TeamLease Services Limited (TEAMLEASE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the TeamLease Services Limited Q4 and FY '21 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sudheer Guntupalli from ICICI Securities Limited. Thank you, and over to you, sir.

Thanks, Atuja. Good evening, everyone. Hope all of you and your loved ones are staying safe and doing well. On behalf of ICICI Securities, I would like to thank the management of TeamLease for giving this opportunity to host this Q4 FY '21 earnings call. On the call, we have with us Mr. Ashok Reddy, MD and CEO; Ms. Rituparna Chakraborty, Executive Vice President, General Staffing; Mr. Sunil Chemmankotil, Senior Vice President, Specialized Staffing; and Ms. Ramani Dathi, Deputy Chief Financial Officer of the company. We'll start the call with opening remarks from Ashok and the team, and then we'll open up the floor for question-and-answer session. Thank you, and over to you, Ashok.

Thank you, Sudheer, and good evening to you all, and I hope all of you are keeping safe and well. Thank you for joining the call. And I think we all know that we started the year with the COVID pandemic coming into play on the lives of people and on the businesses. And I think we, as a company, had a big impact in Q1, with a lot of the clients adjusting and readjusting to the crisis. I think it was first impact and first experience for many people, and they were working on the aspect of coming to terms with it, and there was a lot of cutting of [ fac ], reducing head count, reducing costs; a huge impact, finally, that we saw on our business by virtue of the clients responding to the crisis. However, I think after the Q1, we've had quite a robust growth across all of our businesses, and we have bounced back to equal or surpass the pre-COVID levels of head count and run rate. I think even in Q4, we added a net head count between associates and trainees of 16,000 in the quarter. And we did have a good positive February -- January and February. From March, however, we also started seeing some element of the second wave of the COVID crisis, where clients have been going a little slow thereafter. But nonetheless, I think we have come back to the numbers and run rate. And actually, our operating revenues for the quarter are now marginally higher than when we exited last year, though overall revenues for the year are lower by 6% on account of the Q1 impact that we had. The pandemic also has given us an opportunity to strengthen our digitalization strategy around technology implementation for our clients, accelerate our client partnerships, kind of play around with the product mix that we have in our P&L and product offerings and work on the productivity enhancement from a more long-term perspective. This actually is reflected in our EBITDA and PBT improvement, both in absolute and percentage terms over the year. This is also not restricted to a business, but across all businesses. And this is in spite of a few of our businesses being impacted for some revenue provision on account of delayed receipts from some clients and government. So I think, especially on the government training business, while we have a sunset on the mandates, just the aspect that we've had a round of elections and the COVID impact has kind of delayed the actioning around payments. And we do expect that after the current round of opening, we will see some movement on that front. Strategically, we had indicated at the start of the year that we would exit the perm business, and that has kind of been completed. And we continue to work on sunsetting the government training business while, in the current year, nothing much has really happened on that front given the aspect of the COVID and the inability to have students physically present in classrooms for their learning. I think, overall, we've been able to bounce back from the hit that we took in Q1, have been able to course correct on a number of areas effectively, enabling the aspect of profitability to come back to the earlier levels. And I think that's something that we will continue to work on and focus. Like I said, I think the second wave of COVID is clearly a little bit of a dampener on the element of client aggression and focus for growth. A mini mandate that we had has kind of gone a little slow and has been put on hold. We don't -- we are not seeing a big impact this time around letting go of resources and the kind of cost cutting, head count cutting that happened last year. But I think just the element of growth has been put on a little standstill with many clients coming back that once the lockdowns end, they will be able to revisit that and work back to their growth plans. So we are in close touch with clients. I think some of the businesses have not been impacted even with the second round lockdowns and continue to have healthy pipelines for growth. But staffing is really where clients are a little cautious at this point in time, but we expect a turnaround on that once the lockdown ends. A little more color will be provided by my colleagues [Technical Difficulty]

Sorry to interrupt, the line of Mr. Reddy got disconnected. Please stay connected, while we reconnect. Ladies and gentlemen, thank you for patiently holding your lines. The line of Mr. Reddy is connected back. Thank you, and over to you, sir.

Yes. Thank you very much. So I was just saying that a little more color would also be provided on the specifics by my colleagues. And I would ask Ramani to speak now, and then we'll have Ritu and Sunil also give some context. Ramani, over to you. Thank you.

