TeamLease Services Limited ($TEAMLEASE)

Ladies and gentlemen, good day, and welcome to the TeamLease Q4 FY '26 Earnings Conference Call hosted by HDFC Securities. [Operator Instructions] Please note that this conference has been recorded. I now hand the conference over to Mr. Arjun [indiscernible] from HDFC Securities. Thank you. Over to you, sir.

Thank you. Good evening, everyone. On behalf of HDFC Securities, we welcome you all to the TeamLease quarter 4 FY '26 earnings call. Today, we have with us management team of TeamLease is represented by Ms. Suparna Mitra, Managing Director and CEO; Mr. Ashok Reddy, Executive Vice Chairman; Ms. Ramani Dathi, CFO and COO; Ms. Neeti Sharma, CEO, Specialized Staffing; Mr. Balasubramanian A., Senior VP Enterprise. I will now hand over the call to Ms. Suparna Mitra for opening remarks, post which we can open the call for the Q&A session. Thank you, and over to you, Suparna.

This is Ashok. I'll just start it and hand over to Suparna. I just wanted to apologize for the delayed upload of the results to BSN NSE and MS delay in the call. There were some deliberations that were happening on the buyback, and that was closed and the results and the Board outcome has been uploaded now. So just wanted to apologize for the delay in the scheduled call and appreciate all the joinees who have paid and are participating in the call. Now we've had Suparna join us to take over the MD and CEO role. And the transition has been going well. And from this quarter onward, she will lead the dialogue on the results front. Over to you, Suparna.

Thank you, Ashok. Good evening, everyone. Thank you for joining us. This is my absolute pleasure and honor for me to be -- this is my first earnings call in to be on this call. I want to first begin by acknowledging and thanking what Ashok and Manish has built in TeamLease over the last 25 years. This has been that has a very important guideline putting in there to work. It's a business that has put over 24 lakh unions to work and created at the same time One India's most respected single solutions company. The company has a very strong financial record, great balance sheet, of free cash, virtually no debt and also a very strong brand and operations backbone and I'm very grateful for this legacy that I've inherited, and I'm very excited and committed to building on top of this [indiscernible]. Now over to this particular quarter. Q4 was a quarter that actually demonstrated and tested our operating discipline. Revenue came in softer because of the full impact of resourcing by 1 topic in the NBFC clients. We had already flagged this often in quarter 3. And as a result, the overall headcount growth was muted. Having said that, the operational discipline in the machinery actually came in handy, and we had a good profit story for the quarter. EBITDA grew 8% sequentially and PBT grew 13% year-on-year. Profit after tax grew 22%. This is also the last quarter of the year, and I'm happy to announce that for the full year, EBITDA grew 14, EBT grew 56% and we delivered INR 83 in EPS, 28% higher than last year. As I try to reflect on the quarter, and also building on what I'm focusing on in the next few quarters. These are some pilots as 1 focus area. I think new local addition in general staffing and continuing the momentum on operating range which we call out accelerating the scale of higher-margin businesses, especially in the digital and degree of prints is a priority. I think India's former employment market is an inflection point. I think the last few months, many things that happened at cast the implementation, the livecaincome tax on EPFO, utilize team, GCC, there are all many important things happening also in the digital business across the board branches or our company, there is a significant incoming AI impact and our job is to be ready to capture -- the opportunities have come up in this changing environment. We will do it with the right sales focus and intensity, the right product mix and the right cost structure. I have been spending my first few months visiting clients. I'm really listening to what's there challenges are, what's their issues are and calibrating our go-to-market accordingly. Lastly, the point that Ashok also touched on. We have the balance sheet to be old, the INR 600 crores of cash is a huge number. And the buyback the Board is approved today is an expression of capital discipline. I also want to make this point that we are very keen on investing in the future in the technology in gallons, the adjacencies that will make team lead the absolute default partner for agent CSOs, thinking and planning about the workforce as you go into the future. So for FY '27, I will be focusing on the profitable growth, deepening drive relationships and focusing on operating leverage. My colleagues will now take you through the details of the individual investables and overall financial performance. We will then open the floor for questions, and I look forward to some interesting conversations. Thank you. Over to you, Bala.

