Quess Corp Limited (QUESS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Quess Corp Limited Q3 FY '24 Conference, hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference to Mr. Balaji Subramanian from IIFL Securities Limited. Please go ahead, sir.

Ladies and gentlemen, good morning, and thank you for joining us on the post-results conference call of Quess Corp. It's my pleasure to introduce the senior management team of Quess who are here with us today to discuss the results. We have Mr. Guruprasad Srinivasan, ED and Group CEO; Mr. Kamal Pal Hoda, Group CFO; Mr. Kushal Maheshwari, Head, Investor Relations and Strategic Finance; Mr. Lohit Bhatia, President, Workforce Management; Mr. Pinaki Kar, President, Global Technology Solutions; Mr. Anand Sundar Raj, President, OAM; and Mr. Sekhar Garisa, President, Product Led Businesses. We will begin the call with opening remarks from the management team. And thereafter, we will open the call for a Q&A session. I would now like to hand over the call to Mr. Kushal Maheshwari to take proceedings forward. Thank you, and over to you, Kushal.

Thank you, Balaji. Just wanted to check with the operator, again, if everyone has been able to log in into the con call? Aditya, can you confirm to me?

Yes, sir. Yes, sir. 86 participants have been connected, sir.

Thank you very much. We'll proceed with the call. Good morning, everyone, and thank you for joining our Q3 FY '24 earnings call. The information, data and outlook shared by the management during the call is forward-looking, but subject to prevailing business conditions and government policy. All forward-looking statements are subject to economic growth or other risks faced by the company. Please refer to Slide #2 of investor presentation for the safe harbor clause. With that safe harbor, I will now hand over the call to our Group CEO, Mr. Guruprasad Srinivasan for his opening call. Over to you, Guru.