Thank you, Ashok. Good evening, everyone. So as we have indicated earlier, we closed the year with pre-COVID levels of head count in our general staffing business and overall, including NETAP, we had a 4% year-on-year growth on head count. Also in terms of revenue run rate, we are back to pre-COVID levels in our staffing businesses. And in HR services, we have grown 25% year-on-year, excluding ILS business because in ILS, we plan to exit that line of business, and there is a INR 40 crore dip in revenue during that last year. Coming to margins, in case of staffing, while we have grown 6% quarter-on-quarter in revenues, in terms of margins, we remain flattish, mainly on account of about INR 1.3 crore of impact that we have taken in Q4, which is on account of wage cut reversals. So we have taken few wage cuts -- voluntary wage cuts in Q1 on account of COVID impact last year. So those have been fully reversed in lieu of performance posted by the business during the year and also on account of a few provisions on delayed collection. So barring which, staffing has posted a 6% growth quarter-on-quarter despite slight pressure on PAPM. Coming to HR services. Again, in ILS, we had a few delays in collections, specific to 2 states where the offices are either down with COVID or on election duty. And because of which we have to make a provision of INR 4 crore in HR services for Q4, excluding which HR services would have broken even with about INR 1.5 crore of profit. During the year, we have received overall INR 200 crores of tax refunds, and we closed the year with a cash balance of over INR 350 crores, out of which free disposable cash is about INR 250 crores without any working capital or any other earmarking. So overall, our operating cash flow is upwards of 330% during the year, which is also on account of tax refunds. But excluding the tax component on pure operating basis, we had a 187% cash flow -- operating cash flow conversion during the year on EBITDA. So this is on account of improved DSO, improved collections across all businesses, except for the government training business. So as of 31st March, 2021, we have a total TDS outstanding of about INR 100-odd crores for years FY '20 and FY '21. We have maintained ROCs at 35%. In fact, there is a slight improvement in our ROC from FY '20 to FY '21 despite the COVID impact, and we have also improved on our overall return on equity levels. We have active M&A discussions in pipeline across all our businesses, but none of them are in closure stage of that. Yes. Ritu, can you please give your opening remarks on Staffing business? Thank you.

