Quess Corp Limited (QUESS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Quess Corp Q3 FY '22 Earnings Conference Call hosted by Edelweiss Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Alok Deshpande from Edelweiss Securities Limited. Thank you, and over to you, sir.

Thank you, Lian. Good morning, ladies and gentlemen, and thank you for joining us on the Q3 FY '22 Post Results Conference Call of Quess Corp. It is my pleasure to introduce the senior management team of Quess Corp who are here with us to discuss the results. We will begin the call with the opening remarks by the management team. And thereafter, we will open up the call for Q&A session. I would now like to hand over the call to Mr. Girish Kumar Sharma, DGM, Investor Relations, to take the proceedings forward. Thank you, and over to you, Girish.

Thank you, Alok. 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 Executive Chairman, Mr. Ajit Isaac. Over to you, sir.

Thank you, Girish. Good morning, and a warm welcome to all of you to the third quarter analyst call. As we begin the call, I'm delighted to introduce to you Mr. Guruprasad Srinivasan, who has been appointed as our ED and CEO as of yesterday. Guru replaces Suraj Moraje, who is also present on this call. Suraj, the first external CEO hired in Quess since our inception, did a stellar job. He assumed responsibilities in November 2019, just before the pandemic began, for a period of time for which you are never trained to do what -- how to respond to in college or anywhere else. And then for almost 2.5 years since then, he has been instrumental in shepherding the transformation journey at Quess. A path to 20% ROE is now visible and realizable. And as we are reaching the goal set for Quess, Suraj would like to pursue other opportunities. We are thankful to Suraj for the time he spent here, his leadership and the relationships that he has developed. We wish him very well as he decides on what to do next. Before he signs off, as he has previously done on analyst calls, he will address you now. Over to you, Suraj.

Thank you, Ajit. Thank you very much. I'm sure everybody on the call has lots of questions, as usual. And Guru and Ravi have lots of interesting updates to say, so I'll keep it short. I was reflecting this morning on the agenda we laid out at -- with my very first interaction with investors. I think that was March 5, 2020, as you said, just as COVID was starting to rise globally. The 2 years since, I've seen unprecedented macro volatility with alternating headwinds and tailwinds, each with very high magnitude, wave 1, wave 2, wave 3. And yet, as a team, we made real progress towards the goals we laid out in that conversation. As Nehru said, not wholly or in full measure, but very, very substantially. And I feel proud, if I may use that word, to leave behind the company that's in great shape. This is evident in the Q3 numbers, which Guru and Ravi will present, and also in the business portfolio, the organic top line growth, second and third growth horizon options that you see in the business, the technology intensity in our operations, our employee happiness and, of course, OCF generation. No one individual leader can drive change by himself or herself. I think each and every Quessian has made huge personal sacrifices through 3 waves of COVID and achieved really steep professional targets. And for this, I will be eternally, personally grateful and exceptionally -- especially grateful to our exceptional management committee team. Thank you for working so relentlessly and for accepting some of my so very unreasonable demands from time to time. And Ajit, a very, very special thanks to you and the rest of the Board who have been a great source of guidance, coaching and inspiration. But most of all, today, I want to thank you, our investors and our analysts. Dialogues with you have always been a source of inspiration and learning. It's your toughest questions that have somehow provoked our deepest thinking. And as I move on to pursue new opportunities in the business world, I'm sure our paths will constantly cross. And I look forward to it. I look forward to it. Finally, I just want to wish Guru all the very best as you drive Quess to greater heights under Ajit's continued guidance. Guru nobly represents Quess' values, entrepreneurship and bias to execution as much as we do, and nobody is as well positioned to drive the business forward. I will, of course, be available to help in the transition as much as needed. I'll wrap up again by expressing my deepest gratitude. Thank you. God bless, and Ajit, back to you.