Thank you, Suparna. Good evening, everyone, and thank you for joining us. FY '26 has been a year of 2 differing stories. The first is a regulatory-driven transition with one large NBFC client package in Q3, where about 20,000 associates move directly on to the price both payroll, as we highlighted in our last call. The second is the story of our underlying business, which if you look at that signal traction added meaningful headcount throughout the year. Because our operating performance diverges so material from the absolute headcount line, we think it is critical to look at both [indiscernible] and transparency. To give you the specific numbers, our [indiscernible] starting business closed Q4 had about 2.87 lakh associates, reflecting a net sequential addition of over 4,500 associates. For the full year, while our net headcount shows a decline of roughly 5,500, adjusting for that Q3 transition reveals that the underlying business actually added about 40,000 associates. We also continue to widen our market footprint, adding about 120 new logos over the full year, with almost 2/3s of those coming in under variable market structures. For the more important narrative for the year it on the profit side, despite the marginally negative volume year, we delivered an 11% growth in PBT. This came primarily from operating leverage, specifically a structural reduction of both 20% in our cost to hire year-on-year, we achieved this by optimizing content, capability and productivity in our hiring mandates, alongside an increased variabilization of our sourcing. Additionally, our broader digital backbone, panic compliance, payroll operations and associate engagement is allowing us to run a larger associate book without a linear proportionate increase in our core [indiscernible]. We've spoken in prior calls the process and tech leverage being a structural shift rather than a onetime gain. And FY '26 is the first year where that piece is clearly visible in the profit line. Looking closer at our operational methods, we delivered about 62,000 gross joinings in Q4, with 31%, that is about 19,000 coming in through our own internal hiring efforts. Interestingly, 24% of the gross joining, which is about 15,000 were firsthand employees, reflecting our continued participation in the broader formalization of the Indian workforce. Turning to sectoral performance. The picture in BFSI is really one-off rotations rather than market expansion. The constituted retail price is still working through its correction. So the overall sector and hiring pie hasn't really growth much. Instead, our growth in BFSI has come mostly from wallet share gains from incumbents that connect to private bank, smart [indiscernible] banks and midsized NBFCs. Alongside a steady shift in our hiring footprint towards Tier 2 and Tier 3 markets. We believe the BFSI trust is largely behind us, though the shape of recovery will vary by segment. The consumer vertical on the bit mixed, consumer [indiscernible], particularly air conditioning, white goods and appliances performed strongly in Q4 in anticipation of the hot summer further aided by the GST rationalization of several large categories facing September 25. Consumer goods and retail, however, were more uneven with rural and semiurban demand outpacing urban markets. Meanwhile, e-commerce and e-commerce have clearly shifted to a profitability and consolidation phase, meaning hiring growth was heavily concentrated among the top few category leaders rather than be broad-based across the sector. Last not least, industry that the over the broad structure...

Your voice is breaking.

Yes. Last but not the least, in telecom industry and power infrastructure, we saw some very encouraging structural developments, power, transmission, distribution, CapEx and digital infrastructure have emerged as meaningful new growth areas for us, while Telecom Services continued its steady expansion led by ongoing network rollouts. As we look ahead and enter FY '27. The macro setup was highly supported. We have the RBI [indiscernible] at 5.25%, inflation at decade lows, GDP tracking at 6.5% and the construction tailwinds from GLP-2.0 and income tax release starting to flow through the business. Our own employment outlook report published in March, [indiscernible] possible sentiment showing the net deployment change improving to 4.7% for H1 FY '27, which is 1 of the highest readings we've seen in the last couple of years with 58% of surveyed employers planning to expand their workforces. However, there are 3 uncertainties that warrant flagging. Firstly, the labor cost, while a clear long-term tailwind for formalization and organized staffing will create some transition costs across the industry through FY '27 as center and state to a finalize. From our side, given our existing compliance process and tech infrastructure, we are able to drive smooth transitions for our plants. Secondly, discretionary consumption while improving remains a little uneven and positive. Thirdly, the broader geopolitical environment carries second-order risks that are working closely, specifically around energy and petroleum price inflation, potential supply chain disruptions and entitled consumer sentiment. Ultimately, what we remain [indiscernible] confident about is our operating model. The work we have put in over the last 2 years on commercial discipline, cost to process [indiscernible] infrastructure and our Director associate offerings lead operating leverage. This engine will continue to convert into earnings growth, given the volume grows always. We entered the new fiscal year with about 10,000 local positions. Moving forward, our in-house hiring platform, along with an increased focus on cost variabilization will be sharp areas of focus for us to work in FY '27. Thank you. And with that, I'd like to hand it over to Neeti.

