Quess Corp Limited (QUESS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Quess Corp Limited Q2 FY '22 Earnings 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. Abhijit Akella from IIFL Securities Limited. Thank you, and over to you sir.

Thank you, Lizan. Ladies and gentlemen, good morning and thank you for joining us on the 2Q FY '22 post results conference call of Quess Corp. It is my pleasure to introduce the senior management team of Quess who are here with us to discuss the results. We have with us Mr. Suraj Moraje, Managing Director and Group CEO; Mr. N. Ravi Vishwanath, Chief Financial Officer; Mr. Sekhar Garisa, Chief of Emerging Businesses and Corporate Development; Mr. Guruprasad Srinivasan, Chief Operating Officer; Mr. Lohit Bhatia, President - Workforce Management; and Mr. Pinaki Kar, President - Global Technology Solutions. We will begin the call with opening remarks by the management team and thereafter we will open up the call for a Q&A session. I would now like to hand the call over to Mr. Girish Kumar Sharma, DGM, Investor Relations to take proceedings forward. Thank you and over to you Girish.

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

Thank you, Girish. Good morning everyone, and thank you for joining us today. We hope that you had a good weekend, that you've safely transitioned back to your offices. I hope you're taking your call from the machine coffee and all. Let me start by briefly giving you an overview of the business and then hand over to Ravi to talk through the financials, including walking you through the extraordinary charges this quarter. We will then be happy to take questions. Q2 saw an accelerated opening of the economy, providing significant tailwinds to our business. With the economy projected to grow at north of 8% this year, hiring and employment activity has been in full swing. Indeed, our Allsec payroll data shows over 11% increase in same-customer payslips processed in September this year versus March 23 pre-COVID, reflecting broad-based growth in employment amongst large enterprises across sectors. While delays in return to office in segments such as IT and education continue to exert pressure on parts of our OEM business, we are hopeful that with the pandemics current trajectory, we should see smart recovery here too by Q4. Our focus for Q2 was really to take advantage of the economic surge, riding on the significant investments we've made over the past quarters in sales capabilities and verticalization and technology-led delivery. Speaking of technology-led delivery, we are pleased to inform you that Quess Corp has been named amongst the top HR Tech solution providers in India by the Enterprise World Magazine. With the exception of IFM, as already mentioned, our large businesses have all demonstrated exceptional growth, driving our consolidated revenues up by 23% year-on-year and 8% quarter-on-quarter. So we're about a [indiscernible] larger than we were about a year ago in terms of revenues. At this point, our consolidated revenues have shown above 7% quarter-on-quarter growth for 3 out of the last 4 quarters. We're also delighted to report our highest ever headcount of 401,000 FTE, with headcount growing 9% quarter-on-quarter in 2 out of the last 4 quarters. Please note that this number of 401,000 FTE does exclude an additional 14,698 FTEs who were processed in September, but not in our rolls at the end of the month. We think that some folks in the industry do add this number into their FTE numbers. So it's thought useful to show it to you side-by-side, so you have comparisons. On the back of this strong growth, as Ravi will explain in more detail, our EBITDA from operations has grown by about 12% year-on-year. Our focus on cash generation continues to remain razor sharp. OCF to EBITDA for the half year was about 88%. We do continue to think we can target 70% OCF conversion on a sustained basis going forward, at a growth rate of let's say, about 20% year-on-year top line. Current performance side, we are happy to report that we are continuing to build a formidable revenue pipeline for coming quarters, acquiring about 265 new customers in Q2 versus 195 a year ago. Our focus on cross-sell continues to accelerate. H1 saw 39 wins with an ACV of about INR 310 crores in H1 itself versus about INR 270 crores of ACV for all of last year. 16 of these customers are completely new to Quess, where it was our frontline salesperson who pass the lead from one business to another. Again, highlighting the benefits of how winning together philosophy as one platform. Interestingly, our data also implies a significantly higher conversion of leads that come from cross-sell activities rather than from other sources. Let's move on to specifics, starting with the WFM platform, which posted a revenue growth of 27% year-on-year and 7% quarter-on-quarter. Our general staffing business has achieved the highest ever associate headcount of 267,000, a year-on-year growth of 31%, a quarter-on-quarter growth of 10%. This is the highest count ever achieved by an Indian staffing company, and we congratulate the team for this. Fueled by this growth, revenue was up 27% year-on-year in General Staffing. Interestingly, 25% of the incremental headcount growth in Q2 came from 59 new customers of whom over half are