Thank you. Thank you, Suraj. Well said. As Suraj mentioned, we are together committed to ensure that this process of transition goes smoothly, and he'll be available to ensure that Guru has all the resources to get on with being the CEO of Quess. Guru is a founding member of the company and has handled 2 or 3 platforms. His intimate knowledge and expertise around the business is unmatched at Quess. Therefore, we think it's appropriate Guru to get started with his responsibilities right away. Some of you may also have some thoughts in your mind about the way forward express, and I thought it's good to expand on them before I hand it over to Guru. First, a reiteration of our business goals at Quess, they remain unchanged: 20% ROE from our operating business, 20% OCF growth, 20% EBITDA to OCF conversion. The 3 of them together will remain our north star. Some of you have asked me about whether we plan to do any big-ticket M&As in the future. The answer to this clearly lies in our business goals. Our 20% ROE is supreme. And unless any acquisitions are ROE accretive, we will not consider them. Having said that, the time for any big-ticket acquisitions for Quess is over since we've built the 3 platforms from the capital that we've raised, and we are happy to now extract cash from them and return to shareholders as per our stated dividend policy. Lastly, we now have a rhythm in the company, and this is visible in this quarter's results. As we go forward to Q4, we expect to continue this. Having achieved the transformation, we will intend to strengthen and not make any changes unless it is required by customers. Our senior leadership team, which constitutes our MC, our management committee, all of whom are on this call, will strengthen our path to the stated business goals and not change the way we manage the business at all. At this point, I want to bring in Guru back to the conversation. He is a homegrown leader with an exceptional track record, and he has delivered results in every business or projects that he has led at Quess. I'm personally delighted to see that our leadership bench has delivered a leader like Guru, a Stanford Ignite graduate from the batch of 2015. Guru has more than 25 years of experience, out of which 14 of them have been at Quess. Before Guru addresses you, I'd like to also point out that coincidentally, this has been an eventful quarter for us. We raised capital into Monster at a valuation of near $100 million, up from approximately $15 million that we invested at the time of investment. A reflection -- and this is a reflection of our value creation for our shareholders through the capital allocation done since our IPO. On the operating front, it has been the best quarter for Quess since its inception with the highest ever revenue at INR 3,658 crores and an EBITDA of about INR 179 crores. From an organization and sales standpoint, Quess has become much stronger. And to tell you more about it, over to you, Guru.

