Quess Corp Limited (QUESS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 earnings conference call of Quess Corp. Limited hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sudheer Guntupalli from ICICI Securities. Thank you, and over to you, sir.

Thank you. On behalf of ICICI Securities, I would like to thank the management team of Quess Corp. for giving us the opportunity to host Q1 FY '22 earnings call. We have with us Mr. Suraj Moraje, Managing Director and Group CEO; Mr. Ravi Vishwanath, CFO; Mr. Guruprasad Srinivasan, COO; Mr. Sekhar Garisa, Chief of Emerging Businesses and Corporate Development; Mr. Lohit Bhatia, President of Workforce Management; and Mr. Pinaki Kar, President, Global Technology Solutions on the call. We will start with opening remarks from the management on Q1 FY '22 performance, and then open up the floor for questions. I will now hand over the proceedings to Girish for safe harbor statement. Thank you, and over to you, Girish.

Thank you, Sudheer. 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 that 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 now turn over the call to our Managing Director and Group CEO, Mr. Suraj Moraje. Over to you, sir.

Thank you, Sudheer. Thank you, Girish, and thank you all for joining us today. We hope you and your families are keeping safe as the economy opens up. We hope that you are vaccinated and that you're safely returning to your offices. Let me start by briefly giving you an update of the business and then hand over to Ravi to talk to the financials and also update you on the recent survey conducted by the IT department, which I'm sure is on your mind. We will then be happy to take any questions. Q1 saw our business, once again, weather a lockdown. This time around, we were better prepared. Our first focus for the quarter was to ensure the safety of our employees and their families, given that this wave was more personal for most of us. I'm happy to report that around 65% of our frontline workers have been vaccinated at least once. We've gotten full support from our customers in taking care of our people and the response to the second wave was far more calibrated than observed during the first wave. As a result, the impact of the second wave on our business has been significantly less than the first wave of Q1 FY '21, with several businesses continuing to grow in this time, as I'm sure you've noticed in our presentation. The recent wave did, of course, have some adverse effects on our business. As expected, our DigiCare services installation business and our Excelus training and skill development business were unable to operate during parts of the quarter due to lockdown. Sales momentum as reflected in headcount growth slowed a bit in the quarter. And in this context, the profit growth compensated for less of our salary increments than we'd hoped, which is why you see a marginal increase in our SG&A as a percent of revenue. However, I must say our sustained focus on execution did show through compared to a 20% Q-o-Q decline in revenues in Q1 '21. The last quarter saw revenue stayed flat versus Q4, indeed growing 24% year-on-year. While Q1 '21 saw headcount drop by 13% quarter-on-quarter, the last quarter saw headcount grow by 1.5% quarter-on-quarter, up 10% year-on-year. We are happy to report that our OCF-to-EBITDA also remained strong at 75% and that we continue to build a formidable revenue pipeline for the coming quarters, acquiring 264 new customers in Q1 versus about 142 in Q4 '21 and 196 a year ago. Moving on to specifics. Let me start with the WFM platform as always, which posted a 17% EBITDA growth year-on-year. The general staffing headcount grew 1% Q-on-Q even through the lockdown and has grown 15% Y-o-Y, benefiting from our strong momentum prewave 2. We've added 48 new customers in the quarter, and the growth pipeline for Q2 is very healthy at this point. Our focus on value-added services in GS is paying off. VAS has grown about 60% year-on-year, VAS being value-added services. We continue to increase tech adoption in our operations. For example, around 15% of GS recruitment today is now being done through QJobs, even though QJobs is currently present in only 4 cities, which account for 50% of our hiring volumes. We've also launched specific initiatives and investments in construction, health care and manufacturing, all 3 being sectors where we expect strong medium- to long-term momentum. Our investee company, Taskmo, continues to execute at pace, although they too saw a temporary disruption to field activities during the lockdown. We're very excited by Taskmo's capabilities, which allow our general staffing business to expand its repertoire of SKUs from person months to person days and even person tasks. I'd like to say a big congratulations to the Taskmo team on being selected amongst Business World's top 30 technology disrupters, we must say we agree. The domestic IT staffing business continues to be in a demand-rich environment, and has further grown its revenues during the quarter with a continued focus on higher-margin