Thank you, Kushal. Good morning, everyone. Thank you for joining us today and hope 2024 has been a great start for all. For Quess, profitable growth and consolidation of operations continues to be the key theme for the year. Our efforts in this direction has been showing results. During the last 6 quarters, though the revenue has grown by 13%, EBITDA has grown by 34%, achieving a nonlinear EBITDA growth during the period. During the quarter, we added over 10,000 associates and closed the quarter with a total employee strength of 557,000. The hiring environment was positive in industrial, BFSI, retail, telecom. And 2 specific sectors, e-commerce and FMCG, saw a net headcount decline as festival season concluded in Q3. IT/ITES still continues to be impacted by global headwind. Our sales engine continues to deliver, adding 170 new contracts with annual contract value of INR 416 crores, setting us up well with growth in the coming quarters. We also took a significant step towards streamlining our corporate structure. As part of our simplification of corporate structure, Conneqt, Greenpiece and MFX India business is amalgamated into Quess post NCLT approval in Q3. In addition to this, Quess has invested in Heptagon Technologies. Heptagon drives solutions to develop system and create sustainable impact on digital trend for business enterprise such as product engineering, UX-as-a-service, intelligent automation and managed services. Conneqt has a digital practice for enterprise applications. And combination of Heptagon and Conneqt digital practice will strengthen our market results and a joint go-to-market in digital sales under GTS platform. Key financial highlights. We recorded a revenue of INR 4,842 crores, a growth of 2% quarter-on-quarter and 8% year-on-year. EBITDA stands at INR 181 crores, growing up by 11% quarter-on-quarter and 24% year-on-year. EBITDA margins have improved by 29 basis points quarter-on-quarter and 48 basis points year-on-year. This was driven by consistent profitability growth in GTS platform. Our cash burn in terms of foundit reduced by 50%. Focus on profitability growth in OAM platform as noted. Let me walk you through the business updates for -- and Q4 focus areas. To begin with Workforce Management Platform. The headcount of the platform reached 444,000, which also includes about 34,000 headcount, which was processed in the month of December as part of full and final, adding a net of 14,000 associates during the quarter, driving the increase in revenue by 3% and 1% year-on-year. Revenue growth from work force is driven by wage increase and sales growth with a mix of 70:30. And most of our contracts are flat fee, which also puts pressure on the margins. We remain confident of our sales engine to drive growth. The platform added 87 new contracts during the quarter. Sourcing contributed to 28% of new hiring. Our General Staffing business placed 62% of associates hired in Tier 2 and Tier 3 cities, once again signifying the depth and breadth of our sourcing capability and deployment capability. Now moving on specific to the General Staffing business. We added 13,000 headcount during the quarter, led by manufacturing and telecom and BFSI sector. Over 30% of our new contracts added in Q3, the staffing -- I mean, of the new contracts added in Q3, 30% of our new clients are first time getting into the staffing outsourced mode, validating the long-term trend towards the outsourcing. So we are seeing some level of consolidation and movement from informal to formal. Our vertical-focused strategy has continued to yield dividend, which headcount growth in manufacturing and BFSI stood at 8% each on quarter-on-quarter basis. The momentum is expected to continue in Q4 and BFSI and manufacturing account for almost 18,000 open mandates out of total open mandates of 28,000 as of 31 December. In addition to business -- I mean business has built up scale in terms of the pipeline. Our pipeline is almost about 39,000 for -- stands at 39,000 for Q4, which will drive the headcount over next coming quarters. In order to pick the advantage of the market opportunities, we continue to invest in our sourcing, account management, and new verticals. Specifically, retail and logistics will also operate as a separate vertical from Q4 onwards. As a result, we have seen a marginal decline in associate to core ratios based on the investment that we have made. However, our core to associate ratio still remains best-in-class. IT staffing business. The Indian IT staffing and collection business continues to remain impacted by global headwinds. Current open mandate stands approximately about 1,200, a drop of 16% and 31% year-on-year. Focus continues to be on niche profiles, GCP, BFSI, digital, and maximize our margins. So those are our specific focus areas. Moving on to Global Technology Solutions platform. GTS continued its growth trajectory, delivering a nonlinear EBITDA growth of 3% quarter-on-quarter and 19% year-on-year. EBITDA margin continues to move up, increased by 220 basis points year-on-year and 48 basis points quarter-on-quarter, demonstrating both economies of scale and positive momentum towards higher value of services. The highlights specific to GTS platform are as follows, starting with the Conneqt Business Solutions. Conneqt continues to maintain its momentum with 16 new client additions. The business closed an order book over an ACV of INR 110 crores during the quarter, implying sustained revenue growth in coming quarters. In GTS subvertical, BFSI accounted for 35% of total annual contract value added. We also saw encouraging green shoots in auto, retail, and consumer goods sector. Consistent focus on execution has led business to be consistently ranked first or the second amongst the partners where clients have onboarded multiple partners. Business achieved the highest ever NPS in our leading customers, are achieving an NPS of about 65 from an earlier score of 33. Our non-voice BPM business grew significantly with collection business growing 25% year-on-year, and F&A transaction processing business growing 29% year-on-year. The nature of this business has been one of the key drivers for margin enhancement of GTS platform, and we will continue to invest in our digital solutions to create market-leading solutions and platforms. The growth momentum in our customer experience business in Allsec continues to win about 21% year-on-year growth. This was driven by 30% year-on-year growth on international businesses with significant growth in both #1 and #2 clients. The CXM business -- I mean, the significant growth on #1 and #2 customers in the CXM business by revenue. In platform-based services, the employee experience management vertical in Allsec continues to strengthen its market leader position with 4 million pay slips processed during the quarter, a quarter-on-quarter growth of 4%, and the vertical added about 18 new logos in Q3, driven by BFSI, ITES, which demonstrates a robust pipeline of almost about INR 30 crores for Q4. One key highlight of CXM business growth in the quarter was high order booking in international business compared to the domestic business. Going forward, the focus remains on the following: AI-based automation. Our BPM business is currently running 10 AI format engagements with clients. We will focus on expanding the same. International sales. CXM vertical in Allsec on back of encouraging international sales have tied up with solution partners in global markets to further enhance the growth. In International CXM business, growth momentum is slated to continue in Q4 as well, leveraging the further revenue realization from leading North-American customers. Growth in digital and IT services, 5 new customers were signed up with an ACV of INR 21 crores, signing digital services in UX/UI, core ERP and CRM systems. Moving on to operating asset maintenance. Profitable growth remains the key theme for the quarter. As a result, even though the top line growth has been flat, platform's EBITDA grew by 4% quarter-on-quarter and 16% year-on-year. IFMS added 15 new customers during the quarter. Additionally, 13 contracts with ACV of INR 75 crores are expected to be mobilized in Q4. We are seeing green shoots in health care, manufacturing, infra, and we'll continue to focus on same sectors. Food and beverages saw a gross margin improvement of 18% quarter-on-quarter. The improvement in gross margin has brought in by improving operational efficiencies and mobilization of contracts won during H1. The focus areas for Q4 would be adding new clients in order to set the base for next upcoming financial year. Security Services added over 1,300 headcount in Q3, led by infra and manufacturing segments. As a result, the business saw a revenue growth of 4% and EBITDA growth of 9% quarter-on-quarter. Our sales pipeline remains strong, and business will continue to hedge at present rate. Telecom Active Infra business continued its good run with best ever YTD revenue and EBITDA. 9 month FY '24 revenue and EBITDA have shown a growth of 33% and 41%, respectively. The business was awarded a significant 4G rollout contract with an ACV of over INR 90 crores, for which the deployment will start from Q4. Moving on to the Product Led Business. Foundit had a great quarter on the business and the product front. The sales grew by 9% year-on-year by the enterprise sales in India, despite continued slowdown in IT, which is a major contributor to our business. We successfully launched disruptive AI product, foundit 2.0 for 550-plus customers. Initial feedback has been very positive, and it has been acknowledged as best in class. We expect to roll out the same for every customer by end of Q4. Despite market headwinds, our operational metrics on both candidate and recruiter side remains positive, with job postings up by 7% year-on-year and 6 month active users by 22% year-on-year. CSAT continues to remain healthy at 91% with -- CSAT remains healthy at 91%, while NPS scores are at all-time high, reflecting the improved product. EBITDA achieved is as per plan in foundit, remains on course to deliver breakeven by Q4. Moving on to general updates. As we have communicated often all public forums, including our quarterly call, our employees are our greatest assets. Their well-being is always on top of our mind. It gives me immense pleasure to inform you that Quess has been certified as a great place to work for fifth consecutive year. Our score in the survey has improved from 73 to 87 in the past 5 years. GPTW survey has also recognized Quess as a leadership factory, acknowledging companies that have successfully established a culture centered around fostering exceptional leadership abilities on large scale. This recognition signifies the entrepreneurial spirit within the organization, strong HR process, and a modern inclusive culture. So this was the update. I will now hand over the call to Kamal. Over to you, Kamal.