Thank you, Bala. Good evening, everyone. FY '26 was a year of diversifying across sectors in geographies for specialized staffing business. While the market place stayed selective in its hiring requirements, we did see an increase in demand for particular niche roles in areas of AI, data, cloud cybersecurity and specialized functional growth in health care, engineering, R&D and BFSI sector. We closed Q4 with 7,500 associates, a net addition of 1,000 associates in the last 1 year and above 300 additions in the last quarter with a shift towards high-value and niche hiring, our [indiscernible] realization has gone over 70% and our year-on-year PBT has grown by 15%. So we're not just growing by adding headcount, but growth has also been driven by better realization of the [indiscernible], good utilization and a stronger mix of products and still case. While demand for traditional IT still has been moderated, there has been a steady and significant rise in hiring for roles such as AI uppers, AI integrators and R&D and engineering professionals, a shift visible across both the IT services companies as well as [indiscernible]. Our DTC business remains a cornerstone of stability and growth for us. With partnerships spanning over 110 [indiscernible], this segment contributed approximately 60% of our associated headcounts and around 67% of our revenue. It continues to demonstrate structural strength across high-value verticals, including BFS health care, retail, FMCG and high-tech engineering services, driven by strategic demand, longer engagement cycles and deep customer relationships. Our strategies moved early in FY '26 was a decision to partner with TCC to build and scale the bot model. This has also allowed us to move meaningfully of the value chain delivery integrated growth for solutions represented transactional staffing. The results have validated the strategy and the GCC segment remains 1 of the most important and enduring growth engines. We added 85 new logos in the last year, 24 of them in Q4, contributing nearly about INR 20 crores in annualized revenue. Simultaneously, remaining revenue momentum was safeguarded by deeper penetration into our existing customer base. Our recruiter productivity has improved by 20% year-on-year, reflecting the positive impact of the investment in upscaling our recruiter, building AI-led efficiencies in our hiring purposes and optimal use of our AI-enabled APS that gave us leverage for faster than efficient hiring. Our global business grew by 200% in terms of revenue, a meaningful milestone for us. It is now very well integrated with our India delivery. It is margin-accretive and has been built up a capability extension of everything that we had raised in India. Operationally, FY '26 has been a year of strong execution and vision. We continue to improve recruiter productivity, utilization, fulfillment efficiency and overall delivery capacity and capability while maintaining very tight control on costs. Improvements in productivity and operating leverage has helped us manage seasonal non-available impact effectively during the year and supported margin improvement. As we move into FY '27, our focus will remain on scaling this model in a disciplined manner with continued focus on profitability, productivity and high-quality group. Thank you. And with this, I hand this over to Ramani.