either first-time outsourcers or have switched from local informal vendors. This highlights the continued formalization of labor in our economy. Our focus on driving productivity via technology-led processes is also starting to show up in our results. Q Jobs account for over 30% of our hiring in cities where it is present, and Q Jobs recruiters are 30% to 50% more productive than traditional recruiters. Our investee company, Taskmo, which is a blue-collar gig platform achieved a INR 12 crore annual run rate well ahead of target, 3.5 exiting its monthly run rate over the last 3 quarters, we've been invested in them. We're very excited about the business and the synergies with our core business. Domestic IT staffing continues to be in a demand-rich environment, growing its revenue by 35% year-on-year, with expanded margins during this period due to our focus over the past quarters on higher skill profile. Going forward, our focus will remain on growth and attrition management while we pilot new approaches such as higher train deploy, RTO and assessment-based staffing. The last major part of workforce management platform are training and skill development business, continues to operate in a challenging environment. You will recall that the bulk of this business a year ago was B2G, and we have decided to discontinue those activities. While we are in the process of winding them down, repeated start and stop of operations have made it challenging for us to track down partially trained candidates, and you will therefore notice enhanced volatility in the business performance. So that was the WFM platform. Let me move on to our Global Technology Solutions platform, which has delivered an 18% year-on-year top line growth and actually noticeably a 33% year-on-year EBITDA growth, as our focused strategies adopted over the last few quarters start to bear fruit. Global Technology Solutions has 4 service components within it. First, CLM, with the rapid growth of Indian consumer demand, especially a lot of investments going into new tech-based start-ups and post pandemic of what we perceive is an increased cultural comfort with virtual interactions in India, our CLM business has grown rapidly at 29% year-on-year, 10% Q-o-Q. Both Connect and Allsec have had record client wins, with Allsec especially acquiring more logos in CLM in H1 than in the past 2 years combined. We have made several business model innovations in CLM, including taking a more solution selling approach to our services and driving digitization and we're starting to see the mix of voice versus non-voice shift towards non-voice. The second service line is non-CLM BPO. The Collections business saw a revenue growth of 24% year-on-year, 13% quarter-on-quarter as restrictions across the country continue to ease up. The domestic F&A business has seen a 23% year-on-year top line growth. This growth is a result of Connect management's strong focus on productizing and digitizing these 2 service lines over the last quarters and we are positive about the outlook. The third component, platform-based services has 2 components, the HRO platform, in our Indian subsidiary, Allsec and the Insurtech platform in our MFX subsidiary in the U.S. The HRO platform, the number of payslips processed per quarter has grown 31% year-on-year, surpassing the significant milestone of a million payslips processed per month this last September. The Insurtech business, I'm happy to say is after a fair amount of investment and doubling down into vertical expertise, has resulted in top line growth of 10% quarter-on-quarter in Q2. And interestingly, revenue per FTE up about 10% year-on-year, reflecting the non-linear nature of the platform business. We will continue to invest in both sales and technology capabilities in these platform areas, and we hope this will help us expand our margins in GTS overall over time. Fourth, IT services. We offer IT services in both India and Canada. Our domestic IT services business saw revenue up 41% year-on-year, 20% quarter-on-quarter, largely driven by wins in our Infrastructure Management Services business. But the Canada business also saw a 5% quarter-on-quarter top line growth with our high-margin managed service business delivering 18% quarter-on-quarter growth. I hope you appreciate that this is a significant uptick in the growth of our U.S. businesses, and we do hope and expect this to sustain. Before moving on from GTS, we would like to share that 2 of our GTS service lines have made their debut amongst global contenders on the [indiscernible], one being multi-country payroll solutions and the other being insurance platform IT services. We are pleased to show up formally on the matrices, and we look forward to improved ratings in the years to come as well as having more service lines qualify into these matrices over time, showing our enhanced capabilities in these areas. Next, we come to our OAM platform, where growth has been a bit more muted overall, albeit still at 15% top line year-on-year. The facilities and security services business continues to be challenged given that IT, ITES and education sectors did account for 49% of pre-COVID revenues and are yet to return to office completely. This was partially offset by very rapid growth in BFSI Manufacturing and Logistics segments. New customer