Thank you so much, Ajit. And let me begin by saying how privileged I feel to have had opportunity to serve Quess since inception. I wish to thank Suraj for all the transformational work that he brought in over the last 2 years and the Board members of Quess for giving me the opportunity to serve in this position, especially our Chairman, Ajit Isaac, for his encouragement and his confidence in me. It's extremely important also to acknowledge all our customers and colleagues for all the trust that they have on Quess. I truly feel that last 14 years have been fulfilling. And given an opportunity, again, it's been very valuable experience across Quess that I had. I was both employee and Board, clearly fascinated by prestigious start-up environment. I was fully empowered and started my involvement in building workforce management solution from scratch. I certainly had free hand to implement processes and platform to strengthen the entire delivery structure. And today, where we are, we bring in the best of ability from hire to retire across Quess as a group, and the platform is extremely robust. For the past 8 years, I got opportunity to work in detail in setting up shared services, led asset management business, being part of key decision-making at corporate. So I'm -- in view, in this capacity, I will continue to play a very constructive role in customer focus, shareholder commitments and strengthening delivery platforms to optimize productivity, leveraging technology. I believe all of this will have to continue to make this -- making a great institution for Quess. So let me start briefly giving you overview of business and then hand over to Ravi to talk through financials. And thereafter, we'll be happy to take questions. First and foremost, Q3 was a very good quarter. Three lead indicators: highest ever revenue, highest EBITDA and highest PAT, signifying our execution capability. We saw continued, I mean, continued opening of economy, providing tailwinds in our business with economy projected to grow north of 8% this year. We continue to build upon growing -- growth achieved in previous quarters. All -- the key indicator for us is our Allsec payroll data, which is -- which saw 15% increase of the same period last year, which is December -- versus December this year, reflecting broad-based growth in employment amongst the largest enterprise across sector. While the Omicron wave further delayed the return to office, opening up educational institutes, we are optimistic on the overall outlook for FY '23. Our focus for Q3 was to take advantage of this economic surge, riding the significant investment we made over past quarters in sales capability, verticalization and technology-led productivity. Our large business have all continued to demonstrate exceptional growth, driving our consolidated revenue up by 31% year-on-year and 14% quarter-on-quarter. We are also delighted to report our highest ever head count of 4 lakh 22,000, growing at 5% quarter-on-quarter basis. Please note, this number excludes an additional 13,900 associates, FTEs, who are payrolled in December but were not on rolls at the end of the month. On back of the strong growth, as Ravi will explain more in detail, our EBITDA from operations has grown 14% quarter-on-quarter. Our focus on cash generation continues to remain razor sharp. With postsales EBITDA at 80% of 9 months FY '22, our long-term OCF to EBITDA conversion target continues to be at 70%. We are happy to report that we are continuing to build good revenue pipeline for coming quarters, acquiring to 249 new customers in Q3 versus 265 in Q2 and 126 a year ago. Our focus on cross-sell continues to accelerate. 9 month saw highest of 48 wins with an ACV of INR 480 crores versus INR 270 crores of ACV for last year. So this is an area of focus for us, and we'll continue to stay focused on more cross-selling. Moving on to specifics. Let me start with the Workforce Management platform, which posted a revenue growth of 15% quarter-on-quarter, 34% year-on-year. EBITDA from operations grew from 5% quarter-on-quarter to 12% year-on-year. Our General Staffing business has achieved the highest ever associate head count to 2 lakh 73,000 year-on-year with a growth of 29%, the growth largely led by BFSI, logistics and FMCG/FMCD. Almost 50% of our incremental head count growth in Q3 came from 71 new customers. I'm also happy to report that our staffing business has ranked 48 in top 50 of SIA's prestigious largest global staffing firms for 2021 list. The domestic IT staffing business continues to be in demand-rich, growing its revenue at 52% year-on-year with expanded margins during the period due to our focus on past quarters on high-scale profiles. As a result, EBITDA has grown by 21% and 53% year-on-year. Going forward, our focus will remain on growth and attrition management while we pilot new approaches as we launch into hire, trial and deploy RPO and assessment-based staffing there. The last part of workforce platform is our training and skill development business. Saw limited opening for -- I mean, our focus continues to be fulfilling the existing commitments and exit B2G business as communicated earlier. Repeated start and stop of center operations have made it challenging in terms of keeping this business consistently steady state. So moving on to the next platform, Global Technology Solutions, which delivered 18% year-on-year top line with growth of 30% year-on-year EBITDA. GTS has 4 components in it. The first one is the customer life cycle management. With rapid growth of Indian customer demand, especially a lot of investment going into new tech-based startup and post-pandemic, what we perceive is an increased cultural comfort with virtual interactions in India. Our CLM business has grown rapidly at 26% year-on-year and 11% quarter-on-quarter. Both Conneqt and Allsec had a very impressive revenue uptick in Q3, Conneqt crossing the milestone of INR 100 crore monthly revenue in December and Allsec international revenue growing at 16% quarter-on-quarter. We have made several business model innovation in CLM, including taking more solution selling approach to our services and driving digitalization with a result of non-voice CLM growing at 57% year-on-year. The second business at GTS is non-CLM BPO. The collection business saw a revenue growth of 13% year-on-year. The domestic F&A business had a growth of 17% year-on-year top line growth. On the back of impressive growth in Q2 as well, this growth is a result of Conneqt management's strong focus on productizing and digitizing these services. The third platform under GTS is platform-based services. There are 2 platforms through which we offer these services: HRO, which is our Indian subsidiary, Allsec; and insurtech platform, which is MFX, our sub in the U.S. The insurtech business had excellent quarter with 10% quarter-on-quarter. More importantly, the nonlinear nature of business has led to margin accretion ahead of revenue growth in this platform. In the HRO platform of Allsec, the number of payslips processed per quarter has grown by 27% year-on-year and in Q3 about -- and back of 31% in Q2. We will continue to invest both sales and technology capabilities in this platform area, and we hope that this will expand as -- our margin in GTS for further over time. The fourth vertical under GTS is IT services. Our domestic IT services business saw a revenue growth of 70% year-on-year and 19% quarter-on-quarter, largely driven by multiyear large deal wins in our infrastructure management service business. In Q3, we closed 6 such deals, which is in our infrastructure management service business. Next, we come to OAM platform, where we have -- which has kind of returned back in terms of top line by 35% year-on-year. This quarter saw education sector coming back a bit to normal, which led to kind of recover food segment, leading to margin expansion. We continue to reduce our dependency on IT segment. We have exceeded pre-COVID revenues around -- during the Q3. Head count. Our head count also has come back to pre-pandemic levels to 50,000 plus in this space. We observed the growth in industrial, health care, BFSI and logistics segment. New customer acquisition continues to be strong. 22 new customers added in Q3. We have been aggressive in increasing our customer wallet with over 38% of IFM customers now using greater than one FM services overall, with the business seeing the kind of revenue growth of 14% quarter-on-quarter and 30% year-on-year. The business has made strides on efficiencies. Process digitization has taken our core to associate ratio up by 86 from 66 a year ago, and our cost to serve is down to 4.3% from 5.4%. Our security business has witnessed a recovery in Q3, and the head count has grown by 13% quarter-on-quarter. The revenue grew up by 19% quarter-on-quarter. Customer acquisition remains a strong space for us with 38 customers added. Our industrial business continues to see momentum on -- that's improved by outlook in metal and telecom sectors. Q3 revenue EBITDA were up by 15% and 36% quarter-on-quarter. Moving on to our emerging business, where last quarter witnessed significant progress. As I'm sure most of you have known and have gone through that Monster, our online talent platform, raised INR 137 crores at a valuation of $100 million. This represents 4x jump in valuation in 4 years. The participation from external investors is tremendous vote of confidence in Monster's ability to vision and building India's premier talent platform. We have received the first tranche of funds, and business will start deploying the funds from Q4 FY '22 onwards. Fund raised will be utilized largely towards product development, user acquisition and marketing. We would also like to reiterate that funds that are for growth are raised externally with Quess having an option to supplement with USD 5 million of our own capital. Once the turnaround is now resolute on a strong trajectory, sales and revenue has been growing linear for 4 out of 5 quarters and continued in Q3 clocking at 60% year-on-year growth with 20% quarter-on-quarter in this current year. The new customer acquisition is healthy as ever with 2,000 plus new customers added for per quarter for 3 quarters considerably and now running 2,500 new customer contracts. Key health indicators like recruiters and consumptions have shown greater than 50% improvement over the last quarters with trajectory continuing. Customer experience continues to improve due to the product improvement with CSAT topping up 80% mark, and top customer value retention is close to 100%. We are super excited about the potential in talent acquisition business and Monster right now to win in this exciting and fastest growing market. We continue to attract exceptional talent and have created right incentives through competitive ESOP program. Moving on to QJobs. We have built QJobs from scratch and been most efficient blue-collar platform in India. QJobs is optimizing by [ AdWorks ] algorithms for hiring ratios up to 20%, 25% of our key profiles. The proof of our hard work is in the numbers when a little over a year, such a launch, QJobs had 2 million downloads with 5,000-plus companies recruiting from -- offering for 1 million jobs. We are most proud of the industry-leading efficiencies that are delivering in recruitment process, and the sale is also being validated by exceptional NPS scores upward of 50 from users. We will continue to take long-term view in investing in growing this asset in which we are also seeing external interest from marquee investment partners. Next, moving on to QDigi. QDigi continues to deliver steady state on the core of B2B business while building the foundations for disruptive B2C journey. Q3 saw revenue growing by 14% year-on-year. Our B2C products business, launched under the brand Quess Care, continues to grow rapidly in back of innovative and competitive insurance products sold both in online and off-line channels. While the traditional B2B may likely to slow down due to ongoing Omicron wave, we continue to aggressively expand our B2C business, which has already crossed 100,000 warranty policies in this year itself. Being one of the largest domestic private employer, we take pride in being employer of choice. I'm happy to report that in recent survey conducted among -- I mean, employee satisfaction survey conducted, around 110,000 associates participated, 83% of respondent related themselves to be very satisfied or satisfied with Quess. Quess has also been reaffirmed as great place to work with better and above industry average for -- in a row of 3 now. So that was the overview of business. Let me close by saying we are optimistic in the times to come. As we continue to grow, our joint goal of hitting -- sustaining 20% ROE and -- while growing the OCF at 20% plus our OCF conversion of 70% is going to be paramount for us. We thank you for -- analyst, investor community for support and support to our institution. And now I'm handing over to Ravi. Thank you.

