series B. When I say e-commerce, logistics and all, we actually work with the country's largest, we work with the globe's largest and our focus on customer acquisition has been -- in fact, there are 3 levels of checks which happens before the customer actually get added to the Workforce Management platform or for any matter in platform within Quess.
So, we do a skilled amount of due diligence. We don't go after a lot of small startups. So at the moment, we don't see that as an issue. For our Quess IT staffing business and Quess permanent recruitment business and information technology, in some ways, we feel that the supply side, which was constrained could possibly give us more standard rates and we'll be able to help navigate the great resignation, which is happening. So, in some ways, it could also be positive for us in times to come.
Overall, Alok, overall, our exposure to startup is extremely, extremely low, so -- as a group.
Thank you. Ladies and gentlemen, that was the last question for today. And I would now like to hand the call back to the management for closing comments.
Great. Thank you so much. Thanks for joining us and all we can say, we are quite optimistic in terms of what we are hearing from our customers and the kind of experiences that we are going through in terms of things opening up across. So, look forward for an upcoming great quarter and I look forward to talking you all and meet you soon. Thank you.
Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.