business. We believe this business will continue to be resilient to COVID and will continue to raise its margins over time. At this moment, really the focus is on ramping up our delivery capabilities, leveraging technology assets and sourcing, screening, onboarding and deploying candidates. You would have seen that SG&A has gone up in this business marginally over the last quarter, and that's really because the higher skill resources that we are hiring do require a higher recruiter intensity, and that's what's coming through in our costs. Outside of India, while the Middle East business continues to see good growth, our APAC business is witnessing headwinds given the sustained isolation of the Singapore economy and intermittent lockdowns in Malaysia and the Philippines. We will continue to take a through-cycle mindset to these businesses, driving sales and synergies across the region. The last part of our workforce management platform, our training and skill development business saw some shutdowns in Q1. We do stay committed to running off the -- the high fixed cost B2G business, driving collections and further optimizing productivity even while we explore new B2B business models. Before moving on from WFM, we're pleased to let you know that we have formed a partnership with XLRI Jamshedpur to upskill the next generation of recruiters. We're delighted to play a role in partnering with India's premier education institution in the space to drive forward this critical profession, especially at a time when recruiting is becoming such a bottleneck in our country. So that was the SMS platform. Let me move on to our GTS platform, which has 4 service components. First, platform-based services. There are 2 platforms to which we offer these services: the HRO platform in our Indian subsidiary, Allsec; and the Insurtech platform in our MFX subsidiary in the U.S. The HRO platform, delivered by Allsec, saw the number of payslips process per quarter grew 31% year-on-year. Note that this growth was without a 6% to 7% same customer growth that comes in a typical year, so we're delighted by the pace of customer acquisition and ramp-up there. Our Insurtech business also has seen top line growth of 6% quarter-on-quarter in Q1 with 6 clients having gone live in the quarter. We are doubling down on our capability to drive these platform-based services, and you should see continued acceleration going forward. Second, on CLM, this is a business which has delivered a 38% year-on-year top line growth. 80% of this business is with domestic customers, mainly delivered by Conneqt, which had, by the way, its best quarter 1 ever. And the rest of it is for the North American customers delivered mainly by Allsec. Within CLM, the voice-based CLM has proved remarkably resilient in the second wave as it grew by about 6% quarter-on-quarter, 54% year-on-year. This really shows the untapped potential in India for voice-based services and for better customer services. We also believe this represents a higher shift towards virtual customer service due to the pandemic and due to pressures to improve customer service while sustaining costs. A key focus of the CLM business has been to expand beyond voice and the non-voice CLM revenue has grown by about 15% year-on-year. Our teams are working hard to convert more of our CLM customers to omnichannel users via our unique CLM-in-a-box digital solutions. The third part of GTS is our nonvoice BPO business. This is largely done at Conneqt with a focus on collections which we are also currently in the process of platformizing. We are actually India's largest professionally run collections company. The collection business was severely impacted actually in this lockdown with a 13% reduction in top line versus the quarter below, albeit still growing 29% year-on-year. The domestic F&A business has seen a 23% year-on-year top line growth, and we continue to aggressively explore new deals in this growth segment. The fourth part of our GTS platform is our IT services. We offer IT services both in India and Canada. Our domestic IT services business saw revenue up 49% year-on-year and 7% quarter-on-quarter, with 4 new customer acquisitions in the quarter. We have observed a real paucity of quality players in the Indian domestic space, and we will continue to build our presence here, adding new competencies to our existing infrastructure management services and cybersecurity. In the U.S., our IT Services business actually grew 27% year-on-year. The Canada business is also seeing growth, although a bit slower at 11% year-on-year, and we're seeing how we can invest further to accelerate this growth. Being in the people business, we think people matter seriously. And in this regard, we are grateful the reason Quess Corp. has overall been voted a great place to work, our subsidiary in Canada has been voted amongst Canada's 50 greatest places to work. And our Conneqt subsidiary has been bestowed 2 awards in the last 2 quarters. Number one is the -- first is #92 among great places to work's India's best companies to work for 2021, and it's in