Thank you, Guru. Good morning, everybody. I hope all of you are keeping well and safe during the latest COVID wave and do pray that the pandemic is behind us. Let me walk you through now the financial performance of the company. Our overall revenue in Q3 grew by 14% compared to the previous quarter and grew by 31% on a year-on-year basis. All the segments posted healthy growth numbers with Workforce Management, Global Technology Solutions and the Operating Asset Management platforms growing by 24%, 18% and 35%, respectively, on a year-on-year basis. Our EBITDA growth has kept pace with revenue growth on a quarter-on-quarter basis. However, on a year-on-year basis, there has been some lag. This is driven by 3 factors: one, a change in business mix driven by faster growth in our lower-margin Workforce Management Platform than our higher-margin GTS platform; two, higher incentive cost than a year ago, some indirect costs coming back and heightened investment into growth areas such as QJobs and focused verticals such as construction, health care and manufacturing; and three, lower margin year-on-year in our facilities management business and Terrier businesses given the continued delay in pickup of IT and IT-linked verticals due to successive pandemic waves. We are working hard to increase profit share and hope to see improvement in the next couple of quarters. Consequently, EBITDA from operations in Q2 FY '22 improved by 19% on a year-on-year basis and 14% on a quarter-on-quarter basis to INR 179 crores, driven by GTS, which posted a 27% EBITDA growth on a year-on-year basis. The Operating Asset Management segment has also started to shake out its COVID-induced slowdown and posted a 27% growth in EBITDA on a year-on-year basis. 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 2.10 of operating cash flow. The equivalent number for the 9-month period is INR 3.18. This is a testament to the management's focus on driving strong operating cash flows of high-quality earnings. Segment-wise, some updates on segments, starting with the Workforce Management. Our General Staffing business continued to grow over 34% on a year-on-year basis, crossing the 270,000 mark. Professional staffing business has performed in line with our plans of increasing focus on higher-margin mandates and growing EBITDA by 53% on a year-over-year basis and 21% on a quarter-on-quarter basis. Training and skill development business continues to operate in a difficult environment. As reiterated earlier, our focus is to wind these down by completing our contractual obligations and driving collections. Coming to Global Technology Solutions. GTS continues to perform well. We continued to perform well in Q3 with the CLM business growing by 11% quarter-on-quarter and 26% on a year-on-year basis. The platform business, which is a higher-margin vertical, grew by 8% quarter-on-quarter. Monster, too, saw revenue growth of 9% quarter-on-quarter and 30% on a year-on-year basis on the back of strong hiring activity across the country. Moving on to Operating Asset Management. Our facilities management business grew 30% year-on-year with margins improving by 80 basis points as food business saw some recovery in Q3. Terrier revenues, too, grew 19% quarter-on-quarter as we saw some offices opening up during the quarter. SG&A costs as a percentage of revenue declined to 5.2% of revenue in Q3 versus 5.5% during the same quarter last year. The reported PAT in Q3 is INR 89 crores, an increase of 94% on a year-on-year basis. Coming to the current tax investigations relating to section 80JJAA. We are continually -- we continue to be in touch with the income tax department and furnished all the information that they asked for. We expect to hear from them over the next couple of months, and we'll keep the investors and analysts updated as this unfolds. On the balance sheet, as communicated during the previous call, our net debt position has increased slightly to INR 108 crores in Q3 as against INR 68 crores in Q2 '22. The increase is due to increased working capital to fuel growth. EBITDA from operations for 9 months remained at a healthy 80% with the growth that we are witnessing in our business. Corporate updates. We also increased our stake in Taskmo to 49% with an investment of INR 4 crores during January '22. On the corporate structure front, we continue to focus on our organizational structure. The process of simplification that began earlier continues to be in operation. So we kick-started a process to amalgamate 3 wholly-owned subsidiaries, namely MFX, Greenpiece and Conneqt, during July of '22 and is currently ongoing. We expect this to be completed in the next few quarters. Upon completion of this, we also plan to look at simplifying some of our overseas corporate structures to bring them in line with our current focus to simplify the structure across the group. We thank you all for your continued support, and I would like to now open the floor for questions.