Thank you, Guru. Good morning, everybody, and thank you for joining us today. I extend a very warm welcome to everyone who has logged into this call. I hope you had a chance to look at the investor presentation and financial results for quarter 3 uploaded on our website. Let me now walk you through this quarter's financial performance. Revenue for the quarter stands at INR 4,842 crores, a growth of 8% year-on-year and 2% quarter-on-quarter. Our headcount stands at 557,000 as of December end, a net addition of 10,000 quarter-on-quarter, with key contributing sectors being BFSI, M&I, retail, telecom, and health care. Our EBITDA stands at INR 181 crores for the quarter, a growth of 24% year-on-year and 11% quarter-on-quarter. EBITDA margin stands at 3.7%, a growth of 29 basis points quarter-on-quarter. This increase was driven by the following 3 points: reduction of marketing and product development spend as per plan in foundit, nonlinear growth in profitability in our GTS vertical, and improved margins due to business mix in OAM vertical, and volume growth and controlled cost to serve. Profit after tax decreased by 10% quarter-on-quarter to INR 64 crores due to exceptional noncash write-off for goodwill of approximately INR 20 crores in one of our technology businesses. Excluding above one-off, our adjusted PAT stands at healthy growth of 15% quarter-on-quarter at INR 84 crores. Our commitment to cash management and debt repayment continued in the quarter with gross debt reducing to INR 419 crores, lowest in last 10 quarters, with a reduction of INR 53 crores during the quarter. Our DSOs reduced by 1 day compared to September '23 and now stands at 55 days. Moving on to platform-wise update, starting with Workforce Management. Revenue stands at INR 3,430 crores, registering a growth of 12% year-on-year and 3% quarter-on-quarter. Growth is predominantly in general staffing business with key sectors being manufacturing, BFSI, and retail. IT staffing and APAC professional staffing have remained muted over the last few quarters due to global headwind; however, we have ensured to mitigate such downturns through cost actions. EBITDA has seen a sequential growth of 3% quarter-on-quarter and 4% year-on-year at INR 90 crores. EBITDA margin percentage has seen a nominal 2 basis points decrease quarter-on-quarter due to cost pressure on account of wage inflation with flat margins in General Staffing businesses. The business continues to focus on increasing wallet share of value-added services in platform to offset the inflationary pressures. Moving on to GTS. GTS platform clocked a revenue of INR 588 crores for the quarter, an increase of 5% year-on-year and 1% quarter-on-quarter. Growth in revenue in this vertical has been challenging in this quarter due to muted investment in technology companies. EBITDA stands at INR 108 crores, growth of 19% year-on-year and 3% quarter-on-quarter. Non-voice services and improved international mix in new sales of EXM vertical along with cost efficiencies from merger of Conneqt business has aided to increase in overall profitability. Good order pipeline in Q3 across CLM, infrastructure and digital IT services, including few from Middle East gives us confidence on growth and margin profile moving into Q4. Moving on to Operating Asset Management. Revenue clocked INR 695 crores for the quarter, a growth of 1% year-on-year and a degrowth of 1% quarter-on-quarter. Revenue growth saw some challenges due to rationalization of few large accounts with low margins. Pipeline for Q4 is promising and we are confident to bounce back as focused investment made into key sectors will yield results as we move forward. EBITDA for this platform stands at INR 36 crores, a growth of 16% year-on-year and 4% quarter-on-quarter. Margin increase is aided by business mix case led by food and telecom businesses, including few customer margin initiatives taken across the platform. Moving on to Product Led Business. Revenue clocked for the quarter is INR 129 crores, a degrowth of 13% quarter-on-quarter. While foundit sales have grown 9% year-on-year, our basic business has seen some degrowth as quarter 2 revenues were higher in spare servicing revenues booking due to seasonality. EBITDA losses excluding ESOPs reduced by INR 10 crores quarter-on-quarter and now stands at a negative INR 6 crores. This is largely driven due to reduction in marketing spend in foundit, a step closer towards breakeven by end of financial year as per our earlier guidance. Moving on to some tax updates. There are few developments in the tax matters from the last quarter. For financial year '17-'18, our appeal is at ITAT and next hearing is expected in April 2024. For financial year '18-'19, against the final order of the assessing officer post DRT, the company has filed an appeal in ITAT and next hearing is scheduled in the current month, February 2024. For the year '19-'20 and '20-'21, the tax office had proposed a special audit in line with the previous 2 years. However, based on factual representation, the same has been dropped and the draft assessment order has been passed. The company has filed objections before DRT against all these adjustments proposed by the tax office. With this, now I open the floor for any Q&A.