CII's National HR Excellence award as well. That was GTS. Next, moving on to the OEM platform. Of all of our businesses, I would say that the facility, the security service business has been most impacted by the pandemic, given that ITES and education sectors accounted for 49% of our pre COVID revenues, and these sectors are yet to return to the workplace. While Q4 has seen some limited upside in this sector, Q1 again saw demand reduction at existing customers and delays in transitions at new clients. Despite this, our IFM business has seen revenues up 4% quarter-on-quarter, 5% year-on-year, driven by some very aggressive customer acquisitions in the past quarters. New customer acquisitions continue to remain healthy about 53% in the last quarter versus 26% in the same quarter last year. The pest and disinfection business also is up in terms of revenue, 68% year-on-year. Our security business has not fared as well in the second wave with Q1 seeing a slide versus the recovery made in Q3 and Q4. Revenues were down 3% with the main reductions being in retail and infrastructure verticals, where some customers have once again downsized requirements. So again, here, customer acquisition momentum remains strong. We strongly believe that the IFM and security businesses have the potential to grow at least 20% year-on-year, and we will take a through-cycle view to these businesses. We hope that as towards the end of the year, businesses return to work both from the offices, we will start to see a strong recovery here. The Industrial business continues to see momentum, strong momentum with revenues up 31% year-on-year as the market shifts from local contractors to O&M experts. We won 5 new clients in the quarter. We also mobilized manpower for our first win in fertilizer industry, and we commenced a metering project in Haryana that added about 1.2 million meters to our portfolio. I'm also happy to say that we've completed the innovation of the Ahmedabad Smart City project, allowing faster project execution and better collections. Let me move to our emerging businesses. Monster continues to execute promisingly. Both revenue and new customer sales showed a positive trend quarter-on-quarter despite periods of nonoperation and sales due to lockdown and a lower renewal base that's typical of Q1 versus Q4. Across sales grew by 69% year-on-year, although admittedly off a smaller base in Q1 last year. Across the board, Monster's product performance metrics continue to improve as we implement our transition towards being India's leading talent ecosystem. Q1 saw further growth in operational metrics like candidate acquisition and job postings, which you'll see in our presentation. Key customer satisfaction metrics like retention rate and average order size have also witnessed an upward trend quarter-on-quarter. I'm also happy to report we've made significant strides in Southeast Asia with new business growing 17% quarter-on-quarter and 128% year-on-year. QJobs also continue its march towards being India's most efficient platform for recruiters and job seekers in the grey collar space. With new candidate registrations up 81% quarter-on-quarter, third-party users up 53% quarter-on-quarter, and active job openings up 65% quarter-on-quarter across 4 cities, both recruiters and seekers at this point are raving about the app's unique ability to credentialize talent and match it with opportunities. In fact, our third-party customers gave us an NPS score of 50% and is actually still growing. Finally, our after-sales and installation business, DigiCare saw losses in Q1, again, due to lockdown, although volumes have now rapidly recovered. We will continue to remain focused on service excellence in DigiCare and on building a D2C business for products and services through extended warranty and beyond. So that was a view of our platforms. On the operational side, we remain watchful of cost and collections. Even as we launch new initiatives to drive recruiter productivity, further digitize and optimize our internal operating structures, I'm happy to say that our new S/4 implementation is live, and we are working now on progressively improving its effectiveness. Further, across our businesses, we continue to focus on digitizing how we manage our associates, including through digital training, digital workflow management and digital HR. We also -- we are also continuing focus on cross-sell with a set of new programs and internal targets. In fact, Q1 saw 24 wins with an ACV of about INR 75 crores versus about INR 270 crores of ACV from cross-sell all of last year. As India unlocks, we are more focused than ever on the growth opportunities ahead of us. With our unmatched bet of service capabilities, technology assets and talent, we are distinctly positioned to benefit from the growth to come. And we'd like to reemphasize our determination to achieve our twin goals of 20% ROE and 20% OCF CAGR by FY 2023. We thank you, the analysts and the investor community, for your support to us and to our institution. And with this, let me hand over to Ravi. Over to you, Ravi.