[Operator Instructions] The first question is from the line of Mukul Garg from Motilal Oswal.

My first question is to Ajit. Clearly, the business is back on a high-growth trajectory. And it was nice to see no exceptions coming out this quarter. But at the same time, if you see the transition in the leadership, it was a little bit abrupt in the way -- at least it was visible to us. So if you can just help us understand a bit more in detail the factors which played out behind this transition. And a follow up to that for both Ajit as well as Guru. What are the key areas where you kind of seek to accelerate changes or transitions within Quess going forward to reach your goals at least over the next 1 year, if you can elaborate on that a bit?

Thanks, Mukul. So let me take the first part of the question. As we said, we've had progressive growth quarter-on-quarter in terms of our numbers, in terms of our reporting and in terms of how we're getting more and more market share. I must reiterate that we've been very happy with the way things were shaping. Our MC was coming together very well, and we have great camaraderie and kinsmanship at the senior level. I have no comments to make about the opportunities that Suraj will pursue in the future because that's a matter of an individual choice, and we respect those choices that he's making. We like to support him through the process of transition. And internally, too, he has been very supportive of getting Guru on the saddle. Guru, since he has been here for the last many, many years, knows the innards of the company better than anyone else here. So unlike a new candidate coming in to take the CEO's job, he needs no run-up time to it because of his familiarity with the issues, people, resources that we have, external entities that we connect with and most importantly, customers that we deal with. So we thought it's appropriate that he can get on with the job rather than having an extended period of overlap. But that does not indicate that this is kind of a sudden shift. We've thought about how to go about it smoothly. And we have both, from Suraj's side and my side, committed to ensuring that this goes through smoothly. On going forward from here, we are extending the story of transformation. We have reached a 20% ROE. We increased the visibility to the ROE 20% target that we have set. We've consistently delivered on our OCF to EBITDA conversion. On a 9-month basis, we're standing at an 80-plus number right now. So on an annual basis, we should be able to get to an annual target of 70%. We have also paid dividends this year. So from an overall standpoint of corporate actions, we are committed to continuing all of what we're doing right now. We believe there is an expansion possibility in our ROE over the next 3 years or so. So we want to spend some time to think about how that can be done. And when we are ready with the details, we'll come back to you with that. But clearly, nothing is going to change in the way we are approaching business. In fact, we will accelerate some of the initiatives that we're doing, particularly on the technology side. I'll just take a minute to expand a bit on what we're doing on the technology front. In every business of ours or every platform of ours, we will have separate digital plans, separate automation initiatives that we plan, specifically for Workforce Management, for our asset management business and for our GTS business. In technology, our guiding lights are 3 points. One is that it should be perfect. We should be able to compute wherever we want to, particularly because of the work-from-home imposition on our side now. Second is that we should data on a real-time basis, which means we should be able to connect through APIs into customer systems where required and pull out data both ways seamlessly to have data on a real-time basis. Third is we want all data to be device agnostic so that people can work on a computer, on a desktop, on a laptop or on a mobile wherever they are. So based on these 3, we are making our business -- this will not lead to the creation of more dashboards both for us and for our clients. So these are some of the initiatives that Guru will be particularly driving at an operating level.