[Operator Instructions] Our first question is from the line of Balaji Subramanian from IIFL Securities.

Congrats on a good set of numbers. I have a couple of questions. Firstly, there has been a 30% -- 30 basis points Y-o-Y EBITDA margin improvement driven by OAM and GTS platforms, while the PLB segment losses have come down, which is again in line with your guidance. Could you give some more color on what drove this? And how should we think about it going forward? The second question is on the focus on manufacturing and construction vertical which you have highlighted in the past. Could you share some update on how your headcount has trended just in these two verticals in the last couple of years? And how do you see this panning out in the future?

Sure. Let me take the first question on margin. So yes, we have been -- it's really -- we are able to scale the margin level up. There's a couple of contributors to it, starting from, first, the reduction in terms of the foundit burn has really pushed the margin percentage up for Q3 specifically. We were about 3.4%. From there, we've come to almost about 3.7%. There are a couple of more things that we are doing in our organization in terms of the tight control on cost to serve, which means the productivity or the efficiency is being measured and we are ensuring to ensure that the cost to serve is kept right. If you look at it, it is also reflecting on our OAM platform. So from around 4.3% at a platform level where we used to deliver, we have just delivered about 5.2% EBITDA. And of course, there is definitely scope, specifically in OAM, for a little more room to work on the margin there. The other contributor to this is the nonlinear growth or thesis of nonlinear growth coming in from GTS. So GTS has an efficiency to release higher margins compared to the revenue growth rate. So that is really playing in now. And I think if you look at the kind of additional growth that is happening in non-voice business, which is also a high-margin business, which has grown by 25% year-on-year. So 3 more aspects, just to summarize. One is reduction in foundit; second, tighter control on our cost to serve; nonlinear growth coming in from our technology business; and the mix change in OAM, which is contributing to a betterment of our -- or increase in our margins.