Thank you, Suraj. Good morning, everybody. I hope all of you are doing well and have been vaccinated too. Let me talk about the overall performance first. A quick walk-through of financial performance of the company shows that our overall revenues in Q1 remained flat as compared to the immediate previous quarter, and we grew about 24% on a year-on-year basis. All segments of our business posted healthy growth numbers with workforce management, technology solutions and operating asset management platforms grew by 24%, 22% and 28 -- 26%, respectively, on a year-on-year basis. Consequently, EBITDA in Q1 '22 improved by 13% on a year-on-year basis to INR 147 crores against INR 130 crores in Q1 of FY '21. However, normalized EBITDA declined by 6% on a quarter-on-quarter basis due to seasonality factor in some businesses such as Conneqt and the second wave of COVID pandemic. Segment-wise, our workflow our staffing -- on workforce management. Our staffing business continues to grow by over 20% on a year-on-year basis. Professional staffing business also performed exceptionally well, growing by 15% quarter-on-quarter. Training and skill development businesses continue to remain subdued due to centers being shut down during the second wave. Global Technology Solutions continued to perform well in Q1 with Conneqt achieving the highest ever quarter 1 revenue and EBITDA this quarter on the back of growing CLM business. Collection business took a hit during the lockdown, it was able to grow substantially on an annual basis. Monster saw a slight negative EBITDA on account of increased investment in the product and the second wave of the pandemic. Operating asset management. The facility management business grew 5% year-on-year. Top line remained flat on a quarter-on-quarter basis. Both facility management and security businesses continue to see the headwinds as IT and ITES companies and education facilities remain closed in quarter 1. SG&A costs overall saw a marginal uptick due to increase in salary costs. Monthly SG&A recurring cost for Q1 was INR 56 crores as against INR 51 crores in Q4 of FY '21. We expect SG&A costs to normalize at these levels. However, we do have -- I mean, while we continue to focus on trying to reduce these costs further, a clearer picture would emerge once offices reopen and people get back to work -- people get back to offices. The reported PAT in Q1 '22 is INR 45 crores, an increase of 22% year-on-year basis. I'd like to take a moment to talk about the recent tax survey and the reduction under Section 80-JJAA of the Income Tax Act. The income tax department conducted a survey at the registered office of Quess and that of Terrier Security Services on the 8th, 9th and 10th of July 2021. We extended full cooperation to the department, including providing complete information in a timely manner and have not received any claims to date. We have been very conservative in our accounting of section 80-JJAA benefit. We have not claimed the benefits for eligible candidates who have completed 240 days with the organization, but were not on our payroll as of 31st of March in a given year. The income concealment of INR 880 crores, as mentioned in the press release, is higher than the overall PAT during the year under survey and we still do not have a clear picture as to how these numbers have been arrived at. We have taken advice from eminent experts and are fully confident of the position that we have adopted in our claim. Balance sheet related update. Focusing on the balance sheet, due to the purchase of the remaining 30% in the Conneqt for INR 208 crores and the dividend payout, we currently have a net debt of INR 151 crores on the balance sheet as against a net cash position of INR 99 crores in Q4 '21. However, as stressed during our previous calls, we assure you that we will bring the gross debt down to our net cash position over the next couple of quarters. Our continued focus on cash conversion has seen Q1 '22 delivering an OCF to EBITDA conversion of 75% against 93% in Q4 '21. This is -- as this reflects -- this is important because this reflects true business performance. On the corporate structure front, we continue to simplify our organizational structure. The board has given the approval to amalgamate 3 wholly-owned subsidiary, namely MFX, Greenpiece and Conneqt, and that process is currently underway. We will continue on simplification of the organizational structure through the year. We also increased our stake in Taskmo to 33%, the second investment of INR 3.2 crores during July. Once again, we would like to thank you for your continued support during these unprecedented times. And I would like to now open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Sudheer Guntupalli from ICICI Securities.