Thank you, Neeti, and good evening everyone. This is Ramani and I walk you through the financial highlights for the first and the year. I will also cover the highlight of our strategic shift business as we could including during the call today. Before I begin, I would like to remind participants that this call will cover only completely available disclosed information in [indiscernible] of the city and [indiscernible] requirements, and we can lay forward-looking statements that are subject to risks and uncertainties. Let me start with our business world. [indiscernible] to focus on making vocational education, operational, accessible and affordable through apprenticeship and [indiscernible] program and [indiscernible] educational process. We have recorded a net addition of 2,000 apprenticeship issued for FY '26. The business maintains [indiscernible] stability, improved productivity and added a new client logos in this quarter. We have further strengthened our back-end technology platforms and operational processes to improve delivery efficiency over experience, compliance management and operating [indiscernible]. Apart from manufacturing, [indiscernible], retail and logistics, we are seeing a strong momentum for apprenticeship in the GCC segment with increasing demand for building all selling pipelines and top line under [indiscernible]. Large growth is expected to accelerate due to multiple policy and industry development. Once expansion of the prime minister internship team, EMIS 2.0 with an elevated credit of INR 4,788 crores, which is expected to strengthen industry participation. Two, sustained policy focus on manufacturing group through made in India investments in electronics, semiconductors, EV and the automotive sector, increasing demand of [indiscernible] and job ready [indiscernible]. Moving to the overall financial highlights. Q4 FY '26 were in total as we demonstrated discliplined financial management, even in a profitable revenue environment. Let me give you the headline for each of intervals. Operating revenue stand at INR 2,925 crores for the quarter, reflecting a 2% sequential decline. The primary driver was the rate impact of NBFC sourcing, which we had flat in Q3. Full year revenue growth stands at 6%. EBITDA grew 8% Q-o-Q and 14% of full year basis, EBT grew 30% year-on-year for the quarter and 36% for the full year. Profit after tax grew 22% year-on-year for the quarter and 33% for the full year. There is a INR 143 crores income tax [indiscernible] pertaining for asssessment 2024, '25 received during this quarter, which includes INR 13.1 crores of interest income. Excluding the striped associated interest, underlying PBT growth is about 20% year-on-year. Our EBITDA margin for Q4 was 1.5%, up 10 basis points over Q3 FY '25. For the full year, EBITDA margin came at about 1.34%, about 10 basis points higher than FY '25. Subway [indiscernible] improvement in general staffing, which moved to INR 689 in Q4 from INR 669 in Q1 have steady trajectory that reflects pricing discipline and our valuable market strategy. Exiting [indiscernible] in Q4 has also contributed to sequentially improvement in margin profile. In [indiscernible] services, full year revenue and EBITDA grew by 22% and 23%, respectively. We built porting university in our FX segment in the quarter and signed 70 new ones in the full year. [indiscernible] believe its MRR-based strategic combination digital services, MRR [indiscernible] verticals stood at INR 3.6 crores [indiscernible]. We do not expect ATM to be a drag on group level margin as we scale the platform through FY '27. On balance sheet and cash position, which I think is a significant differentiator for TeamLease, we closed Q4 with net free cash of INR 600 crores in the receipt of INR 106 crores income tax [indiscernible] for assessment year '24, '25. Outside in [indiscernible] stands at about INR 149 crores stores and assessment year 2023-'24 adjustments are completed and we continue to make progress in [indiscernible]. DSO and staffing business stands at [ 6.8 ] and funding exposure is at 14%, both consistent with the prior period and reflecting our receivables [indiscernible]. On the new labor cost, we have actions with compliance requirements for core employee a provision of INR 5.82 crore highly [indiscernible] in Q4 FY '26 reflected as [indiscernible]. Our capital addition the board has approved a buyback approximate 25% of [indiscernible] at a price of INR 1,600 per share to INR 300 from existing free cash. The entity is clear and we believes are strong is undervalue related to the earnings program of the business and continued efficiency in cash conversion of EBITDA. This reflect to option there is a plan in [indiscernible] between our staffing in the use in Q1, Q2 of FY '27 which has regionally low margin mandates. There is no [indiscernible] margin impacts from these transitions as the market services. However there is a pipeline of open positions and client mandates we are confident of ending [indiscernible] FY '27 headcount impacts. Thank you. I'll hand back to the moderator to open the fllor for questions.

[Operator Instructions] We have the first question from the line of Mahesh from DT Partners.

And first of all, we appreciate the decision move on capital allocation and a meaningful one. My question is a slightly broader question on strategy. I think if you look at the ecosystem, there seems to be some of these upcoming start-ups who are basically positioning themselves at catfish kind of proposition for hiring on blue collar economy workers and so on. And in that context, someone like teams with its own proprietary data on placement history, attrition patterns, compliance record, etc on lacks of workers. Just curious, are there any initiatives or thought process you have where you think there is an opportunity to productize your data into more AI-driven analytics or tons where the business could eventually over a long run, start to have slightly more format broadband. That's my first question.

Yes. That's a very interesting question, and it is actually something that we are actively working on in our strategy. Clearly, the idea of sporting some specific opportunities where we can offer product type offerings is very much possible, and there is some degree of work. And we see these opportunities coming from exactly what you said, which is our large long experience, which is a combination of both data that gives us indications as well as a working knowledge of how it actually happens on the ground. So this combination of data giving insights on how one can offer productized offerings along with the operational and on-ground execution is very much something that we are thinking of and working on.

Understood. Just one question, Ramani, I think we've seen a couple of sort of notification leading up to the results around some of the old legal proceedings or notices around the PFO, et cetera. If you can just sort of give where we stand at. I mean we understand the exchange this has been going on for a while in [indiscernible], but just some color would be helpful to the extent you can.