Request Lohit, if you can give some color on the two verticals that Balaji has inquired about, manufacturing and construction. Over to you, Lohit.

I hope I'm clear and audible. So thank you very much for that question for WFM. To your specific point on M&I or the manufacturing segment and the construction segment, we are closer to the 70,000 mark today. This is a growth of about 34% to 38% year-on-year in the last year and 46% in the prior year. In fact, since December '21, this entire segment has grown by almost 130%. This has become the third largest segment for Quess Workforce Management today after BFSI and Retail. In the times to come, the way we are looking at manufacturing, there are a couple of things that I just wanted to add here. Number one, the transition of India from only a services economy to services cum product and manufacturing economy. Second, aided by informal segment transitioning quickly to formal. The transition of rural India to urban India and to formal jobs. This along with the PLI scheme and the kind of benefits and aid that the government is pushing as far as infrastructure development is concerned, for us this is a segment to watch, not just for this quarter, next quarter or 1 or 2 years, this is a segment to continuously keep watching for at least a decade as far as India is concerned. So we feel that this is an area that we need to deeply invest. We have invested in sourcing and technology, and that is something that we will continue to do. I hope that answers the question.

Our next question is from the line of Kavish from B&K Securities.

I have a few questions. So we have reported and continue to improve our strong margins on the GTS space. So can you elaborate on whether we have reached peak levels here or we can still grow? So what is the 2- to 3-year thought process here?

Thanks for the question. This is Pinaki here. Am I audible?

Your voice is slightly muffled. Yes.

Yes. So you know, the results that you have seen, that's part of a well calculated strategy and execution. If you go back 14 to 15 quarters, just to show we have been sustainable, we always remain within a band from 16% to 18%, which is a 200 basis point. So that question like 3 years back, we were at 15%. What we did was that we had optimized the cost structure, which is coming in and the operating efficiency, the normal thing, right? So that helped us to have [indiscernible] . But what is balancing the incremental another 200 basis points have been mainly the changes of business mix towards higher value-adds. They are only 3 aspects, right? The largest factor is the if you see the movement from domestic to international. So these are the three components mainly in GTS. The Conneqt which is mostly domestic. Then there is Allsec, which at that point of time was 50% domestic, 50% international. And [indiscernible] will be 100% domestic. So what has happened over the last few quarters, both Conneqt Digital as well as the Allsec increased the CXM business. The growth has been disproportionately high on the international segment, which has higher realization as well as higher margin profile than domestic. And the EXM like if we get into that [indiscernible] it used to be 100% domestic. Last quarter, from an ACV booking perspective, for the first time, that was 55% international, 45% domestic, which is [indiscernible] for the quarter. And another changes or mix for the platform has been in the CLM, both voice and non-voice. If you see Conneqt, Conneqt will have around 42% to 43% voice business, 57% to 58% non-voice business, where collections obviously have been a major part as well as the international BPM part. And both collections and F&A, BPM had 25% and 28% growth rates respectively, which is higher than the voice business for us. So it is in terms of the [indiscernible] the efficient cost structure, change in business mix, and obviously a much bigger push towards international North American business. I hope I was able to answer your question.

Yes. Secondly, we have also reduced our losses in the Product Led business, especially foundit. So we do remain on track to achieve breakeven by the end of the year or, say, early next year, right? And the last question is, can you elaborate on the impairment taken this quarter?

I'll ask Sekhar to speak on foundit and give us color on the performance.

Yes. On foundit, we have stayed on track on our plan that we shared with all of you about three quarters back that as we go through the quarter, we'll continue the investments in product and marketing, which will taper down to the second half of the year once the product launch happens, which happened in the last quarter. And the revenue will continue to grow irrespective of what the external environment is, which is what is playing out. So from Q2 to Q3, the operational burn in the business has come down by more than half, and we are well on track to meet our projections or outlook that we've shared, which is close to breakeven for Q4. Thank you.