Suraj, my first question is for you on Allsec Technologies. So it has been quite some time since we acquired this entity. Any thoughts on a potential merger or amalgamation with Quess going forward?

Thanks, Sudheer. I think the answer is there are no updates right now. I think these are both listed companies. And so merging them I think there's a complexity around it, and there's a SEBI requirement around it in terms of process. At this point, we're not seeing a pressing need to execute such a merger Sudheer. I think that both companies are executing well individually, we're extracting whatever synergies we need to. And the reality, if you were to go ahead with the merger, it would have to be after taking both the Quess and Allsec shareholders interest into account, we got to make sure it makes sense for both of them, including our own goal of a 20% ROE. So it is not that we've ruled it out, we're looking at it. But I think at this point, we're not seeing a pressing need. There obviously is cash at Allsec and the Board there has now put in place a dividend policy. So we have to see sort of what dividends play out there as well and when and how, but really no update on a merger, Sudheer.

And Ravi, on the query raised by the income tax department since it has been a month and no claim or update was received from them so far, is it fair to assume that they are satisfied with your response? Or with your interpretation of Section 80-JJAA and this issue is completely behind?

I would not like to think so. I would think that they are actually working -- I mean they're probably currently working. And I do think that we will hear back from them on this particular matter within the next 30 to 45 days is what we believe. So this -- I mean, so this is actually more of an industry issue, Sudheer. I don't think this issue can be isolated to Quess because I'm sure most companies in the industry would have followed a similar kind of metric in arriving at the claim. So this is something that we will as an industry have to face this. And I don't think the issue is behind us yet. We will wait to hear from them, but we have done our homework in terms of what the back-end analysis and calculations and do believe that we are ready with any answers should they come back with whatever questions that they have.

Sure, Ravi. And just one follow-up. Is there any precedent that you would have done due diligence on of, let's say, some company where this issue would have raised? And let's say, it was sorted out either in court or out of court?

Of the 3 matters that income tax issue raised for 80-JJAA, let me quickly just talk about it. One is on the determination of salary below INR 25,000 per month. The second is to consider reimbursement as part of salary. And the third one, which is -- I mean, the employee to be on the payroll of the company for the succeeding 2 years. We do have judicial pronouncements for 2 out of the 3, which is reimbursements and the employee having to continue on our role in the subsequent 2 years. There are judicial precedents available and both on the jurisdictional high court and jurisdictional tribunal, while we do not have a judicial visit for the first one.

Sure, Ravi. And on the outcome, is it in favor of the company? Or how exactly was the precedent?

Yes, both the decisions are in favor of the assessee of the taxpayer.

Got it, Ravi. And one last question from my side, maybe Guru or Lohit can answer. Actually, we are seeing a very strong pickup in hiring across both white collar space and across blue collar space in the industry. And this is a broad-based phenomenon across sectors, let's say, maybe some of the sectors like e-commerce, BFSI, we are seeing a very strong pickup. And in a few other sectors also, we are seeing, if not very strong, maybe a strong pickup. And some of your competitors, if I look at their commentary, it has been very upbeat in this quarter. But your commentary seems to be a little more calibrated and balanced at this juncture. Should we read it as a bit of an extra caution? Or should we read it as any other potential headwind that you might be looking at this juncture?

So I mean, first and foremost, Sudheer, yes. Fact is true that we are also talking about open mandates coming in and it's -- I mean those decisions are definitely happening in logistics and supply chain space, which is the most sought these days -- I mean, definitely, they are coming in. But there's some wait and watch on the third wave around here. So either the hirings are getting slightly deferred, that's what we are currently experiencing. But coming specific back to the white collar segment, I mean, you can see how the technology staffing is doing and the space is really doing well, and it's quite visible on our results. So I mean I would say there's little wait and watch for the logistic and supply chain.

Sudheer, maybe just a couple of things that I want to add. I think that look, at this point, if you look at the current pace of recovery, the current pace of -- the current trajectory, I think we're headed towards our best -- as an economy, our best Q3 ever. Let's be very clear about that. I think the calibrated response is just that we all saw the best Q4 ever also. I think we just don't -- the shape and form of COVID is just unknown to us, right? So that is where we're getting calibrated. But I think are we seeing the opening of mandates now. Are we seeing the momentum? The answer is absolutely. And on the IT side, for example, we've had headcount grow significantly in the quarter, plus we've had higher value headcount for all that is happening. I think the reality is most of corporate India, as we see it, is keeping one eye on the timing, depth and synchronicity of wave 3. I think the hope is that even if it comes, it's not going to be synchronous across states and therefore, we'll -- the economy will be able to weather it better. But I think one can't ignore the presence of COVID at this point, Sudheer, I don't think that would be prudent at all.

The next question is from the line of Mukul Garg from Motilal Oswal.

I have one for Suraj and Ravi each. Suraj, on the GTS side, this quarter, was flat on the top line side, there was a very marginal growth while your domestic IT services business grew quite smartly. You highlighted Conneqt, but was there a bit of a softness on a Q-o-Q basis in the international business as well? And what was the reason behind that?