Yes, we have received a series of notices, one from PS department with respect to the senate interest, which happened long back and sales demand of INR 180 crores pertaining to how the profits are the [indiscernible] of profits and loss were done in the [indiscernible] level. But we have sufficient opinions. In fact, we also obtained an NOC from NOC from [indiscernible] authorities at this time doing the full and final agreement on calendar of the [indiscernible]. So we are very confident that the fee -- the biggest industry in that favor. Saying that a few other notices pertaining to GST as well as another one with respect to PFC implication of [ e-trade ]. So even these two, we are confident that we have sufficient people case on that side and in the due course of time, we can close these.

We will take the next question from the line of Amit Chandra from HDFC Securities.

My first question is on the core staffing business. Obviously, we have seen some headwinds in sourcing for the last year. So from here on, how do we see the next year panning out in terms of volume growth? And also, if you can give some color in terms of how the demand environment is panning out. And obviously, you have mentioned about the open mandates but how to see about the growth for the next year in the core staffing business? And also in terms of margins, are we seeing some signs of some of the margins, a little bit come from here because we are shifting away from this to the other segments for the growth, which is comparatively a better margin segment. So can you see the EBITDA expansion also coming in for the next year?

[indiscernible].

Sorry to interrupt in between, sir, your voice is breaking.

Yes. Thanks for the question. As fallout in the previous earnings call, the insourcing was specific to that client. And we don't really see this as a broad-based phenomenon so far. Also with respect to our outlook for the new [indiscernible] as we have called out during this call, we are starting this year with more open positions that we had in the previous quarter, and the outlook for now remains quite positive, and that is also reflected in the employment outlook report that we published a couple of months ago. And with respect to margins, yes, in the enterprise segment, it's more of a volume play. And with respect to margins, the outlook is a bit flattish and as [indiscernible] again earlier in this call itself, we continue to back on operating leverage, which has already played out in FY '26 playing out further on in FY '27, which need not necessarily depend on volumes moderating.

Okay. So in terms of the margin for the sector which has been kind of suppressed over the last many years. So as you said, it's just a volume play. But in terms of volume also, there is some part of the portfolio, which is having some kind of regulatory stress or in sourcing that is happening because we have [indiscernible] heavy and it's happening mostly in the BFSI sector. So what portion of the existing portfolio is still having any kind of issues that can again pop up in the future? Or you're saying that the existing portfolio almost say for any kind of regulatory headwinds.

Firstly the in-sourcing happened with only one large client. And subsequent to that, we didn't see any kind of in-sourcing or regulatory sectors. But if any new regulatory [indiscernible] is coming that we have to factor in. But at this stage, we are confident of maintaining the growth momentum within our [indiscernible] business, which this contribute to operating leverage because all of our fixed costs are fully absorbed, and with the investments that we need in our technology and packing processing, we believe that margin expansion can continue to play in FY '27 and this is after all taking into account a couple of planned exits that will happen in Q1 of FY '27, which we are [indiscernible] the general staffing business because these are very low margin businesses and in fact, they are to [indiscernible] playing negative contribution on the bottom line. So FY '27, will be to be consistently expanding margins in the starting the and DA vertical.

Okay. Okay. So on the specialized staffing, obviously, you have seen strong growth in the specialized staffing which is, thanks to the exposure we had to the GCC segment, which is growing pretty fast. So within that, are we also offering some more value-added services, which can help us to expand the margins that we get from GCC because if I see some of the competition, which is operating in the same segment they're operating at much higher margins versus what we are doing, plus in terms of the hiring fees that we've seen in the traditional IT Services segment, is there any hopeful level there and what portion of the associates are associated to the traditional IT segment within specialized.

Thank you for the question. You are right that while we had traditionally started with pure-play hiring and staffing the services for Today, we are partnering with [indiscernible] of them on both models, which give us higher margin. And along with that, we're also doing models such as RPO, we are working on models like [indiscernible] can deploy and also AI-led hiring. So there are a couple of new initiatives that we have started to grow our margins for DTC and other customers as well, but yes, DCs remains the largest segment that our focus is, and we are looking at a multi-product, multi-level engagement with basis going forward.