acquisition in IFM continues to be very strong with the pipeline this year being 2.5x the pipeline last year. And we have been very aggressive in IFM in increasing our customer wallet share with over 35% of IFM customers now using more than one service line. Overall, the business has seen revenue growth of 3% quarter-on-quarter and 13% year-on-year. We are doubling down on sales to accelerate sales, and we should see improved performance in the quarters to come. The IFM business has also made big strides on efficiencies. Process digitization has taken our core to associate ratio up to [ 81 ] in Q2 from about [ 66 ] a year ago. And our cost to serve is down to 4.6% from 6% of revenue during the -- over the same period. However, EBITDA has remained muted due to a decline in the high-margin food business as certain education institutions closed in Q2. Our security business has witnessed a recovery in Q2 with revenue growing by 12% year-on-year, 8% Q-on-Q. Customer acquisitions remained strong with 26 customers added in Q2. We are working on driving our profits in both IFM and Terrier and we expect to see material progress in the quarters to come. Our Industrial business continues to see momentum on the back of improved outlook in metals and telecom sectors. Q2 revenue was up 10% quarter-on-quarter with the business winning 5 new clients during the quarter. This momentum you're seeing is a result of significant investments in capability and sales force over the last 18 months, and we do hope that it will continue. Let's move to our emerging businesses where the last quarter has witnessed some significant milestones and progress. Monster's turnaround is now resolutely on a strong trajectory. Sales and revenue have been growing for 4 out of the last 5 quarters and continued to grow in Q2 by 65%. Key health indicators like recruiter searches and consumption have shown over 50% improvement over the last 2 quarters, with the trajectory continuing. Customer experience continues to improve due to product improvements. CSAT has actually topped 80% and customer retention rates crossed 70%, both at their 3-year high levels. In this context, we do believe now is the right time to invest in growth. We have seen significant interest from external parties to invest into Monster and are pursuing alternatives to supplement this with maybe about $10 million of our own capital over the next 2 years. We will come back to you with more details and disclosures when we have firmer plan. Moving on to Monster. Much has been said about the need for improved hiring practices in the blue-collar space in India. On the one hand, job seekers in the segment who don't have resumes find it hard to stand out from others and discover the best possible opportunity. On the other hand, recruiters are dismayed as a large number of unqualified candidates turning up during online platform searches leading to very, very poor conversion rates. We believe we are best positioned to solve this problem and have built QJobs from scratch to being India's most efficient blue collar hiring platform. While for a typical recruitment platform, hiring efficiency may be in the range of 2% to 3%, QJobs optimization driven by advanced algorithms and deep insight into recruiter behavior, allows for hiring ratios of up to 25% to 30% for key profiles. Candidates who credentialize themselves using our unique skilling system are also 5x more likely to find a job. In fact, I would encourage each of you to download QJobs today, try and see the product for yourself. Everyone I demoed the product to -- or any of us as demo the product too has actually been very impressed by the quality. And I'm happy to inform you that QJob has actually crossed a million downloads with more than 2,200 companies using the app to recruit offering over 0.5 million jobs. We are proud of the industry-leading efficiencies we are delivering in the recruitment process. And the same is also being validated by exceptional NPS scores of upwards of 90% -- upwards of 90 from the users. We will continue to take a long-term view on investing in growing this asset in which we've also seen external interest to invest. QDigi recorded a great quarter with revenue growing by 90% Q-o-Q on the back of pent-up demand in the economy. While traditionally a B2C business, QDigi has definite opportunity to work directly with consumers on both on-demand services and insurance products. While B2B continues to perform more strongly than ever, we're happy to share that we have launched dedicated talent for our B2C business. We've launched about 40 extended warranty products already, and we are on track to sell over 100,000 extended warranty policies this year itself. So that was an overview of the business. Let me close by saying that we're in an exciting business environment, we're optimistic about the times to come as we continue to focus on our joint goals of hitting and sustaining a 20% ROE, while growing OCF at a 20% CAGR. I'd like to offer my heartfelt thanks to the team and to every Quessian who I think has outdone themselves in the past quarters to build the capabilities to put us in the place where we have the momentum we have today. And we thank you, the analysts and investor community, for your support to us and to our institution. Ravi, over to you.