Sure. So I think -- so the international business in GTS is doing just fine, right? As I mentioned in WFM, WFM does have an international business around APAC and Singapore. I think there, I think the impact of COVID has actually been, in a sense, higher now than it was a year ago, right? But GTS no. I think the 2 impacts on GTS, Mukul. One is just the collections, right, which is a fair part of what we do at Conneqt, like I mentioned. The field activity was locked for a couple of months. And usually, Q4 is anyway far better than Q1, because there's a strong push by the banks to collect as many NPAs as they can before the end of the year, right? So Q1, there is seasonality there, and then there is a lockdown effect on collections. Two, Q4 is always an extraordinary quarter for the HRO business in Allsec because we do the Form 16A processing, which brings sort of -- which is a highly profitable and an incremental business there. So those are the 2 things, I would say, from a business perspective. If you're looking at the segment reporting on the last page, where you -- we have GTS and emerging businesses, then I would add, from an EBITDA perspective, 2 additional impacts. Mukul, one will be our DigiCare business, which was lockdown for part and that is in the back page segment reporting as part of GTS. And the second is Monster went through a cloud migration in the quarter. So we had double burned on the cloud for part of the quarter. So the Monster burn was about INR 2.5 crores higher than a quarter before. That should come down over the next coming quarters.

Sure. And on -- Ravi, on the margin side, if you take out the provision reversal this quarter, you guys had a fairly sharp dip in margins at 4.4. If you can just help us through a margin walk of the pulls and pushes there? And how should we see profitability over the near to medium term? As you mentioned that SG&A will normalize at the elevated level, so if you can just help us how should we think about the margins going forward?

So I would say that these probably are the lowest margins that we'll probably come at for the current year barring unforeseen circumstances. This, you could take this as a baseline margin for the year. We have been impacted, like I said, the Conneqt business, in fact these are the impacts in the Conneqt business. These are the impacts of Excelus. These are the impact on cost, which is actually the payroll in kind of cost increases. We've had DigiCare, which has been shut, which actually contributed to almost about INR 4.5 crores in losses for the current quarter. And of course, Suraj alluded to the extra cost in Monster that we had to bear. So overall, I think we've had -- but for these one-off items, our margins would have certainly been much higher. And like I said, this would be the lowest that we can probably think of for the year. It can really get better from here, Mukul.

Sir, just to follow up on this. What would be the impact of the one-offs in the quarter on margins? And if you take out the wage hike and Monster losses, these issues would have been there a year ago as well, whereas your margins are down almost 100 basis points from the same quarter last year. So that way, is there some incremental cost pressure coming on, on the wage side, which is leading to lower profitability?

Not really because the Monster was actually -- has actually been up in Q1 '21, I mean as opposed to Q1 '22, Monster was actually up in Q1 '21. And we also -- we will also remember that we had salary cuts in Q1 of last year versus an increment in the current year, not just extra cost, but we had increased salary costs compared to Q4 itself. So I think the year-on-year comparison probably is not right. I'll be happy to walk you these things a little more in detail. But it is largely on account of Excelus, DigiCare, Monster in the current quarter, and the Conneqt business slightly dipping on the collections part for Q1.

And Mukul, also remember Q1 last year, we didn't give increments, which we have given before.

And we had salary cuts as well.

There is a difference there. There is a difference there. The other thing I would say on Monster because you'll recall, Q1 last year was a very low quarter from a sales perspective, given this is a SaaS business, you will see a bit of a lag effect of that also, right? So on Monster specifically, the increase in sales we are seeing now should -- will actually get the bottom line in the coming quarters. There's always a lag there. Mukul, there is one more point that I do want to make, which is against last quarter versus this quarter, you look at WFM. WFM, if you take this quarter last year, this quarter last year, a lot of the bonuses and incentives to associates were absolutely cut through the bond, right, people did not pay. Whereas like I've alluded this time, I think the humanitarian response was just better. For us, those bonuses and incentives often tend to be passed through. So they increase the top line, but not the bottom line. And that also that effectively sort of moderates the margin of the GS business without a reduction in the pricing per se, right? So you will see that the top line of GS has gone up quarter-on-quarter substantially.