Sorry, you asked a second question on IT services, whether the, [indiscernible], is that right?

Sorry, Yes. So Amit, why the traditional conventional tech hiring is obviously not scaling, we do see some hiring on those skill sets, maybe like a low single-digit 3% to 4% hiring were the largest skill set being hired or in AI and AI a related and adjacent skill. So cloud, data security, governance, AI and ML coding, a large part of AI integrator role, all of those hirings are happening. In the past 2 quarters, actually, we have done -- we've done about 500 to 600 higher only on these skills, which give us not just the higher skill set, but also a higher margin and a higher value of the people that we are bringing into the workforce. I think that's what is really happening, not a conventional step, but anything related to AI. Their requirements are actually the demand is much higher.

We will take the next question from the line of Dipesh Mehta from Emkay Global.

I'm sorry but your audio is not clear throughout the call. So I may something which you might have covered earlier. So first on the revenue growth. If I look at the general stocking remain fairly muted, you indicated some open projects and higher, but I missed the number, if you have had any number on open position side. So can you provide some sense on general staffing? And any further detail in terms of, let's say, which vertical or which industries where you see recently speaking of versus last year? And any incremental data in terms of what will the revenues are, let's say, across industries Y-o-Y over if you can provide comparison that would be helpful considering the NBF simulated changes, which we faced during the year. So that is question one. Second question is on the overall revenue and margin outlook. Earlier, we indicated 30% kind of growth possibility on EBITDA terms when last year started. How one should look, let's say, in FY '27, considering the potential margin expansion as well as revenue growth recovery, which you are indicating. And lastly is on HR services. If you can provide some detail on that business because from growth perspective, I think this year, Q4 is not playing out to the extent of last year. Obviously, Q3 was better, but even on segmental reserve what we reported performance seems to be weaker than last year. So I just want to get sense earlier expect as much performance would improve consistently. It is not showing their thing. And last, more strategic perspective because now we have new leadership in place kind of any strategy change which we plan for next 1- to 2-year perspective, if you want to highlight some of those changes.

I answer your first question on open positions. So we had called out that we are right now at about 20,000 open positions at the start of this financial year, which is about 15% or 20% higher than where we were at the same point in time in the previous quarter so like we had called out in many of the sectors, we believe that the [indiscernible] is behind us, of course, there are some immediate headwinds because of labor costs, while there is a medium- to long-term basis that we see. Also geopolitical situations are leading to things we are little tentative at this point in time. So it's hard to really predict how it is going to shape up, but as things stand presently, [indiscernible] is definitely positive. And regarding the muted revenue growth that you called out, we were sequentially grow until Q3 when this large transition happened, and that led to the dip but we do see recovery because we already closed the year almost flattish even on volume we recover 70% of the launch in terms of volume and nearly 80% of the launch is also recurring revenue as well. Over to Ramani for the next question for the overall growth.

Yes. Dipesh, regarding the margin outlook, we can't get any tax guidance. Now that all the current businesses add on strategy, we are seeing strong quarter-on-quarter addition happening in our higher-margin verticals, especially starting in [indiscernible]. So we would be able to maintain year-on-year EBITDA growth of 20% for FY '27. Next question on retire services with respect to Q4 performance in comparison with Q4 of last year. Again, this is driven mainly by the exit seasonal billing, last year FY '25, majority of [indiscernible] billing happened in Q4. So that's why you can see Q4 retired services, EBITDA contribution is higher for the action term as well as market does. So wherever this year, it is spread Q3 and Q4. So on a full year basis, HR business contribution of EBITDA is higher year-on-year by about 22%. However if we are comparing only Q4 to Q4, it may appear as -- compared to Q4 of last year, there is a slide deck. But on a full year basis, the vertical has grown 22%.

Ramani, I'm referring to the segmental number which we reported. I think so far we have received your press release on data EBITDA related. But if I look BSE from profit to negative kind of segmental performance is visible for full year perspective. That is what I was trying to understand.

Sure, Dipesh. Let me connect to you separately and over to Suparna for the strategy question.