Thank you, Suraj. Good morning, everybody. I hope all of you had fun and joyous Diwali. Let me now walk you through the financial performance of the company. Overall performance. Our overall revenue in Q2 grew by 8% compared to the previous quarter and grew by 23% on a year-on-year basis. All the segments posted healthy growth numbers with workforce management, global technology solutions, and operating asset management platforms growing by 27%, 19% and 15%, respectively on a year-on-year basis. Our EBITDA growth has trailed that of revenue. This was driven by 3 factors, 1, a change in business mix, driven by faster growth in our lower-margin workforce management platform than our higher-margin OAM platform; 2, higher incentive costs than a year ago, some indirect costs coming back, et cetera; 3, heightened investment into growth areas such as QJobs and focused verticals such as construction and healthcare; and 4, lower margins year-on-year in our facilities management and Terrier businesses, given the continued delay in pickup of IT and ITES verticals and the food business. We are working hard to increase profits here and hope to see improvements within the next couple of quarters. Consequently, EBITDA from operations in Q2 FY '22 improved by 12% on a year-on-year basis and 7% on a quarter-on-quarter basis to INR 157 crores. This excludes an extraordinary ECL expected credit loss of INR 44 crores, which arose on account of the pandemics continued impact of certain business where we have taken an additional provision of INR 44 crores relating to credit loss based on expected time to recover. These relate largely to government training business. We do not expect any further credit loss in our businesses. I would also like to spend a minute on operating cash flow. In FY '20, for every INR 100 of revenue we earned, we generated INR 2.1 of operating cash flow. The equivalent number for H1 is INR 3.5. This is a testament to the management's focus on driving strong operating cash flows of high-quality earnings. In this context, we are pleased to have announced our interim dividend. I'll now move on to segment-wise updates, starting with workforce management. Our general staffing business continued to grow over 27% on a year-on-year basis, crossing the 250,000 head count. Professional staffing business has performed in line with our plans of increasing focus on higher-margin mandates and growing EBITDA by 43% on a year-on-year basis and 8% on a quarter-on-quarter basis. Trading and skill development business continues to operate in a difficult environment, while our focus is to wind these down by completing our contractual obligations, driving collections and further optimizing productivity. Coming to Global Technology Solutions. GTS continued to perform well in Q2 with Connect growing by 10% quarter-on-quarter and 27% year-on-year on the back of growing CLM business. The collection business too saw a revenue growth of 24% year-on-year and 13% quarter-on-quarter as restrictions were eased across the country. Monster saw revenue growth of 19% on a quarter-on-quarter basis on the back of strong hiring activity across the country. Moving on to operating asset management. Our facility management business grew 13% year-on-year, although margin shrank 1.6% quarter-on-quarter due to slowdown in the food business. Terrier revenue grew 8% quarter-on-quarter as we saw some offices opening up during the quarter. Our SG&A cost as a percentage of revenue saw marginal decline due to increased revenue growth, mostly our monthly SG&A cost run rate for Q2 for FY '22 was INR 59 crores as against INR 56 crores in Q1 FY '22. The reported profit after tax in Q1 '22 is at INR 41 crores, a decreased 17% year-on-year basis, arising on account of extraordinary charges to the profit and loss account. The expected tax rate will even out for the year by Q4 since H1 has been impacted by charges like dividend tax in Philippines and the fact that we have not considered a creation of a deferred tax asset on the GST write-down, et cetera. I would also like to spend a couple of minutes talking about the exceptional charges and credit as part of the balance sheet review undertaken below the EBITDA line. Given that we are registered for GST across 20 states and multiple businesses, we concluded the reconciliation of the filings as of 30th September from 1st July 2017. While our payouts have been accurate and there have been no default on this account, we had made certain claims with respect to the input credits. We have now taken a call to write these losses. The charge of this account is INR 48 crores, and I would like to inform you that there will be no impact on this -- of this to our cash flows. Similarly, we also undertook a review of the other financial assets and have taken a charge of INR 20 crores. As part of the exercise, we also looked at our intangible balances. You are all aware that as at the beginning of the pandemic and extreme uncertainty, we had taken a prudent view and impaired goodwill and intangibles. In the light of actual business performance since then, we have reviewed our position that believe that -- and believe that some of the intangible deserve to be brought back so as to reflect the true position. We have therefore written back INR 77 crores across Allsec and specialties management. The fact that we are able to write back intangible customer relationship is a testimony to the fact that our business growth and performance are in a much better place now compared to March '20 when we took the write-off due to COVID. I would also like to inform you all that our exposure to [indiscernible] at the end of the quarter stands at less than INR 10 crores. Coming to 80JJAA, we are continuously in touch with the IT department, and there has been no significant update as of now. Balance sheet updates. So focusing on the balance sheet, as communicated during the previous analyst call, we have improved our net debt position to INR 68 crores in Q2 against INR 151 crores in Q1 '22 on the back of 100% OCF to EBITDA from operations for Q2. EBITDA from operations for the first half remained at a healthy 88% with the growth that we are witnessing in our business. Some of the corporate updates. We have declared an interim dividend of INR 4 per share, which once again reflects our confidence in the business performance and underlines our cash generation capabilities. We have also increased our stake in Taskmo more to 36.58%, with third investment of 80 lakhs during October '21. We thank you all for your continued support. And I would like to now open the floor for questions. Thank you once again.