So Suraj, sorry, just on this, can you quantify what would have been the margin impact from all of these?

So the bonus pass-through that was there in this quarter versus a year ago, that was INR 120 crores of top line.

[Operator Instructions] The next question is from the line of Jonas Bhutta from PhillipCapital.

Congratulations on a decent set of numbers despite the challenges. A couple of questions, sir. Firstly, more bookkeeping kind of question there. If Ravi can explain, why the tax rate, particularly in the subsidiaries, as in any net of consol minus stand-alone is so abnormally high at about INR 28-odd crores? That's the first one, and I'll follow it up with the other.

Yes. When we declare a dividend from Allsec Manila into Allsec India, there was a dividend distribution tax of INR 16 crores that we had to incur. So this tax has been considered as current tax in the quarterly reporting. The benefit of this tax is available and to be set off against the income that we earn during the year. So this is really a onetime tax cost that we've actually incurred in Q1. And actually, Allsec moves to a 25% tax because they will be -- they were under MAT until last year, they will move it to a 25% tax rate for the current year. And so we will get the benefit of this over the year. So that is what has actually spiked the current tax rates to higher than what we would normally see actually, Jonas.

So what would be your full year tax assumption be, I mean tax rate assumption be for the Quess consolidated entity suppose keeping in mind this Q1 impact?

Yes. Overall, I think for the year, we will probably come in at about 17%, 18% of effective tax rate as a company for the year.

Understood. Second question was where you sort of touched upon how you see the margin trajectory progressively on both GTS and WFM? I wanted to pick your brain on OAM because that business at least has made -- has shown a multi-quarter high kind of margins. Is there some one-off embedded within that? Or is this now back to the normal margin kind of scenario that we should build in for the remainder of the year?

I think, 7% would be -- anything between 7%, 7.2% would be more or less like steady-state margins in the operating asset management business. There are some onetime -- some collections that have been emitted in the current quarter. But by and large, I think 7% would be a steady-state margin in the operating asset management. And we have actually done some back-end improvements in the -- as far as the facility management business is concerned, the benefits of all of those should start playing out once offices reopen and people get back to offices, we should probably start seeing better productivity of our people when offices reopen in the facility management business.

Understood. And last one, if I can quickly squeeze in. So basically, for WFM, should we at least assume that you get to what you did in FY '21 because you are at 3.5%, Suraj highlighted that there was a INR 120 crore impact of the bonus increment that's actually been flowed down to EBITDA, but at least 3.7% which you did for the full year FY '21 is something that we should build in?

Absolutely. Without a doubt. Yes.

The next question is from the line of Vidit Shah from IIFL Capital.

Just to clarify the point that you made on the increased tax rate due to dividend distribution in Allsec from Philippines to India, is it -- so are you saying that this is -- this tax will be set up against any tax liability that Allsec has going forward? Or how does this...

Yes. That's right. You're right. This is -- this tax, I mean India has a tax treaty with Philippines and just this tax would be available in a set off under the double tax avoiding agreement.

Okay. So has this all been set up this quarter itself? Or it's...

No, we will have to compute it for the whole year and then do the set up, Vidit.

All right, understood. And secondly just can I understand the training and skill development business, so the revenues have been kind of flat year-on-year -- quarter-on-quarter, sorry so what is the level of operations, capacity operations that the business is operating at currently? And where can these revenues go when they operate at full capacity?

See, we were operating at about 50% capacity in Q4. That was when we had opened up some of our centers. I mean these are -- we operate about 120 centers across 20 states where we conduct these training programs. And we were operating at about 50% capacity in Q4. And at full capacity, our revenue would be in the range of about INR 50 crores to INR 60 crores a year. And currently, again, in Q1, we've seen -- maybe we are operating at about maybe sub-5% currently or maybe -- so we do expect that these will start reopening over time. And by about Q3, we expect -- if the third wave is not very severe, we do expect to get back to at least about 70%, 75% of the centers being opened by Q4.

All right. And that could drive a significant margin improvement within the WFM side?

That's right, yes. Yes.

All right. Also, just one last clarification on the provisions that you made last quarter for the Excelus and the Trimax businesses. Is there any update on if anything has been received, have you reversed any...