Yes. Thank you. Good afternoon, everyone, hope all of you are safe and your extended families, everyone is doing well. So let me just summarize the performance of Staffing in Q4 for the last financial year. So of course, pleased to share that we closed the year covering up for the losses in H1 to our pre-COVID numbers. Most of the [indiscernible] and associate growth have been driven by the following sectors: consumer; digital businesses like e-commerce; essential retail; and telecom. BFSI and manufacturing, initial momentum was sluggish. However, towards December, Jan, I think it started to pick up. We've noticed that the overall positive employment momentum has centered around these segments primarily, while industries like hospitality, aviation, lifestyle, retailer, most others remain subdued and showed very little impact on employment sentiment. Overall hiring movement has been polarized on just these cluster -- a handful of maybe 5, 6 industry segments. In spite of the tepid atmosphere, we managed to add 100 new logos during the year, and Q4 showed the maximum new client additions up by almost 50% over Q3. The new sign-ups contributed to about 43% of the associate growth of the quarter, the rest coming from existing customers. Strong customer testimonials on our overall servicing and our ability to support our customers through the rough weather played an important role in ramp-up of our client base. Incidentally, 33% of our customers showed net growth in associate additions over previous quarter. Hiring played the most significant role in our growth during Q4 and the whole of H2. We sustained and built on the hiring momentum we delivered in Q3 and managed to hire about 23,000 on our own out of the total gross additions during H2. Most of the hiring has been in e-commerce, manufacturing, telecom and BFSI. Technology and channel mix continue to play a very critical role in delivering hiring for us with more than 80% of our closures driven through non recruiter channels, thereby helping us improve our cost per hire. And also there is an interesting trend we have noticed, and there seems to be a spike in demand for women in various roles in manufacturing and in e-commerce, which were earlier predominantly men-dominated. Also a constant focus on automation, optimization and operational efficiency have managed to shoot up our employee productivity from an ST ratio of 335 in Q3, 354 in Q4. And we're quite confident of our ability to do -- to improve upon this further going ahead. I think through the year, we have encountered permanent discount requests from some of our customers, which we were able to entertain. While it has pressurized our per-associate average realization, we were able to sustain them on the back of the benefits of improvement in our employee productivity. Also more than 80% of our associates are either in essential services or are in roles which can only be done outdoors, it was our responsibility to ensure their health and safety as far as possible. So we continue to send out role-specific advisories around dos and don'ts and how to keep them safe at frequent intervals through phone calls, messages, notifications through our app. We also launched one of a kind end-to-end vaccination supervision management and slot finder workflow on our app to keep track of the vaccination status with each of the associates as well as provided them with an ability to book their appointment directly through our app using a public API provided by the government. And we also started our vaccination drive for our associates in a phased manner based on availability across locations through tie-ups with a couple of the leading hospital chains in India. In addition, given the financial burden that many of the associate encountered for themselves as well as their family members, we hosted sessions as well as created self-help kits for them to create awareness of the benefits that they are entitled to which can ease their financial burden in a big way. We also collaborated with Colive, a not-for-profit venture to provide free meals to our front-line workers who are struggling to manage their meals, given restrictions and lockdowns have led to closures of smaller food kiosks and hotels. So looking ahead, we were optimistic, like Ashok shared, of the new financial year. However, after a modest April, our Q1 expectation is now muted. Largely, because most of the new hirings have been put on hold or deferred, onboardings have been delayed. Because of COVID impact, all employees of different organizations, there is a visible lag in decision-making amongst employers, whether it's large or small. So unlike in the first wave, we have not so far witnessed any major reactions like wage cuts or large-scale layoffs. However, we do anticipate attrition on account of extended leave of absence of associates or on account of migrating away from work location. Also limited or no backfills for associates whose contracts have expired. We are watchful of how corporate India choose to react. And hence, on our part, we continue to remain vigilant on how optimally we can continue to run our operations. For now, there is a continued momentum in new sales sign-on which gives us confidence that while opportunities might be delayed, that we can make a big turnaround. This year on, we have chosen to focus primarily across cohorts created around BFSI, industrial, e-commerce, telecom and tech, consumer and health care and emerging sectors, which we believe shall lead employment growth in the near to 5-year horizon. Our sales and hiring capabilities shall be geared around the specific needs of these cohorts. The time we have spent last year in reorganizing, rationalizing and strengthening [ from plumbing ] and digital evolution shall help us in shifting all our attention towards our customers through rapid sales acquisitions and we, of course, continue to flex our muscles in hiring. So even as we've slowly crawled back to our office towards restored normalcy, we do believe the world of work has changed forever. It is expected to impact employment models, tenures, basic framework of workplace, the need for digital adoption, learning and much more. So there would be more unknowns than knowns for many of our customers, and it would be an opportunity for us through our cohorts to build intimacy with their challenges and become our lives and solving for them through our core and adjustment business offerings. That's clearly our way forward. So thank you so much. Sunil, would you like to take on Specialized Staffing?

Thanks, Ritu. Good evening, everyone. From a Specialized Staffing point of view, the year saw a subdued hiring activity, which led to a dip of 3% in revenue. However, we focused on replacement hiring at a higher profile leading to product mix improvement. We were very conscious to let go some of the low-margin businesses because those were not helping us to improve our margins. As a result, we were able to maintain our revenues close to last year despite lesser head count than last year. On the PBT front, we grew by 10% quarter-on-quarter, with a 120 basis point improvement. FY '21 saw a substantial improvement in the PBT and margins grew from 5% up to -- grew to -- grew to 8.6% from 5%. The improvement of the margin is mainly because we focused on higher-value profile in our IT business as well as addition of high-margin new non-IT staffing verticals like engineering, gaming, energy to complement our telecom business. We saw a huge uptake of digital skills, AI, ML, cybersecurity and DevOps, which fetched that higher bill rate. The demand for higher-end IT infra skills, along with our asset management, digital inventory verification and IT infra, digital productivity and improvement solutions helped us to get new projects as well as increase our deal values in the IT infra business. We acquired 102 customers -- new customers in FY '21 and we were able to change the product mix substantially, along with improvement in our operational efficiencies due to better productivity and shared services setup. All these efforts help us to improve our margins substantially. When we look at the overall year, there is an overall change in the product mix and the business has moved into a higher profit range. So we are very confident that the foundation will help us to take it forward in the coming year, and we look forward for a great FY '22. Thank you.

Thank you, Sunil. Sudheer, I think that's it from our end, Sudheer and we can open to questions.

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

Yes. Since provisions seem to have become a recurring issue, Ramani, if you can call out both the expected provisions and provision reversals in general staffing and HR services going ahead? Also, what will be the normalized EBITDA margin in general staffing adjusted for the impact of both this wage cut reversal and the provisions you spoke about? I think you called out the wage cut reversal. But what would be the normalized overall general staffing EBITDA margin?