[Operator Instructions] The first question is from the line of Sidhant Mattha from B&K Securities.

Ravi, I just wanted to know about the statement you were giving on the taxation for the year. Can you just repeat that? Just raise the point.

Yes. Thanks, Sidhant. What we meant was the first half of the year has had some onetime taxes that were incurred in Philippines when we declare a dividend from the Philippines entity to the India entity. This tax that is paid in Philippines can be offset when we file the tax return in India, and claim a double taxation credit for the same. That will get evened out over the year, which is why, like I said, we will probably have a clearer position on the expected tax rate between Q3 and Q4. And once the overall year's performance is understood.

Okay. And can you just give me a color on the Taskmo business, what is that exactly? And how are you shaping up to improve -- like what is Taskmo business exactly?

So maybe Lohit will take this one.

Sidhant, so Taskmo was an investment which was made by us at the start of this calendar year, if you would remember, it used to -- it's a platform, which basically brings together task curves as we call them, to render services to companies on a big manner, which is on per assignment per activity. And on the other end, would be large corporates and large consumers who would use these workers to essentially deliver certain outcomes. So let's imagine you are a new grocery major, you would require many grocery stores to be empaneled. Let's imagine you are one of the large ride-hailing company, you'd go into new cities and you want to onboard new drivers for 3-wheelers, 2-wheelers, 4 wheelers. A lot of this work in the past used to be done in the informal way and the best way to do them is through a digital platform. So Taskmo was started as feed my pockets about 3 years ago. The 2 founders, both Navin and Prashant have done a stellar job and when they brought the product to Quess we clearly saw that there is a huge additive benefit that we can see in this. As you know, India has about 390 million informal workers who are always constantly looking for assignments and activities to come into the formalized workforce. We are doing a very, very healthy run rate in the last 3 quarters that they have been with us, like Suraj mentioned, in his opening comment itself. We are expanding ourselves not just in cities, in downloads, in task curves as well as customers, brands that we work with. I think as Quess, one thing is very clear, we feel employers will use every form of employment, be it permanent recruitment, temporary staffing, deep workforce and apprenticeship program. As Quess, we wanted to be in all the 4 quadrants, and this completes that fourth quadrants for us. So we look very passionately and extremely bullish on this asset of us in times to come.

Maybe just to add to what Lohit has said. You think about outsourcing, which is basically -- we are an outsourcing company. There are 3 models by which you can price outsourcing, right? Model 1, is time and material based, which is really traditionally what our staffing business has been doing. Model 2, is a managed solution where you sort of -- where you guarantee an outcome and you deliver against it and you figure out how to make it more productive and how to make it more profitable. Our Global Technology Solutions business is probably the most evolved on that front. There is some of that happening in facilities, for example, where we have about 20% of our revenues coming from contracts where we are paid per square foot and it's for us to become more efficient. So that's the second model, which is our managed solution. The third is sort of the, let's say, the gig end of it, right, where you tell the customer, look, you tell me how much you're going to pay for a job and I will actually find a way to fulfill this where my cost structure is also per job. And what we are seeing is even large enterprises in India are getting used to the notion of saying there are some marginal tasks in my workforce. For example, if I want to enter a new city in India and [ Brexit ] with posters or if I want to acquire merchant partners, I can actually pay on a per task basis. And that is where Taskmo fits front and center. So we really are, to my knowledge, the only outsourcing player in this space who operates in all 3 models.

Okay. And my last question is regarding the margins. So we have seen 5% plus margin till FY '20 and then because of the training skill development business slowing down and the revenue mix changing of general staffing doing better than -- doing better the margins fell to 3, 3.5. And it's consistently if you remove -- if you see the normalized EBITDA, excluding the credit loss it is around 3.5, what expectations are for the workforce management margins? What do you expect the margins to be in the next 2, 3 years for achieving the 20% ROE and other things?

We actually expected it to be in the current -- I mean the current trajectory will be maintained with the platform minus small variation. And we believe the current trajectory, we should be able to hit the 20% ROE target that we have set ourselves.

So basically, from till FY '20, what has currently changed because you used to maintain a 5% margin. So the shrinkage, what has -- is this skill development basis? Or what is the -- why there's a margin shrinkage compared to last 2 years? Because like you don't expect it to go back?

It is -- the drop in margins in workforce management is largely on account of the training and skill development business, Sidhant. As you are aware, we are -- we took a call not to sign any further contracts and to exit and to wind down our existing contracts by completing our obligations, which we are currently in the process of. It's just that the pandemic has delayed the process by a couple of years. So while we are in the process of completing it, completing our obligations, collecting our dues and that rendering these projects effectively -- and completing it effectively. We don't expect it to contribute significantly to the margins as it did in the early years, which is why prudently, we've said that we will probably take the margins in workforce management as they currently are. And we have used the same for our -- in our projections for the future ROE calculations as well.