So one, as far as Trimax is concerned, we've had the contract novated. We discussed brief -- I mean, when the governments came forward, while we had made a provision on one side, we discussed internally. I mean when the government came back to us with their proposals to novate the contract on some new terms, we discussed whether we should at all go ahead or should we just back off from the project. But then we took a call in the larger interest of the business, we took a call that it would be in our best interest especially after having come thus far, we said, let's go ahead, have the contracts completed and try and collect as much money as possible. And in the current month, we have recovered about INR 23 crores of the past dues on GST from the government. Nothing much as far as GST is concerned, but this is the update as far as Trimax. We do expect to give -- we do expect to receive some more over the next few months, over the next few weeks or months.

[Operator Instructions] The next question is from the line of [ Raghuram N S ] from Eurindia Funds Management.

Yes, I just wanted to -- I have been an investor in Allsec and have always been tracking how Quess has been managing the investment. This was regarding the, obviously comments made by Mr. Ajit Isaac during the AGM of Allsec. When it was very clearly mentioned that a merger with Conneqt or with Quess itself would be considered and taken at the right time. I obviously heard your first comment to the first question that was made that both companies seem to be going along at their own pace, and that doesn't seem to be a need to immediately do anything about it. But it always was something that we at Allsec, the investors who remained, we're obviously wanting some clarity on what was the thinking behind continuing these 2 companies as separate? Now Conneqt has also been obviously merged into the main company. But this remains as a separate entity, whereas there -- obviously, there is no clarity on how the process could evolve over the next few quarters itself. So if you can please clarify as to whether there is a decision going to be taken at all? Or is it just going to be continuing like this for a long period of time?

Sure. Raghuram. Thank you for your question. Look, I mean, I absolutely appreciate where you're coming from on this. I think the reality is these are -- this is a rapidly evolving business environment. And at the end of the day, we're also getting to understand Allsec's capabilities better. We are -- it's not that we're not looking at it, we're still looking at it. You would have seen that we have moved to merge Conneqt into Quess. So we're doing the right things at the right time. It's just that, at this point, we're not seeing a need to do this. Also you'd have seen as an Allsec investor, the performance has gone up. I think Quess is doing whatever we can to use our Global Tech Solutions platform to open those for Allsec to improve the base of customer acquisitions. In India also, our general staffing business is introducing them to help them cross-sell to general staffing customers. So a lot of those issues are being worked through anyway operationally. As far as the merger goes, I think there's many considerations in the mix here. And we're working through all those considerations to figure out, given they're both publicly listed companies, what is the right way, what is the right thing going forward. It will evolve and we're looking at it, but I just can't give you -- I'm sure you'll appreciate, I can't make a specific comment on this at this point.

Yes, I understand. I obviously appreciate the fact that both these are listed companies, so there are very clearly processes and sensitivities that need to be handled here. But it would always be much more helpful for shareholders saying that, okay, unless these conditions are met, we will continue as separate companies. Or we just have some kind of a plan to do something together over the next 6 months -- there is no real timeline to any decision.

Yes. No, I hear you. Unfortunately, with 2 public listed companies. It's impractical possibly even illegal to put a timeline in place, Raghuram. But I hear you, and let's take this. We'll take this as a point, and we'll chew on this one and thank you for your comment.

Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Suraj Moraje for closing comments.

Sure. I just want to start again by thanking ICICI Securities and Sudheer for hosting the call, really appreciate it. We want to thank all of you for being here today. Q1 was a tough environment. We're very pleased with how the business has -- while still focusing on the humanitarian side weather through it, 24% revenue growth, 22% PAT growth, staying flat quarter-on-quarter, increasing headcount. We're looking forward to the quarters to come. I think there is very strong momentum in the businesses. We are committed to executing, very focused on that, and I hope you see the results and the purpose coming through on these calls. We are continuing to invest in our sales delivery capabilities. We believe the Quess platform is getting more and more differentiated over time from our competitors, driving our cross-sell and driving our demand. Our tech assets are doing very well. Monster, QJobs and others. So outlook, I think overall, the outlook is positive. I'd like to say thank you again, and we look forward to speaking to you again in a quarter. In the meantime, stay safe. And please, if you're not vaccinated, get vaccinated. And most importantly, go back to your offices. It's good for you, it's good for us. Thanks very much.

Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.