Yes, Sudheer. So as I said, there is a INR 1.3 crore of onetime impact that we had in general staffing. So if you can add back that INR 1.3 crore back, that would be the normalized EBITDA in general staffing. And out of this INR 1.3 crore, about INR 70 lakhs is the planned impact to the P&L on account of wage cut reversals, and the balance is an unplanned impact. And then coming to ILS, I mean, we were very positive of collecting this money because all paperwork has been done, we received all clearances. And specific to these 2 states, with the election duty for the officers and one of the officers was down with COVID because of this entire [ fourth quarter ] got delayed and -- but we are expecting the collection to come back in end of Q1 or early Q2.

Just to add to that Sudheer, is that most of these are provisions from a prudent perspective, but I don't think we have a doubt on the ability to collect them. So I think it's just students that kind of are ensuring that we provide for these in a timely manner. And there is a cycle of this happening in certain cases and a reversal thereafter. Most of these don't really go bad.

Got it, Ashok. Got it. No, I was just trying to assess what would be the overall receivables where we see, let's say, probability of provisioning in the next couple of quarters, and whatever may come back as reversal because you have been taking it with, let's say, abundant caution? So of course, INR 4 crores is the one in HR services, which may get reversed in the future quarters. But if there is anything else which are likely to get provisioned or reversed? So I was just looking at that data point if you have it handy?

Nothing substantive that is due for provisioning in Learning Services. Over the next 2 quarters, we would have another INR 4 crores, INR 5 crores that is due. If not collected, we would look to provision. We have a similar amount that should be available for reversing on collection. In staffing and in our other businesses, the amounts are more incremental. In that sense, there's not normally a huge impact that comes in as a onetime hit.

Understood, Ashok. And actually, if you look at the head count growth in general staffing segment in March, of course, I understand towards the end of the quarter, probably, there would have been some sort of holdback due to COVID second wave related noise and all. But at least the December, January, February months, there was a good momentum buildup as you yourself have alluded to. In that backdrop, do you think the growth -- head count growth in general staffing segment on a sequential basis could have been stronger than where we were, the 4%, 5% sort of a growth?

Obviously, anything better than what we did we'd be very proud of and happy about. No questions on that front. So I think in Q3, we added 16,000 associates, trainees on a cumulative basis. And I think we've done a similar amount in Q4 also, even with the element of March being a little more subdued than what we had expected it to be. So I think a larger element of that clearly came in between January and February and we would have ended probably higher had the second wave indications not started to kick in. But having said that, I mean, our continued focus, and like Ritu mentioned, is on growth sectors, where we have focused teams working to drive growth both by new client acquisition and growing with our existing customers. And we do -- we have seen clear traction on both fronts, where we have added new logos, and our existing clients had come back to growth. I think like we had said earlier, obviously, the second wave has put a little bit of a dampener on the plans that corporates had about replacement hiring, about hiring new cohort's requirements and some transitions that were planned. We hopefully should get that back on track as we go into Q2 with hopefully the element of easing up of the lockdowns across the country.

Got it. Got it, Ashok. So if I were to -- I know the predictability of growth is a little dented at the juncture because still it's a fluid issue. The progression of second wave is a fluid issue. But if you were to kind of quantify an outlook in terms of revenue growth or margins for FY '22, how would that look like? [Technical Difficulty]

The line of the management got disconnected. Please stay connected while we reconnect. Ladies and gentlemen, thank you for patiently holding the line. The line of Mr. Ashok Reddy is reconnected back. Thank you, and over to you, sir.

Thank you. Yes, so I had answered the question from my end, so [ if you think ].

Yes, yes. So my next question, I think that's where you got dropped off. Is that -- if I were to ask for an outlook in terms of revenue growth and in terms of, let's say, head count addition and even margins for FY '22, I understand that predictability may be a little dented at this juncture. But what are your internal expectations for these 3 metrics for FY '22?