Thanks. Just to add, Mukul, I mean, 2 years ago, we had gotten clearly on winning together as a team, and nothing changes from there. So our focus is going to be on investor, customer and people. So -- and as part of investor, all the commitments or all the strategies that we have will continue: ROE 20%, OCF and OCF conversion. So that's a carryforward for us, absolutely no division, no focus, no change on that. When it comes to customer, our focus is going to be on continue to stay a market leader in all the businesses that we have. So we'll continue to be there. We'll continue to stay focused on cross-selling, taking aggressive position there, plus strengthening our own sales team across. All of that is going to continue. Our delivery structure are going to get stronger backed up by technology platform. So that's going to be our primary focus on the customer. When it comes to people, again, focus on people, building leadership constantly because we have been consistent in getting our great place to work. So our focus will not change. These 3 elements are going to continue, and anything that we are going to do is -- will revolve around this. And our 3.0 version, we are now in making. So we'll -- I mean, as and when we are prepared, as Ajit said, we'll come out with more information on that.

Sure. Sir, I have just one clarification. Given that the growth is picking up so rapidly, are you seeing any signs of supply stress ex of the GTS business as you guys are -- we all are aware of what is happening? But in other businesses, is there some supply constraint or price increase coming on?

Okay. Let me start. I mean, the straight answer would be, we are not seeing much of a turbulence at the moment. We are seeing -- witnessing things to be steady state. So I mean, if you look at the number of logos that we have signed, almost 71 logos in Q3 for Workforce Management, 22 logos for the entire OAM platform and about 16 logos for the GTS platform, I mean, these are kind of reassurance because all of these will start getting converted into Q4 and Q1 for next financial year. And from that trajectory, we are really positioned well. So I mean, the second area that we thought is the Omicron wave is going to be -- we anticipated that it's going to be a little more longer. But I think shortening of that is also to our advantage. So I mean, these are a few indicators that we can see why Q4 and FY '23 has to be great or better for us.

Maybe at this point, we'll also get Lohit to just talk to us a bit about why he thinks -- what his comments are about the supply constraints, if any, in the staffing side. Lohit, would you want to just comment on that?

Yes. I hope I am audible. So just to give you a sense of what's happening in the market, this is the time when you'll see Quess winning more. Like Guru added, and I'll just add to that, we've just, in this quarter alone, added more than 70 customers. In this financial year of 9 months gone by in Workforce Management and GTS, particularly, we've added about 177 clients. This is 2x the number of new customers added in the last financial year. So 2x customers already added in 9 months what they were added as new customers in the last financial year. However, one caveat here to note, and we've been consistently saying this, that the order size and the mandate size from each new customer, because of the various waves of Omicron and before that Delta and the first wave, are slightly lower than what it used to be. Traditionally, Quess General Staffing has, on an average, 300 associates deployed with each client. Whereas with the new customers, we are still at 101 associates deployed to each client. The point I'm trying to make is we are already 11% over our pre-COVID numbers in the Workforce Management business. So we've recovered from that point of view, but the deal is coming with lesser number of head count. Now to antidote that point on the supply side that you have mentioned is where QJobs is a great investment. While Quess had 122 training centers which were attracting and mobilizing talent, we had 65 offices which used to attract and mobilize talent. But we realized that the size of the physical infrastructure also came to a standstill because of the lockdowns. And that's when QJobs was born. The first year of QJobs did 1 million. The next 80 days did another 1 million, and now we are run rating of close to adding 1 million every 45 to 60 days. And that's where our supply side will also get taken care of. I must end by saying QJobs is not just what Quess has created. Government, including state and central government, is partnering with us. Google has partnered with us and has given us a real-time API to feed talent into QJob ecosystem. And at the same time, customers have also started taking talent from there. So many of these things are strengthening what QJobs can offer. And many of these things will eventually take us to a point where we'll not have a supply side issue. I hope that answers the question that you had.

Suraj, thanks a lot for helping out over the last 2 years. Best of luck for your future endeavors.

[Operator Instructions] The next question is from the line of Jasdeep Walia from New Mark Capital.

Sir, what's been the negative impact of training and skill development business on your margins on an absolute basis for this quarter and for 9 months this year? And also, if you could talk about the negative impact of food services business on your margin for this quarter and the 9 months.

QJobs?

No.

TSD?

Food business.

Okay. The TSD business kind of just about broke even in Q3. And for the year, I'll -- just give me a minute. I'll -- for the year, again, it's been at a kind of a breakeven to a slight negative for the year so far. We've just about been able to keep our head above the water as far as the TSD business is concerned. And as far as the food business is concerned, the first 2 quarters are a complete washout for us. And the food business just came back very, very marginally with the total billings in the food business about INR 4 crores. Same about Q3.

Got it, sir. And what's the impact on EBITDA of food services business for this quarter and 9 months?

The food business, I mean, like I said, is about INR 4 crores for the whole -- I mean, it was almost a nonexistent food business for the 9-month period. And you could just say that the impact would be about INR 4 crores. I mean, the impact would have probably been much more because even the previous year, the food business never came back. So I can't really compare it to a previous year's number here, pure industry.