I just want to make a couple of additional points here, Sidhant, I think one, the margins of the GS business have actually stayed remarkably stable over the last couple of years. So -- and while it's the lowest margin business, it's also at this point amongst the highest ROE businesses. So I think as somebody tracking our businesses, what is important is not to -- the margin coming out of each platform and then the margin of the group is sort of some product of what each business delivers. As Ravi said, WFM, the real delta has been in TSD, but the underlying business performance continues to be strong. The one place where we think we can do better on margins is actually in operating asset management. I think there is an improvement potential there, and we're working on it, as I said.

So that would be around 7% you're aiming for in operating asset management because --.

I think we should be able to do 50 to 100 basis points better as the business comes back is my sense. And the -- other thing you should note, by the way, is just the GTS business has already expanded its margins in the last sort of 18 to 24 months.

So I just wanted to know about the workforce -- basic question was for the workforce management. But thank you for the update.

[Operator Instructions] The next question is from the line of Abhijit Akella.

So a couple of questions from my end. First one is a little bit broad in scope. So now that the economy has kind of started to come out of the COVID scenario. Could you please talk a little bit about where your key businesses stand relative to their respective pre-COVID levels? And what kind of trajectory do you see for them over the next few quarters shaping up?

Sure. Let me take this at an uber level, and then we can dive into specific places. So if you go to -- I'll talk about the main ones. You talk about general staffing is at its all-time high, Abhijit. And I think that's true from a headcount perspective, from a margin perspective, from a result perspective. It's also true from a core to associate ratio perspective. So I think at this point, our assumption -- our hope is that there is -- wave 3 is going to be -- have limited impact on the economy. We think it's, at this point, it's just full steam ahead, and that's how we're thinking about it. We're also hiring that mindset in terms of just hiring our own core people. The Connect business is also larger than it's ever been in terms of size, in terms of revenue, in terms of profit. It's actually performed tremendously since our acquisition. I think the team there right now has done an admirable job, both on the sales side, where our pipeline is much better this year than ever before. But also on the delivery side, where we see a lot of digitization happening in 2 things. One is the product offering and 2, on the delivery side. Within GTS, also, if you look at Allsec, which is our -- it's a public listed entity and they make separate disclosures, but my sense is that the management team there is also -- over the last 18 months, their efforts are beginning to show in terms of faster growth, HRO has grown 30-plus percent year-on-year. The DBS business there has acquired more new customers in the last 6 months than the last 2 years before that. So we're seeing real momentum on the GTS side. And North America as well, again, it's early days, but I feel a sense of momentum and promise there, which is -- and you're seeing the results in quarter-on-quarter revenue growth. I think where we're feeling -- in OEM as well, the industrial business, I think the formalization continues. I think the investments -- fresh investments in telecoms, where it's entering the 5G cycle are all beginning to show on the industrial business momentum. I think the team there is doing a great job of just keeping its head down, building the right expertise and moving on. Where we are seeing the industry not getting back, and this is frankly -- we hope this would -- that the industry would bounce back by Q2, Q3, I think wave 2 has pushed it out. Fears of wave 3 have pushed it out, but we are sensing that by Q4, it should come back is actually the specifically the management side, where I think that there's been 2 large impacts. One is obviously the food business, which has been a very profitable business for us in the past, but that depends on people being in their colleges, in their universities, and in their offices, and that has not happened yet. It's a bit in suspended abeyance, and we hope that by Q4, it will come back. And the second is around the whole IT and IT-enabled solutions, I think Industry has come a long way, first of all, from 2 years ago -- not 2 years ago, but wave 1 last year where a lot of industry voices were saying we're all going to be virtual forever to now realizing that actually virtualization doesn't work in all situations, attrition has gone up, loyalty has come down, cultures have dissipated. But I think there is also -- it's going to -- the move back to office will -- I mean, some people talk about the great attrition. I think there's going to be a great re-expectation setting in that people are going to realize that you can't work from Goa forever. You've got to come to the cities you've got to be in the office, but that setting will take a few months. People are a bit scared of losing people in that process. But we do see that it's starting to happen. We do see that net-net, facilities have not been given up. And we hope that when it comes back, -- that segment is usually quite profitable because the required SLAs are higher, the quality of delivery is higher. So we do hope that we will see the margins recover there, and we're working very hard towards it. On the emerging businesses, I must say, Monster is -- I think Monster and Digicare are both in a great environment. Monster has been growing quarter-on-quarter on sales for the last 3 quarters. The sales productivity is at its highest ever. And I can see real momentum there. I think the hiring activity is across -- I mean, and it's not just a lot of people talk about hiring in the IT sector. It's not just there. It's across the board. We struggle to get -- people are struggling to hire field sales executives today. The construction industry is struggling to get workers back and to reduce worker attrition because people are just jumping from site to site to whoever pays more. So across the board, I think what we are seeing is a little bit of a temporary maybe, but shift in balance of power between capital and labor, I think labor is able to demand a little bit more right now. And I think that it's showing up. We've had one customer, an automotive customer ask us if we can actually formalize not just their own operations, but their entire sales dealership chain because they want to bring down attrition there. And so that is an interesting project where we're going dealer-by-dealer formalizing and outsourcing their staff. So we're seeing a huge momentum in terms of formalization, huge momentum in terms of hiring, in terms of upskilling. I think the themes we've been working on are starting to pay off. And I think the push right now and the team is no longer around pricing. It's around, how do we up our delivery skills, how do we just grow more and faster.