I mean I'm not going to hazard a guess on that front right now. I mean it's becoming difficult to say whether we are at the start, middle or end of the pandemic, given the waves that we have seen. But I think corporates are -- have learned to deal with the crisis on hand. I think there was, like I said, a kneejerk immediate reaction that we saw last year. It is a much more muted cognizant reaction that we have seen in the second round this year, very different from what we saw last year. So I think corporates are learning to deal with the element of the pandemic and also learning to plan to some extent about the waves that we have been talking about and so on. So I think, overall, there seems to be a lot more optimism in the corporate sector about the future plans and the need to ramp up on hiring for that. And I think the same dialogue around formalization, around utilizing service providers, given the variabilization of cost, the formalization, coupled with outsourcing, should play out as we go forward into the future. And I think that really would open up a lot of opportunity for us. Like I said, while we are seeing an element of -- on the general staffing front, specialized staffing, which works to higher skill levels and cognitive capabilities, it's still seeing healthy demand even in Q1. I think the sectors that the specialized staffing addresses has kind of better prepared themselves for continuity and for scale, and we continue to see demand on that front. Even in our employability learning front, leaving aside the aspect of universities and students in classrooms, the acceptance of learning digitally online has become more accepted. And I think we continue to see volume up and requirements on that front. So I think overall, I would say that while we would clearly look to having a muted Q1, we are more optimistic about the quarters thereon. And we, like I said, obviously, can't be a predictor to the wave 3 or not and so on. But I think overall sentiment in industry ability for resilience and outlook for growth is there. Coupled with the element of formalization and variabilization, we stand a good opportunity for growth as we go forward.

Sure, Ashok. On margins, I think maybe this is a slightly better predictable variable, and we have been expecting margins to improve on a year-on-year basis, so any guidance on the margin trend for FY '22 at the EBITDA margin level?

So I don't normally give guidance, Sudheer, but I think the focus is that the initiatives that we have taken and have gained traction, thanks to the pandemic, around technology implementation and adoption at client associate level, around our client partnerships, around productivity enhancement, product mix should enable the element of margin improvement to continue to play out as we go forward?

The next question is from the line of Susmit Patodia from Motilal Oswal.

And congratulations on the head count achievement. I have a few questions. Firstly, just carrying on what Sudheer was talking about provisions. If I were to add up your write-backs, as you've shown in the cash flow statement, and deduct the provisions, the number is broadly 0, right? So you don't seem to have any loss, but there is a lot of volatility because of provisioning and writing off. Is that understanding correct?

Sorry, can't -- we lost your voice.

Susmit, can you repeat your question?

Sure, Ramani. So if I look at the cash flow statement and together for '20 and '21, the write-backs of provisions that you have done and the provisions/credit cost you have -- or bad debt you have pulled there, they all cancel out each other, right? So as Ashok has said, that our loss is really nearly 0, right? And that's what comes out. And I'm just wondering if there is a little bit of volatility in the P&L, but there is no real loss that happens?

On a full year basis, yes, Susmit, the comment that we made earlier is specific to Q4, where we have taken INR 4 crores provision in ILS and about INR 1.3 crore in staffing. So that's specific to this quarter. But as you rightly pointed out, on a full year basis, it offsets, that's what even Ashok mentioned. Next quarter in ILS, we have INR 4 crore to INR 5 crore coming up for due. And this INR 4 crores that we have provided now might get collected by then and offset the new provision.

Yes. So one request is could you also then give us a net provision number because this is causing one more level of detailing that may not be required, looking at your annual statements is what my request would be.

Sure. No issue. It can be done.

Yes. Yes. The second is on your increase in unbilled revenue that has come through in this year. Now could you give us -- this has happened because the pandemic that struck towards the end of the year, is that the reason?

So this is just because of the timing, Susmit, because subsequently, the invoices have been billed and collected. As of 31st March, that is the status of unbilled. So we have -- I mean, there is no unusual delay in subsequent billing or collection.

Okay. So there is no dispute kind of an issue that we should be worried about?

No.

So there's no dispute at all. This is just a timing aspect towards the end of the year. And normally, within the next 10 days in April, most of these invoices get raised. So these are not disputed amounts. This is just a timing element.

Got it. And the third aspect is, again, if I look at '20 and '21 together, your PBT margin is 1.7%. But your OCF before tax margin is 2.7%, right? So what will convert with what is I just wanted to understand? Is -- or should we be looking at OCF margins as a more representative of the company?

So this year, we have taken up a very aggressive collections [indiscernible] system because the first half of the year when we lost head count, so we made sure that invoicing being done on time and the follow-ups with the clients for all collections are being on track. So that has really helped us to improve DSO across all the businesses. And that's what has led to a higher cash conversion in terms of better working capital and reduction in receivables and stuff.

No. I know Ramani. What I'm asking is combined both the years. So last year, your OCF was quite -- was not so good, right? It was just INR 10 crores, correct?

Yes.