Sir, what are the losses in this business for 9 months?

There was not -- I mean, the losses would not have been there because overall, this is part of the OAM platform. So we really can't -- I mean, I can't really work the losses there, but the gains can actually be -- we computed and actually told you.

Got it, sir. Got it. And sir, at what level do you expect margins to stabilize in your Workforce Management business once the training and skill development business comes back?

I think the current margin -- we had alluded to the -- at the end of previous quarter, we said the previous quarter's margins are indicative of what the long-term margin in the business would be like, which is at about 3.3% is what we have said. So I think we will continue to hold that. The fact that between -- I mean, we will continue to maintain a 3.3% to 3.5% kind of margin in the Workforce Management business, steadily inching up to about 4% over time.

Got it. Sir, if the training and skill development business comes back and you're able to change the mix to cater more towards the private enterprise rather than the government, don't you think margins can come back to the earlier levels of around 5-odd percent?

While we are making efforts to compensate for the loss of training -- I mean, the loss government business with corporate business, I don't think we will be able to have a one-on-one replacement there. And we don't want to really put a -- while we are making all efforts to include the corporate training business, our margins will improve. And as they improve, you will see the benefits of those increased margins in our Workforce Management's overall profitability, Jasdeep.

Got it, sir. On a pre-COVID basis, what was the top line and EBITDA of training and skill development business on an annual basis?

Pre-COVID, we had -- the total EBITDA was about INR 17 crores for FY '20.

Got it. And the top line, sir?

Top line would have been about INR 100 crores plus -- I mean, yes, about INR 150 crores.

The next question is from the line of Nitin Padmanabhan from Investec.

Congratulations, Guru, on the elevation. And Suraj, you will be missed.

Thank you.

Broadly -- yes. So on the workforce management, just wanted your thoughts on the margin aspect here. It's been sort of trending down. Specifically for this quarter, were there any specific pass-through? Or how should we really think about margins in this business overall? You did suggest 3.3% to 3.5%. But more specifically to the quarter, I just wanted to understand what the moving parts are and what's driving the related softness.

Sure. So Nitin, there are 3 parts to it. One is TSD obviously overshadowing a bit there, which we are partially downsizing. So that's one which we have already taken as part of the margin mix here, and that's impacting to EBITDA. Beyond that, we are also investing a lot on future revenue streams. So one is as part of workforce management into construction, and we have added more sales fleet to VAS business, value-added services, which is our work and the outcome-based project, the field force project, plus M&I, manufacturing and industry. So we are putting -- we are setting up the sales team and the operations team to carry on operations and slowly start carving it out as a vertical under workforce. So these are few investments that we have made, which is the cost coming into Q3 onwards. And I mean, beyond that, there's some very slight catch-up of cost that has come into Q3. But otherwise, I mean, it largely comes from the investments that we are making where the costs are slightly going up. Maybe you want to add?

Yes. The Q3 numbers for Workforce Management, Nitin, included some catch-up of costs for Q1 and Q2, which is why I said the Q2 numbers that we had, let's say, put out, the 3.3%, is a number that we would be able to sustain going forward. So we are absolutely clear the 3.3% is a base at which we would be -- like to be building the margin up from. So I hope that explains your question.

From a margin perspective, I mean, you should estimate this as the base and then work accordingly. That would be the right approach as of now.

Sure. Just one follow-up. Sir, you mentioned value-added services and investments in sales. Just wanted your thought process there. So at least in the past, I remember we had Dependo, wherein I think for Amazon, we were doing end-to-end on the delivery side. We moved out of that. Just -- so does this -- is this initiative something similar for other industries in terms of what you're trying to do? And is there any risk that -- I just wanted your thought process because of the early experience in terms of risks in the approach. Just wanted your thoughts, yes.

Not really. So let me give more clarity on this. So I mean, there are 3 segments that we are looking as part of adjacencies in business and the workforce. First of all is into manufacturing and industries. Again, these are pure-play staffing kind of engagement, right? So I mean, with the PLI schemes coming in and manufacturing activities getting intensified, you need a very unique proposition from hiring to deploying people there. So we are working out an end-to-end labor force management, starting from sourcing them and ensuring they're staying in place and the dormitories are taken care. And that also gives adjacent business to Quess within Workforce Management and -- I mean, facility management and food, and then deploying these people on pure-play staffing model. So if you look at it overall, it's a staffing model, but it needs a little more concentration because these units are in specific clusters and zones. And the entire sourcing capability has to be built accordingly. So that's the kind of activity, what we would be doing in manufacturing. The second area is when I talk about value-added services, a, we deploy people. And for our customers, along with people, we also deploy a platform to monitor them, starting from capturing their attendance, capturing the kind of pass that they do on a bonding -- traveling check-in to checkout time line. So I mean, this goes as a value-added services to customer where we charge a premium on our services. So that, we start measuring separately by revenue that we generate through digital assets over a period of time. So that's the intent there. So VAS will bundle along with our services and start getting deployed in the market. And when it comes to construction, again, it's clearly workforce management. Again, it's a very different area altogether. We have just started our first pilot project and through which we are now ramping up slowly. I mean, this -- I mean, all these projects would be taking some time. It will take at least 3, 4 quarters for us to bring it to a kind of separate P&L and all of that. Till such time, it will be part of workforce and we'll be building this as a future vertical. So -- but all these are pure-play manpower business, if you look at it. It's just staffing.