On impairments -- good morning, once again, Kamal this side. So the impairment represents the noncash charge on goodwill, which was part of the original investment done by Quess in Heptagon. Guru did cover in his speech about the internal restructuring and the business contracts and employees of Heptagon, which is a subsidiary of Quess being innovated and transferred into Quess, and the synergies of Conneqt merger and then combining these contracts, which has led to this non-cash impairment, which is a one-time noncash charge.

Kavish, hope this answers your question?

Sure.

Our next question is from the line of Raghuram N.S.S. from Eurindia Ventures.

Yes. Hello. Am I audible, please?

Yes. You are.

This was regarding the CXM and the EXM business that you guys have really now focused a lot of your management attention on. The CXM business, obviously, I do allude to what Mr. Pinaki Kar also mentioned that there is a huge amount of growth on -- or focus on growing the international business. So is there any ACV kind of data that can be shared on what has been the total ACV booked in the last 2, 3 quarters? And very similar, I think I heard about INR 30 crores of ACV being booked in the Q3 quarter. And what would be the kind of growth that can be expected in the EXM business also?

Raghuram, thank you for the question. Pinaki here taking this. So like INR 30 crores that was the EXM business. And as I told you that 55% of that was international for the first time compared to domestic. If you look at similar numbers from the EXM business, what has been booked without giving will be like forward looking in terms of [indiscernible] book-to-bill, which is there is another 4-5 [indiscernible]. And it is mostly international, so 90% of this is international. So from that perspective, I'm just correlating to that we have consistently in the last few 3-4 quarters of 30% growth in the international business in Allsec in terms of revenue and with the current book-to-bill ratio that we have, so I think [indiscernible] we should be able to maintain that.

Also, just to add, Raghuram, specifically for EXM, the sales cycle is generally between Q3 -- Q2 and Q3. So I mean financial year and calendar year beginning that's when the large transmissions happened in that space in terms of the employee records and all of that. So generally, Q1 and Q2 is -- I mean, generally, Q4 and Q1 is slightly lower.

Okay. No, I thought in India at least, Q4 is pretty large in terms of...

See Q4 -- I mean, those sales cycles would have got closed in Q3. So I mean, we would be getting into the migrations in Q4.

Okay. Okay. So how does this compare with last year? If you can please share that kind of thing? The INR 30 crores, is it comparable? Is there a growth as compared to last year same quarter?

It's around 45% more than last year comparable.

Okay. Mainly driven by, as you mentioned, international business?

Mainly driven by international as well as the number of clients and the -- average ticket size as well as the number of clients that have got opened up in the last 3 quarters on the EXM side. Whereas on the CXM side, it is mainly driven by two or three large accounts, where there have been opportunities which were [indiscernible] .

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

Yes. I hope my audio is clear. So obviously, to start with, I think, great work on the PLB business. It looks like you guys are on track to breakeven next quarter. So great execution there. Just two questions from my side. First on the Workforce Management Business. How should we think about avenues for margin improvement there? Especially on the core side, while you guys have been trying to take action, and I understand there are limitations because of fixed price contracts, but the core to associate ratio has been trending downward. So do you see any low-hanging fruits there which can be kind of plugged over next few quarters to improve the profitability? And on the client side, are you kind of trying to increase the average pricing, which can help you improve the profitability there?

I'll ask Lohit to answer your questions.