So I'm combining the 2. And I'm saying that the margin, when you look at a cost cash flow perspective, it's closer to what you had aspired for a couple of years ago, which is excess of 2.5. Reported PBT margin is more like 1 point...

Yes. But it is better mixed with 2...

Yes, I'm just trying to understand, as analysts, what is the metric we should track?

So definitely, cash conversion can be a key metric of that business, which also gives the comfort that we are maintaining the ROCs and maintaining the working capital levels and overall margins.

Right. And just my last question is on -- there are a few news articles saying that people are -- there are some manufacturing facilities coming up, and they're hiring large numbers. So are they also asking you to include facility management services or pantry services? And any thoughts on that, while you've still not staying away from it?

Ramani, I'll take that. First and foremost, yes, there are a lot of news articles about the anticipated hiring surge in manufacturing sector and especially driven by the PLI scheme. However, we've noticed that after the initial enthusiasm, the hiring definitely has slowed down even in those segments. And of course, some of the incidents which have happened, which got a lot of prime time coverage, a lot of organizations have gone on their back foot. Having said that, when outsourcing discussions are happening, they cut across different kinds of profiles. However, most of the outsourcing is happening in profiles which are at the shop floor level. Yes, there will be some requirement, which are happening in allied services and support function. But I think that share of that number is much lesser in comparison to the demand that comes in from the added head count they need at the shop floor level. Pantry housekeeping is, of course, something that there are some demands, but a lot of these organizations choose to have a separate services contract for such arrangements. Having said that, I think wherever there is an opportunity where the customer feels that they would like to combine in with the normal staffing arrangement, it gets combined. I don't know whether that answers your question.

So you -- I mean TeamLease has made it clear in the past that they would not get into FMS or pantry. So if there is a requirement, how do you handle? Do you subcontract it further down? Or do you -- are you thinking of starting that line of business?

Well, actually, TeamLease is not averse to picking up profiles which are in pantry or housekeeping. I think the only kind of mandate we have stayed away are the ones where the organization wants to structure it completely as a job contract or as a managed services. So we are seeing organized -- we have seen organizations who just actually request us to take them on as staffing head count and wherever that is the case, we do it. Wherever there is a specific, we ask for the customers that they would want to have a services arrangement. At the moment, we are not getting into subcontracting arrangements. However, that is today. It's something that depends upon demand. If there is a surge in demand, we will look at exploring options at that point of time.

Sorry, just to add on that, we don't do the managed services activities. We do the profiles in all functional key areas front. And I think at least for the foreseeable future, we don't intend to get into managed services. So some mandates, if asked for purely from a managed service perspective, will be outside of our domain, and we are not in the fray for those mandates. But clearly, I think we are looking to go just beyond the aspect of general staffing in terms of just providing the bodies through our digital workforce solutions that can complement for add-on administrative capabilities at the client and through the platforms that we are able to bring to the table.

[Operator Instructions] The next question is from the line of Madhu Babu from Canara HSBC.

Congrats on a good quarter. So are there any large lift-and-shift mandates in this quarter, which has led to the strong hiring? And especially with this kind of continuous COVID waves, do you see employees moving more to a flexi staffing model and whether that can drive a pent-up demand in the next 1.5, 2 years? So these are the 2 questions.

Yes, I don't think we've had any large lift-and-shift mandates that have come in and nor are we seeing any large ones in the immediate future. Like I said, clients, we have been able to acquire new logos. And normally, new logos start small and scale up on numbers over a period. We've also been seeing growth with our existing customers who, in the initial round of the pandemic, had cut the head counts and, on stabilization and opening up of the economy, had started to effectively rehire the resources and build the bandwidth in terms of head count. I think clearly, as I mentioned earlier, the aspect of -- and I've mentioned this earlier in the quarters also that 1 enduring image from the first wave of the pandemic was the migration of the [Audio Gap] that was left high and dry without any statutory benefits. And I think realization clearly is that while the government can't provide all of that from a fiscal perspective, formalization and industrial -- I mean, industrial as in corporate employment, could be a net -- a safety net for such instances. And I think most corporates have played honorably towards their employees in these times to the extent that they could and as long as survival permitted. And I think to that extent, element of formalization and also a focus from the government end to enable that into the future should be a focus. And I think we will see more corporates willing to come on the table for that. And I think also the element of variabilization of cost given the uncertainty, like you mentioned, wave 3, wave 4, like I had earlier said after the second wave, we are now not sure whether we are at the start, middle or end of the pandemic. Most of us thought in Q3 that the pandemic was behind us. And I think the second wave was clearly more vigilant and impactful than the first. But corporates have kind of reacted much more maturely to this round. So I think the aspect of formalization, the aspect of variabilization and the fact that the government should work to enable formal employment will be winds in our back as we go forward, not immediate, but will play out to the longer term.