Got it. That's really helpful. And I also just wanted to drill a little bit further down into the GS outlook that you just alluded to, but we've seen, I believe, about 25,000 headcount additions this quarter, which seems a very strong number sequentially. So just wondering if Lohit could maybe talk a little bit about how he sees the trajectory going forward? And what kind of road map you see for the industry overall, the general staffing industry overall? And where do you see Quess ending up in terms of market shares over the next whatever foreseeable future?

So I think I'll give you a quick data point on what we've been talking about in the last couple of quarters, and that will cement your thought on general stocking itself. Same time last year this quarter for our advance to decline customers for every one customer that used to grow, we had 1.5x customers declining. Last quarter, we said this rolled over and switched the other way around. And the declines were one and the advances were 2.6x -- 2.5x -- a little over 2.5x. This time, happy to report that the advanced customers are 3.7x for any one customer decline. That's point number 1. Point number 2, you remember from last time's call, we said, sequentially, if we look at it, every sector has done well and recovered over pre-COVID barring the one sector, which till Q1 result when we gave it to you from a general stocking perspective, we said that it was a little subdued on retail. We were still about 85% to 90%. Again, happy to report, in Q2, retail has also joined back to the party and is at least back at pre-COVID numbers. So what Suraj said that this is a historical high for general staffing is definitely built on the back of BFSI, telecom, manufacturing, FMCG, FMCD and with retail and logistics also growing. So that's the second point I wanted to raise. The third point, what we are [indiscernible] about formalization is genuinely happening. This point that Suraj rose about a very important new project that our team is working on, which is formalizing dealerships for automobile majors. That's just one aspect of it. We have interest from customers, which are very large, but they aren't the likes of our global Fortune 500 or the large FMCG listed companies in India. But no matter, they would have 5 digits, in crores of revenues at a location in UP or at a location in Rajasthan. It's companies like this, which are now joining the formalization pack, and they want to come to formalized companies, listed companies like a Quess, they want the complete magnitude of technology, mobilization, governance, compliance, reach, geographical reach that we can offer to our customer. So what our teams are today noticing and some of the work that we've done is we further deepened our verticalization strategy across different segments. We've made a few which are verticals and made a few which are horizontal. In Q2, while our outlook was cautious as we had spoken in the Q1 period, what we also did was we kept investing in sales. And we are very confident that this is the investment, which will give us additional customers, new customers, expanding customers. Last point I want to leave with you on general staffing. A year ago same quarter, the number of new customers added were 24. And last quarter -- last -- same quarter last year was 24. Last quarter, this year was 48 and now it's 59. If you would remember, we also said that the new customer additions are growing quarter-on-quarter, though the PO value from every customer is small because customers are also being cautious on how much they want to add. When all of these customers no longer have that caution with them, you can assume what the kind of growth could be. So we are pretty encouraged by the fact that this, by all records in the last 12 months, a 64,000 addition in general staffing is already our best-ever 12-month period. This quarter is one of our best at 25,000 people that we've added. We are confident that our team and our customers will grow further as well.

The next question is from the line of Kaustubh Pawaskar from Sharekhan by BNP Paribas.

A couple of questions from my. First, what will be your tax rate going ahead maybe for FY '23 and [indiscernible]

The tax rate for me, like I said earlier, Kaustubh, we will have a lot more clarity on the expected tax rate by about -- I mean, by the end of Q3, given that we've had some onetime charges. But we do believe -- but having said that, I think we do believe it would probably be in the 18% to 22% range for the current year.

Okay. And sir, in the initial comment, you mentioned about healthcare being one of your verticals where you're focusing. So can you just give us some more thought process on that front?

Sure. Guru, do you want to take that?

