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What's In Store For Quess Corp In FY25? | NDTV Profit
NDTV Profit
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7/31/2024
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00:00
Guru Prasad Srinivasan, CEO and Kamal Pal Hoda, CFO of Quest Corp, joining us now.
00:06
A very good morning to you gentlemen and thank you for speaking with us here at NDTV Profit.
00:11
Well, the year-on-year numbers look good. Quarterly numbers have seen a bit of squeeze
00:19
on the EBIT margins and the EBIT as well. Is that a seasonal impact? Can you give us
00:25
sort of an overview of the quarter? Let me start with that question to Mr. Srinivasan.
00:30
Sure. Thank you so much for having us on the show. Year-on-year, we have grown by revenue 14%
00:37
and as we stepped into Q1 of FY25, it's been a fantastic start and we have added about 30,000
00:45
by headcount in Q1 in itself. And this is some total of what we have done in Q3 and Q4. So,
00:50
it's a good start. And the second call-out is we have crossed about 5,000 crore of quarterly
00:55
revenue. And again, a good milestone to cross and consistently we'll move forward from here.
01:03
And as we stepped into the year, our sales have been very strong. We have done about 160 plus
01:08
acquisition of new customers with an ACV of 660 crores. So, to your point, Q1 has some
01:14
seasonal effect. It is by plan and specifically comes from our GTS business. We have one of the
01:21
business in our GTS platform, which is specific for the BFSI segment in terms of collections.
01:27
So, they taper down a bit in Q1. And as part of our asset maintenance business, we do cater to
01:35
food and beverage segment specifically for university institutions. And due to the seasonal
01:42
close of vacation in new institutions, that business actually tapers down a bit.
01:47
And these two are high margin business and this will have a seasonal impact in Q1.
01:52
But as we step into Q2, they will start recovering back. So, that's the trajectory for us to start
01:59
with. So, now I get it. So, summer vacations has one impact as well. So, just to follow up on that,
02:04
Mr. Srinivasan, then which is expected to be your best quarter? Because your PACT year-on-year
02:09
is up 132%. What are the kind of margins you think you will see in Q2 and going forward?
02:15
So, while we don't give a guidance on the margin, but if you look at our trajectory has been that
02:21
we have been able to grow at anywhere between 12 to 14% year-on-year and that we have demonstrated
02:27
continuously. So, our best of quarters are normally Q2 and Q3 because being seasonal in nature.
02:34
And of course, for a few set of our businesses, Q4 like GTS is good. So, from that standpoint,
02:42
I think we should be able to deliver online to our plan. And with regard to our margins,
02:49
currently we are about 3.7%. And some about 20 basis points would recover as we move back
02:57
into Q2 and Q3. And by end of FY25, we should be close to about 4%.
03:03
Mr. Srinivasan, why don't you tell us about the rest of FY25? How many new clients have you added
03:09
across the board? And how sticky are these clients? Are they usually recurring revenue
03:15
that your company manages with these clients that you own? Or are these one-offs? And also,
03:22
the split between the global clients added and the local clients added?
03:25
Sure. So, I mean, most of our businesses are ad-youti. And we tend to sign any contracts
03:32
between one to three years and they continue in terms of recurring both revenue as well as,
03:37
you know, the realization that we get from these accounts. And we have strengthened our sales team
03:41
across both domestic and international geographies. If you look at the way we have started our Q1 in
03:49
itself is a great start. And what happens is generally when in sales, what we acquire now
03:55
will start delivering post H2 in terms of in its full form. So, what we write now in Q1 and Q2 is
04:03
largely what we would have signed between H2 of previous year. So, from that standpoint, I think
04:09
we are well stated for the year. The other attention that I would like to bring is the kind
04:15
of, you know, the budgetary announcement, which has been specifically the sector that we cater to,
04:21
specific to, you know, skilling, employment, manufacturing, orientation that has come into.
04:26
That is going to also benefit a lot. Quest has to benefit a lot in terms of, you know, creating more
04:32
pressures coming into workforce and employment. So, which we are still not completely budgeted
04:38
Huda, if you want to come in Mr. Huda and give me a sense of expansion, because historically,
04:43
you'll have gone out and acquired small companies, but there has been a lot of growth coming in from
04:47
inorganic expansion. Is that the plan going in as well for F525? What have you year marked in
04:53
terms of expansion and how would you be looking to fund it? Yeah, thanks for this question. So,
05:00
we've been, if you see last three years, we've been, you know, we've been doing a lot of
05:05
if you see last three years, we've been pretty much focused on organic growth rather than
05:10
organic growth. Some of our past acquisitions have worked wonderfully well for us,
05:15
but right now, you know, as we've announced a scheme of demerger with a mirror shareholding,
05:20
the entire focus is on A, getting the, you know, best out of the present set of operations and grow
05:25
organically and also work with the regulators and get the demerger process completed on time.