I would add to what Ashok -- sorry.

So just one more question.

Yes. I'll just add to what Ashok said. To answer your specific question, what was the growth in associates, whether it was lift and shift. Actually, a significant amount of the growth has come from hiring mandates in the quarter, which is for us, the key takeaway. So it's largely -- we are not also looking at too many opportunities out there where there will be a very large-scale transition. And -- but there is obviously going to be increased opportunities too of growing through hiring. And as we scale up hiring, we will see this growth continuing. Besides the point that Ashok mentioned, we are seeing that there is increasing appetite in corporates and especially those organizations who are traditionally not very open to the idea of manpower outsourcing, that they are willing to now experiment with different models of outsourcing just to make sure that the organization is lean and agile and responsive to any eventuality that happens. So we are seeing organizations moving to hourly billing. Demand, we're seeing on demand staffing to specific roles. We are seeing very, very niche part-time requirements coming up. So I think these are some of the drifts into the future, which we think we are in a position to optimize and grow on.

Yes. Just one more on the tax rate. Obviously, that depends on the net additions. So is it right to model low tax rate for next 2 years? Or should we take a bit higher? Because clearly, net addition is not a clear sign now, at least because of this COVID, so how should we model the tax rate?

So this year, FY '22, we are positive that we'll have a net addition in associate head count, Madhu. So we will be having sufficient 80JJ provision to offset the taxes. So yes, I mean, we don't think there will be any substantial increase in the taxation for FY '22.

That is clearly subject to growth, which at least given the current indications, we are quite confident about, and hence, the rate should be [indiscernible].

The next question is from the line of Garima Mishra from Kotak.

I had one question on the general staffing business. Ritu, you mentioned that some PAPM cuts were entertained through the year, which is understandable. But does that set a low base for future with these same customers?

Yes. So like I alluded to, Garima, that there have been some permanent revisions downwards as well. Yes, it started with a request, which were temporary in nature, but it has led to permanent downward revisions. And yes, that has reset the base, and that's why we do believe that there will be pressure on the per-associate realization. However, I think given that we are looking to address a lot more of the customer challenges and offer digital tools, learning tools, we would be able to manage that pressure. And of course, the optimization and efficiencies we've gained from the improvement of employee productivity, we should be able to offset some of those discounts which have become permanent in nature right now.

Okay. And one question on the IT staffing business. IT services companies in general are seeing good demand, decent revenue growth trajectory, et cetera. What kind of pipeline are you witnessing for your various IT staffing company?

So I'll take that question. So we are seeing -- we are seeing a lot of demand coming in from across the IT services companies, particularly since we work with all the major IT services companies, and we are seeing a change in the kind of requirements. We are seeing a lot of high-end requirements coming in, which will definitely help us to get better margins per placement. Does that answer your question?

So also, Garima, on that front, I think, like I had mentioned earlier, though we are seeing an element of general slowdown in other sectors on account of the second wave, IT services product and captive side is still seeing healthy demand coming in and healthy onboarding happening. So as of now, we stand quite positive around productivity of our team to new onboards and growth in the IT services sector.

So -- but do you think the demand is good for you to target a 20%-plus kind of revenue growth for your IT staffing business, somewhere in that ballpark, given the kind of demand that you're seeing? I mean my point is that, look, IT services companies themselves are talking of a decent sort of double-digit kind of revenue growth. And some of them have been even increasing their revenue guidance through the past 3, 4 quarters, right? So that should have some kind of positive rebound. That's basically what I wanted to see that. Is it basically material much ahead than what it was in FY '21?

I agree with you.

The next question is from the line of Abhijit Akella from IIFL Securities.

Possible to just share the PAPM numbers for 4Q and FY '21?

Sure, Abhijit. So for...

I mean we ended with…

Ramani, are you covering that?

Yes, yes. So for the quarter 4, we had a PAPM of about 693. And on a full year basis, it is about 700.

Okay. Got it. And just -- so when we look at the adjusted margin for general staffing, it seems to work out about 1.9% after adding back the INR 1.3 crores of one-off that you mentioned. So there's a little bit of pressure through the year, I guess, compared to where we were in 1Q and 2Q, it seems; 20, 30 bps down from there. So is this largely driven by the PAPM factor? Or are there any other factors at play as well?