Sure. So specific to healthcare, during pandemic, we started getting a lot of requirements from health sector. Typically, the profile such as GDA, general duty administrators and doctors, nurses across India. So one area that we had not really focused, which we have now set up as a vertical and then putting more focus is to get right -- I mean, higher trying and deploy such resources across. So we signed -- we signed MOU with AHPI that is Associated Healthcare Providers of India where all hospitals are part of it. So jointly, we are setting up training centers and training sourcing, mobilizing people, deploying them to various hospitals across the country. So this is just the second quarter that we have set up and we have incubated this internally.

Will managing the assets under the healthcare space would be a focus going ahead like we have also attended a lot of hospital companies call and they are now focusing on penetrating bid into the Tier 2 and Tier 3 markets and through virtual or digital. So that is something which most of the hospital or healthcare companies are focusing on. So will that be another kind of a focus for the company going ahead, which will help just vertical to grow?

So if you look at our entire offering of solution in this space, a, of course, I mean we are taking all Quess' service specific to health care. So starting from people services, which is as I said, hiring doctors, nurses and in the entry level to support people at hospital. Second is to get access to the entire hard services and soft services, which Quess is quite strong with. So that's the second area that we can naturally take into hospitals. The third area is anything related to technology intervention in terms of helping them to implement platforms and systems and technical assistance for operating medical equipment, so training that set of people. So Quess as an offering, we can take each and every vertical of Quess into healthcare. So that's where we have formed a separate vertical and got domain specialist as part of this process who is working together with us to get access to various healthcare hospitals and health care sectors across country. So I mean the way to visualize this is literally, we can take every services of Quess specific to healthcare. And currently, we do cater to about 15,000 beds as part of our facility, but we are now making a larger agenda to see how we can -- I mean take all services across healthcare.

And one last one on your OEM business, will -- we have already seen the recovery in the business. Should we anticipate sustainable kind of growth now in this business since now the recovery is on card?

So Kaustubh, I think our aspirations at each of our businesses should grow at 20% CAGR minimum, right. And I think the -- in the OEM side, industrial is already there. I think the security and facilities business should also be able to do that. I think it's just a question of finding the right market momentum and positioning ourselves correctly. So yes, the answer is, yes, it should be sustainable, and we should target that.

The next question is from the line of Jasdeep Walia from New Mark Capital.

Sir, in IT staffing, the headcount has been flat, and I understand the mix has been improving. But now I think the mix improvement is already there in the business. So going forward, do we see expanding headcount in this business?

Yes, absolutely. And I think you've got the numbers very, very brilliantly. I do want to take a moment to explain to everyone what Suraj had also briefly alluded to. If you look at our PO values, they are above 30% year-on-year from where we were a year ago. If you look at our gross margin, it's about 35% to 36%, and our EBITDA is about 43% up. This has happened because we've obviously exited POs and contracts, which were very low in margin in that business. And it's a highly productive recruiter intensive business. So when you have for each recruiter and x amount of productivity that you can deliver, I think in current markets, it just makes better economics to go after higher margin and digital revenue. We have a separate stream of digital that we started a few quarters ago. Our higher margin and super higher-margin businesses have completely taken over our steady-state businesses, and that's what is baked into the results. To your question on will we further see our volume growth along with EBITDA and value? Absolutely, yes. That's what the team is working on. That's what our plans are for each of the verticals within the Quess IT staffing. And overseas also, I just wanted to leave one point with you. We've had multiple geographies which have done extremely well in the last 1 to 2 years. Our business in Middle East has been doubling in the last 2 years. Our business in Philippines has recovered in Asian much faster than Singapore has. So these are the markets where, again, we are getting a benefit of both e-commerce wave as well as the IT ITES wave which is happening. At this moment, the only market which is from a WFM overseas perspective, which has not joined the party yet, is Comtel, which is Singapore, and we've recently rebranded that to Quess Singapore as well. We feel with the coming times, the government of Singapore will also be easing a few restrictions that they've imposed on visas and people coming into the country. That should also be very beneficial for the entire IT pack within WFS.

Got it, sir. And here also the aspiration is to grow the top line by 20%.

Absolutely.

Got it, sir. So on the government receivables side, what are the overdue receivables as of now, after you've taken this write-off in the current quarter?

The total receivables on the training and skill development business is about INR 150 crores after factoring for the provision that we have made.

[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Suraj Moraje for his closing comments.

Thank you very much. Thank you. I just want to thank everybody again for being here today. Your support means a lot to us. We were very enthused by the business momentum right now. The fact that the business has grown by -- we're about a third bigger today than we were a year ago. We have continued to focus very much on operating cash flows, on improving our ROEs and our efforts in that direction will continue. I wish you all the very best for the quarter to come, and look forward to seeing you again. Thank you so much, and I think we can now end this call.

Thank you all.

Thank you. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.