As far as WFM margins are concerned, Mukul, we're currently at about 2.6%. About a year back, we were closer to the 2.8% mark, but that was about 12 months to 15 months ago. WFM primarily has three large components today. There is WFM India General Staffing business. As you know, it has 70% of the book is a flat service. And every time the revenue goes up or the wage inflation goes up, unfortunately, in a percentage term, the margin comes down, though rupee terms, the margin accretive is better than before. The second element of WFM is the professional staffing or what we call the IT business in India. And the third element is the overseas business. Last 12 months to 15 months has also seen a decline as far as the trend in professional staffing and the IT business is concerned, as is known to you what's happening in the broader market. Guru and Kamal also spoke about the international challenges and the headwinds that we are facing. So from a lot of perspective, if you really look at it, this is probably the bottom of where WFM today is. And with the advent of, a, the professional staffing as a mix, both international and domestic playing more than the speed of rate of growth from general staffing is one. Secondly, now coming back to the specifics of general staffing itself. You alluded to core to FTE ratio and that's a right point. Our investments in manufacturing tailored to take care of every site, every factory where the customer wants us to work? See, in M&I segment, one interesting thing is also we're not taking business from any international or large domestic company. We are rather taking the business away from local erstwhile contractors who've probably been in this business for 10, 20 or 30 years. And that transition to a large company like us is an area where we have to make that investment. You have to be closer to the customer, you have to be in the factory, and you have to disproportionately add recruiter sourcing and technology, which is where also the margin remains a little soft when you start playing this industry a bit. To the last point that you said about trending margins with customers, we are in the band of 680 to about 700 gross margin [ platform ] as far as the general staffing business is concerned. In spite of all the challenges that we are hit with given the competition in the general staffing space, we continue to hold ourselves there with a lot of work, which has been happening in the VAS space. And value-added as well as the growth, which over a period of time beyond the investment, starts to give us results, we'll be able to see this inch forward. I think at some stage, Mukul, and I've said this for a couple of years now, at some stage, both the client as well as competition will move away from a pricing-only strategy and will start playing a service and a price strategy. Quess has been retaining itself there for many years now. We hope to see some time into the future that also starts to play. I hope that gives you an overall color of what we are dealing with.

Guru, second question was on the operating asset management side. Can you just help us with a bit of color on the subsegments where you guys were able to take efficiency gain or cut a lower kind of margin clients? And how do you see it progress over the next 1 to 2 years both from growth as well as profitability perspective?

Sure. So as you know, under operating asset management, we have three set of sub businesses. First one is into facility management, integrated facility management, then followed by security services, and industrial and telecom business. So I mean, if you look at the largest among these three is integrated facility management, of which we had -- I mean, in the past if you -- we believe we have been interacting on this. Our exposure to IT services were pretty high pre-COVID and we did change the strategy. And now if you look at in the order of segment, manufacturing tops across all segments within the facility. And we continue to grow in that segment. We have invested in terms of sales and acquisition platform separately in terms of the go-to-market, followed by health care continues to grow for us, and BFSI. So these are the three segments, which are driving specific growth. Also what we did is specifically for both security and facility, we did take a deeper stab in terms of the business KPI and the profitability by customer. We did go through the rationalization of low-margin contracts. I mean, whenever we had to go and look for -- get for a price hike, we have done that. And wherever we had to seize the account, we have gone through and made those hard decisions to get where we are today, which is actually yielding well in our result in terms of percentage getting better. The business mix in terms of food business, which is high-margin business, slowly the mix is changing, and we are almost about -- close to about 20% of our contribution comes from food business now, which is also a healthy bottom line. So we have done all necessary correction in terms of KPI, productivity, efficiency. Our core to associate stands at 105 per FTE in terms of the overall ability. So we have done everything right. One area which still we have to -- we are continuing to do is put more effort on sales and go-to-market. So I think we have already done that in Q3 and Q4, which we have invested in things. So we are all kind of prepared to get into the next financial year in a good positioning in this. So let me -- added to that, telecom business is doing really well there. I mean, as I said in my initial speech, they're ahead of their AOP targets. On the back of 5G rollout, we are doing extremely well in that space, which is also contributing very -- almost about 11% EBITDA margin that they delivered, uplifting the overall segment. So overall, I think the house is in order now to get into the next financial year right from the right launch pad. Anand, do you want to add anything?

Yes. Thank you, Guru. Good morning. This is Anand. here from OAM team. So if you see the last 2 quarters, our EBITDA margin is in the range of 5 to 5.2. So this is what we called out in the previous year that our focus is going to be profitable growth. So we have levers in food and telecom and other profitable business we did. So I think between short and medium term, we are on the right trajectory in terms of margin. When it comes to the top line growth, focus is on sales. We are adding new clients. But in the last 3 quarters, we focused on swapping some of the existing clients who are not profitable. That's given us results. So we are confident with the new ACVs in pipeline, starting from Q1, we will see better results coming from the top line. Thank you.

The next question is from the line of Alok Deshpande from Nuvama Institutional Equities. Just a minute, he got disconnected, sir.

You can continue to the next question.

Okay, sir. Next question is from the line of Pratik from [indiscernible].