Dipesh, so it's just been about 3.5 months for me. And really, I'm working very closely with the team. I think that there are two big areas. One is on really focusing on our current business verticals and improving execution, operational defensiveness, focusing a lot more on client relationships and on the sales side. I'm simultaneously also looking for a longer range kind of strategy for which we need to do deep dive on what are some of the larger trends in the entire arena of employment, different models, different sectors, different types of companies where their requirement is and how will we kind of accelerate some businesses maybe see some new ones. So it's a work in progress. I think the starting point has been a much deeper engagement and understanding of what clients want, what our customers want in terms of their workforce, what their challenges are and how we as a company can leverage our strength and maybe also develop some new ones to be able to fulfill their requirements for being funding the group's prominent and I would say impactful people solution partner. So I think that's really the journey. Like I said, it's very early days, and we will start both deploying and communicating new piece of our strategy in the coming quarters.

And any area of investment based on the, let's say, strategy, what you might plan to execute in over next few quarters which could have implication on your margin trajectory?

It's too early. It's too premature. We are still working on the strategy. So after which we will take any investment decisions corresponding to that. You know, like finalization strategy.

[Operator Instructions] We will take the next question from the line of [indiscernible] from Maximal Capital.

So sorry, if I joined a little bit late, and I think the presentation is also not out. So some of the questions might be repetitive. But ma'am, if you can like give us what was the headcount growth for this year? I mean you mentioned it was muted, if I heard it right. And also, like what was the PAPM for FY '26 and FY '25 and what is your outlook going forward? Because this has been kind of trending down. And if you can like give us some [indiscernible] general staffing and how the PAPM is evolving? And why do you think we should go up or [indiscernible] and the competitive [indiscernible] also the other factors like the inflection point that you mentioned, give us some color on the PAPM and what are your thoughts on that?

Sure. So firstly, on the headcount. On a sequential basis, Q-o-Q, we have added about 5,500 headcount. And on a full year basis, there is a drop of 5,000 headcount, which is led by the insourcing of the NBFC clients. With respect to PAPM, we have been steadily improving our overall levels. For the current quarter, we stand at INR 689 where in Q1 of this, we opened with about 1,669. So one of the main drivers of this market expansion is the fact that almost 70% of our new mandates, where we signed on variable markup model. And this, we are being consistently doing over the last 2.5 years, and that has started contributing to our AGM expansion. Also, we are focusing a lot more on new logo additions in midsize as well as long data recruits where PAPM is relatively higher, and we believe the change trend can be continued in FY '26 as well.

And when the [indiscernible] on the full year basis, what was the timing for quarter ending, it was 689 for FY '25. For FY '26, what was [indiscernible].

Yes. For the quarter, it's 689, we usually don't measure it on a full year basis. By did what we closed last year was about 665.

And the key catalyst you are saying that you are moving more towards the variable markup models that will kind of get through to the PAPM?

Yes, also finding of higher margins or higher PAPM [indiscernible].

And then this is generally staffing kind of -- still kind of kind of drives our overall revenue as well as the like -- I mean, on the general staffing, what are the time of road that we kind of -- in terms of staffing that we provide what is the usual kind of revenue or your salary from on kind of [indiscernible] that we kind of provide the general staffing.

Yes. See general staffing contributes about 90% of our overall top line, and we still continue to drive the revenue in future as well. However, on bottom line, the contribution from specialized staffing, degree apprenticeship, I mean, these are all the higher-margin businesses, and they have been growing at a faster rate than general staffing. So overall, at the portfolio level, there will be a consistent margin expansion. While the staffing contribution would be largely coming from operating lease and slight improvement in PAPM. The base shift will be coming from a larger contribution from this higher markup for higher-margin verticals.

Okay. Okay. And you make the general staffing NIM, like salary range of the staffs that we provide? I mean, is it less than like 10,000 or more than that?

So in general staffing, the average salaries are about INR 26,000 per employee per month. As traditional business, these are about INR 40,000 a month. So they about the bare minimum wage level.

Got it. So sir, the current kind of include states we are hearing, I mean, the wage court impact is there? I mean the minimum wages are getting increased and on. That 1 has a lot of impact on our business, right, since the [indiscernible] these are high products.

Yes. So in fact, we call it earlier. [indiscernible] the short term may have a kind of negative impact on the headcount growth because many companies are revisiting their account plans as well as revisiting the compliance under the new labor court restructuring [indiscernible]. So in the next 2 quarters, each may slow down or to some extent, it may impact the headcount growth. But as we've been saying in the long run, labor ports will drive formalization in employment, specifically in the staffing segment, where 90% of the industry is led by unorganized staff.