So it's largely driven by PAPM, Abhijit, because all other internal expenses have been rationalized, be it facilities or core employee costs or other service delivery costs have been rationalized. Our cost per hire has come down during the year. It's mainly on account of PAPM pressure.

Got it. Just one last thing. Just on the PF issue. So any update on sort of your thought process in that regard? And any thoughts about possibly having to take some provision? Or do you still believe that there won't be any need to do anything of that sort?

I mean right now, we still believe in the hold position on that front. One is the recovery to whatever percentage around the aspect of the investments. And the second element is active to inactive accounts. So the view is that we hold the same stance going forward. Ramani, you can add.

No, it's the same point, I wanted to say. So there has been no change in our approach, obviously, because we believe that at PF trust level, there is no liquidity crunch, there are sufficient reserves and cash balances to offset this investment. And once we get some visibility on the likely recovery on these investments, we'll take a call.

Our next question is from the line of Jonas Bhutta from PhillipCapital.

So my question again is around the general staffing margin, sir. So through the year progressively, now at the year-end to year-end basis, we've seen that our productivity levels have gone up by almost 35% based on the FTE productivity. But margins are still, as is, varied. So while Ritu had mentioned it's because of the PAPM pressures, but going forward, do you believe that -- given the current condition and the kind of feedback that you're getting back from your clients, do you believe that this pressure on PAPM sustains in FY '22, and hence whatever measures that we've taken on cost containments are largely offsetting in nature and will not actually be accretive to margins even in '22? And then basically, we'll only end up seeing any benefit when volumes pick up in '23?

So just before Ritu chips in, I think we still -- as Ritu mentioned earlier, we still have, we believe, leeway for further productivity improvement. I think the larger impact of initially clients ask for discounts, some of them have renegotiated on the price front, given the challenges that they are facing. And I think it's just right for us to be accommodating of the ground realities that the customers are facing at this point in time. We believe that the wave and the continuance of the pandemic will dictate, to some extent, the pricing power or the pricing acceptability that the customers would have as we go forward. But having said that, I think the add-on services that the business could potentially partner with the customers could also give some price leverage. And I think that is really what the team is focusing on in saying the add-on technology solutions that can be bundled to the customer, providing a realization that kind of complements the staffing realization. So I think some element of the pressure on pricing PAPM is on account of the realities that corporates are facing in the market and looking to reduce costs on. But we are trying to complement that with alternate revenues coming in from the rollout of the technology platforms and solutions that corporates could use. And we will continue to work on furthering the productivity improvement at our end also. Ritu?

Actually, nothing further to add, Ashok. That's pretty much it. That's exactly what we intend to do.

The next question is from the line of Susmit Patodia from Motilal Oswal Asset Management.

My question was on the 80JJ. One is a more theoretical question, which is you may be getting some tax breaks on your -- you're getting tax breaks on your overall profit, while the large part of your profit is actually coming from employees greater than INR 25,000 month's salary. So do you worry that the government may come back and say that you need to differentiate between [indiscernible]?

So any regulatory change will definitely impact it. I mean, be it changing the INR 25,000 cutoff or any other changes to the 80JJ applicability, that will definitely impact our effective tax rate.

Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Ashok Reddy for closing comments.

Yes. Thank you very much. And clearly, like, as we have discussed, we have risen out the first wave of the COVID pandemic and have been able to rebuild on all the businesses to a healthier opening balance into the current year. But the wave 2 has happened and it has muted the quarter. But in a more long-term perspective, as I had mentioned on multiple parameters, we stay confident of the market opportunity. And we will continue to work for growth, profitability, productivity and to delivering to expectations on a recurring basis given the market opportunity that we have. We do believe that the pandemic is an event and not climate change. And we all have learned to kind of handle the reality that has been thrown at us. I mean just from a TeamLease perspective, 100% of our core employees have been working from home for nearly 2 months now. But the continuity in business, continuity in engagement, continuity in working the customer requirements have been priority. And they have been delivered quite successfully. So I think going forward, we clearly believe the opportunity will play out once the lockdowns end. Clients are optimistic about growth and about having to invest in people and about formalization with an element of variabilization of cost. And I think that's really where our opportunity lies, and we will continue to work on that front. With that, thank you all for joining the call. Stay safe. Thank you.

Thank you.

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