I just wanted to know what percent of your revenue comes from outside India versus India?

Can you repeat the question?

I just wanted to understand like what percent of your revenue comes from outside India considering all 4 business verticals?

So we have -- I mean, our headcount, if I were to go, it's pretty -- I mean, about 7,000 people we have across all our international geographies put together. And...

Pratik, why don't I take this question offline and I'll get the relevant data and then mail it to you. You can send me the question over the mail. Okay?

Yes. On which mail ID -- the investor mail ID, you mean to say?

You can send us on the investor relations email ID. Operator, can we move on to the next question?

Our next question is from the line of Balaji Subramanian from IIFL Securities.

I had a couple of follow-up questions. The first is on foundit. So once you achieve EBITDA breakeven maybe by this quarter, what are your future plans for growth and profitability? And the second would be on the qualified audit opinion in this quarter. So while the 80JJAA dispute has been on for a few years, what triggered this qualified opinion this quarter? And we have also called out about INR 159 crores of contingent liability. So what is the exact demand from IT authorities? And what is the potential risk that you see?

I'll ask Sekhar first to answer the question on foundit, and then Kamal will take over on your question related to IT.

Yes. So thanks for the question on foundit. As you know, foundit follows the financial structure of a SaaS subscription business. So for us, achieving a breakeven is a very important milestone in the journey of the company because most of our cost structure remains more or less flat from this point onwards, except for cost of sales. So once we achieve breakeven, subsequent to that, thanks to the successful launch of our new product, we expect to continue our high sales growth. And as the sales growth comes through, it will have significant positive impact on profitability, as you can expect from any subscription SaaS companies once they achieve the threshold scale. So subsequent to the achievement of breakeven, we continue to expect that the business will grow fast. And most of the top line that gets added from that point onwards adds disproportionately to our gross margins from there on. And therefore, we expect the business to have significantly positive gross margins from the next year onwards.

Thank you, Sekhar. I'll ask Kamal to answer the next part of the question.

Yes. Thanks, Balaji, for this question. So I think there are two parts to your question. One is the patent tax litigation and the claims of 80JJAA. And second, I think, is on the qualified opinion. So on the first one, we actually expect for both if you refer to the note 5 that we have given as part of the notes for our quarterly results. For 4 years that the assessment has been done, for the 2 years, which was FY '18 and FY '19, the assessment has been completed by the department and then Quess. We as an organization represented to DRP and from there we are right now in tribunal. And as I explained in my speech as well that hearings are in the month of February, the current month, as well as in April lined up. And for the subsequent 2 years, we've got the draft assessment orders, and we are filing our points and legal grounds with the dispute resolution panel. Now the cumulative potential impact for the company for all these 4 years for which the assessment has been done by the department is to the magnitude of INR 158 crores, which is what has been disclosed also as a contingent liability. So what happened during the current quarter is National Financial Reporting Authority, NFRA, in an order relating to certificates for these years issued by a certain chartered accountant pertaining to our claims of 80JJAA has made certain observations of applicability of certain conditions of the IT Act, which have also been very elaborately explained in Note 5 of the financial statement. For that matter, this order was subsequently stayed by the Honorable Delhi High Court on jurisdictional grounds of NFRA on this chartered accountant. So as we speak, those proceedings have been stayed on jurisdiction. However, we continue to believe that our claim is valid and we intend to vigorously contest our position on the interpretative stance of these sections on merit, including judicial precedence, and we believe we can strongly defend our position through legal process as we find under the income tax act. The pure reason for our qualification, and if you read the qualification also is on account of uncertainty, which is there in respect of outcome and the timing that we will take for these matters. So the impact, as we already mentioned in the financial statements as contingent liability and the uncertainty in terms of the outcome and the timing has led to this qualification. I hope I'm able to explain to your question.

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

Thank you very much. Thank you for the interactive session. I will now ask our Group CEO, Mr. Guruprasad, to close the call.

Thanks again for joining us for this Q3 earnings call. I would like to once again highlight that our consistent effort towards new logo addition, SG&A rationalization and operational execution has shown a consecutive 6 quarter increase in EBITDA. Our effort is unwavering and we will continue to scale new heights in coming quarters. Thank you so much for all your support. Thank you.

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