Due to the increasing borrowing of the compliance cost, I mean, I assume the unorganized are not following all the rules and the compliance cost and they are not -- they don't get the kind of data to support this, but there is we do. So in the medium to long term, that could be beneficial, is that understanding correct?

No, unorganized because of multiple reasons. So one is lack of transparency and complexity in the earlier tables, which are like 44 different favor docks, many contradictions, not school based led to the interpretation of the labor offices on ground. So that led to the lot of organized regional small staffing players operating outside the radar. So with the new labor courts and once the [indiscernible] goes live, which is expected in the next 18 to 20 months. So there will be a central repository for all the labor related filings, which is very much similar to income tax or GST. So even the administration as well as top line of management will be transferred to the end client asset because right now, the end client have no clarity on whether their staffing service providers are fully compliant of not. And they have more incentive to work only with organized players like us. So with the new labor courts and the digital infrastructure going like, there will be a lot more shift from unorganized to organized.

Yes. And just to add to that to Ramani's point, a lot of us seem to be focused more on what is the impact for employees, but not too many people seem to be talking about the impact for employers because first and foremost, labor courts are positioned to an ease of doing business digitalization and centralization of compliances for employers. And the impact that we see for employees is completely downstream from that. And if you look at the pace of formalization in India, be it at a corporate level or at an employee level, it has almost doubled in the last 7, 8 years. The pesto employees in India is 2x of what it was pre COVID, and we are seeing the same payout at the employer level as well. So if anything, this is only going to incentivize more and more employers to choose a stick with large formal organized staffing players such as TeamLease rather than bulk of the industry, which is today operating outside the radar.

Okay. Okay. And finally, Ma'am, like any outlook you want to provide in terms of the headcount growth as well as [indiscernible] EBITDA margin?

I mean specific to hedge fund. As I said, we have a planned head count transitioning staffing and vertical comparable on a half year basis as well as a full year basis, we will be positive. And also on the bottom line, we are targeting cohort of 20% growth.

We will take the next question from the line of Pratim Kangara from Quantum ANC.

So just wanted to know your thoughts with what AI is doing to the IT companies. So if I try to visualize it for the staffing company, say, on the pyramid, so on lower level, there could be a lot of reduction in the headcount. So at least what we have seen in the past in that kind of hiring phase given the automation and all these things at me. So how do we view this scenario for even in specialized earlier we used to higher entry-level jobs for these IT companies.

Yes. Thank you for your question. Even traditionally, we've not hired pressures as much as you hired laterals. So that is a one shift. The other is while yes, AI is disrupting a lot of jobs roles like [indiscernible] like manual testing, entry-level software developer role, those are going away. But there are newer jobs that are getting created. Also, apart from the IT services companies that a job for these roles, it is AI integrators, AI developers, data engineers, data sciences, all these jobs are getting created in DCC as well as a lot of large non-tech companies as well. So what we see is that while, yes, the volume play for IT services will not be as high as what it used to be till what was 3 years ago. This volume will come in from different segments and in different jobs at very different skill sets. So like we say that the 5 million IT workforce will get to 10 million at some point in 3 to 4, 5 years time frame. What will change is, who's hiring? Where are they hiring? What are they hiring and what do they want the workforce to do. So that shift is very evident. Already, we've seen a large demand in AI and adjacent skill sets. We believe this to normally grow off the ladder. We do see some traction in the middle level hiring, which is largely focusing on only people with domain and AI skills. And I believe that demand will also increase as we go along because almost all organizations are now on the drawing more using their AI adoption strategy. So we do see these demands increasing, while the traditional conventional tech demands are clearly going down as you rightly call out.

That should try to offset what was losing volume, but could we gain that on the value front.

Eventually, yes, probably in over 18 to 24 months time frame, not immediately.

Thank you very much. We will take that as the last question. I now hand the conference back to the management for the closing comments. Thank you, and over to you, ma'am.

Thank you all going on very-engaging questions and overall confidence in the kind of efforts that we are putting in the strategy and continued execution. We hope to continue this good run of profit performance along with greater revenue growth in the next few quarters. Thank you, and see you the next time around.

Thank you, members of the management. On behalf of HDFC Securities, we conclude this conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.