We'll move on to the next question. That is from the line of Ratish Varier from Sundaram Mutual Fund.

First of all, congrats to Suraj on a good performance for the last 2 years, right? And all the best for your future. And we're a little disappointed, right? We thought that you are there for much more longer term. And then congrats to Guru for the elevation. Just Ajit and team, I have just a couple of quick questions. The first question, you alluded a lot about strategy being continued. So a little bit, can you talk about capital allocation over the next 2, 3 years, the cash flows, what we will be generating? So what all investments are still left in digital initiatives or various subsidiaries? And any kind of capital allocation policy we are looking at? That's one. And second, more from the team, top management side. Last 2 years, we have actually streamlined the organization, having various heads, et cetera. How do you make sure that whatever our strategy in place, how that gets executed for a much longer period because there's more of people facing organization? So at the top, how do we make sure that the attrition is low?

Sure. So let me take that, Ratish. First is about our capital allocation policy. We have a published capital allocation policy where 1/3 of the free cash that we generate will go to funding internal growth, 1/3 for dividends and the 1/3 that's left, for acquisitions, if we don't -- over a period of 3 years' time. So in case we don't do any acquisitions, the money will come back to the Board, and then we give it back to shareholders. So our focus is clearly not losing all the cash that we generate to any more acquisitions for the future but to return to shareholders as and when we get the opportunity. When we do an acquisition, we will only look at adjacencies to current businesses that we are present in. We don't intend to get into any new lines of business. We've built 3 platforms with the capital that we raised in the IPO. We're happy with the assets that we've got. Our focus is on building them organically. If there are any tuck-ins that's required for either specific technology, geography or a service line that is very small in nature, we may look at something of that type. But we don't have anything in the pipeline right now. So that's what we will look at. On the technology side, we will come back to you with a more studied proposal on how we intend to bucket the digital assets we've got. We are looking ourselves as an investor in that we will grow value in them with separate teams. Teams are incentivized to run them on the basis of ESOPs. There will be start-ups within our company. They will be creating value, hopefully, in the time to come. And that value, we will return back to shareholders. So we have 3 or 4 of them right now, which are maturing well. Monster, as you've seen, we've demonstrated that we can create some value there. QJobs has got 2 million downloads and is on the cusp of building out an organization that will help with the go-to market. We have another company where we have an investment in excess of about 50% called Taskmo, which has now grown substantially since the time of investment. And you'll hear positives in the next, let's say -- in a few months' time as we get ready with some fundraising. So our capital allocation policy will stay within what we've communicated to the markets. It will not go outside the 20% ROE standards that we've set for ourselves. And on the second question, about management team and the execution, as you've seen now, Guru has been here for 14 years. Most of the members of the MC, Lohit has been here for about 10, 12 years. Pinaki was the first-time appointee to that position as the President of GTS. Our Head of the Emerging Business Group is again the first-time appointee to that. So we've not seen attritional at those levels. And we think that these are individuals, professionals with a lot of skin in the game in terms of the independence that they have in running it. They have contributed to the team through their performance and also the way that they come together at the MC to plan and to deliver for the company. So this has been the positive outcome over the last 2 years of working with Suraj, and we think this will continue. We also have set some stock option policies that has been -- grants that have enabled all the individuals to attain grants that we believe will be substantial in the future. So at the top level, we are foreseeing a level of consistency ahead, and we are hopeful that our execution will continue to plan.

Just one quick follow-up on this Monster and other QJobs. We will not require any kind of further investments there, right, in Monster?

So we've got Sekhar, who heads the business. And Sekhar will just now address you, Ratish.

Ratish, this is Sekhar here. On Monster, in the current round, we have an option for Quess to participate. At this point in time, in the first tranche of funds that we have received, these are all 100% coming in from external investors. What we are noticing is a significant interest from rest of the investors with whom we had active conversations to come into the round. So at this point in time, we believe Monster is adequately capitalized for the path of growth that we set ourselves on. And we have more investor -- external investor interest than the capital that we can take into the [ form ].

Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Guruprasad for his closing comments.

Thank you so much. On behalf of the entire management team, we are quite optimistic about the future and the times to come. We thank the analysts and investor community for all your support and -- to our institution. Thank you so much and look forward to interact with you all more. Thank you.

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