05:31
So, there are no plans of any active inorganic growth that we have for this year.
05:39
Okay. Now, Mr. Hoda, looking at seasonality and as we understood that Q1 might have a bit
05:47
of a seasonality, but overall, things notwithstanding, with the leg up that the
05:56
budget gives to skill hiring plus the kind of cost pressures that you might be seeing,
06:03
would you reckon that on an increased base, there is a probability of upping the performance on the
06:12
operational metrics or do you believe that for a business like yours, whether for you or for
06:16
your peers, this is about the margin set that you would maintain and you would rather focus on
06:23
on growth as opposed to margins?
06:27
No, so the focus is on growth. See, the growth, I think, is an opportunity right now and especially
06:32
like you mentioned, I think the budget has opened up those growth opportunities for all companies
06:37
which are in this space. First time we have seen, you know, announcements which are linked to
06:43
formalisation, linked to EPFO, bringing women into workforce in India as compared to other
06:49
global economies. I think the share of women participation in the workforce. So, there are
06:53
specific announcements to get more women in the workforce. There are, you know, in addition to
06:59
the PLI schemes in manufacturing, there are ELA incentive schemes for the manufacturing that we
07:04
saw for the first time in the budget. So, as far as the growth or the revenue targets are concerned,
07:09
we are very bullish and we hope that we will be able to deliver better than, you know, what we
07:14
had planned for this year. And as far as margins is concerned, as we explained, you know, Q1 is a
07:20
quarter where we experience seasonality for some of our high margin businesses. So, we are at around
07:25
3.7 percent. We have clear visibility of taking this margin up to, you know, crossing the 4 percent
07:31
as we progress through the year. So, the focus is on both the areas, you know,
07:36
growing volume as well as growing profitability. Mr. Srinivasan, good morning to you. Long time
07:43
that we've spoken, but I was wanting to understand what are the timelines for this
07:47
de-merger and is there a base case of what's the kind of value unlocking that can happen?
07:53
Is that the principal reason for this process? Yeah, Viraj, thanks for that question.
08:03
And, you know, we are working towards that in terms of de-merger a lot. If you look at,
08:08
there are three elements. One, how are we strengthening our leadership as we move forward
08:14
close to the de-merger? How are we going to get our leadership strength and capability building?
08:18
So, that's one stream of work that we are doing. The second stream of work is this process generally
08:23
take anywhere between 12 to 15 months. And we have already announced it. So, as of now, it's
08:28
progressing well. Everything is on track. So, since our cases, we see it as largely it's a
08:35
mirror shareholding. So, there's no complication involved. It should definitely sail through well.
08:41
And the other part is, why did we do even at this point in time? Because each of our business
08:47
are at its position of strength. GTA is delivering about 17 to 18% EBITDA margins. And by size,
08:54
they're almost about close to about 2,700, 3,000 crores. We have a clear path as to how we can
09:01
take that business in the long term to a billion dollar by size. And we also strengthen the
09:06
leadership in that sector. Second, with regard to our workforce, it has been our signature business
09:13
and we have been growing very aggressively and we have been bullish about India market.
09:17
The way the investments are happening in India in terms of CapEx. And if you look at the latest
09:23
retail FMCG consumption report, rural consumption has gone almost about 7.76%. It has beaten the
09:31
urban consumption. So, which means it is also reflecting the way we are hiring people in
09:38
tier three, tier four cities. The demand also is coming from there. So, this business we are always
09:43
bullish about and we want to take this business to be globally number one in workforce. And with
09:49
regard to our asset management, there's so much of CapEx investment happening, starting from
09:53
infrastructure to public utility spaces, healthcare. And we see a lot of contribution or consolidation
10:00
happening in that space. And it is also a volume value business for us. And I mean, we have
10:07
substantial revenue close to about 3,000 crores coming in from there. And this business will do
10:14
well as infrastructure grows well. So, sheer from position of strength, each of them are in the right
10:20
place for us to put them under independent listed companies as and when the legal process
10:29
completes. So, we are quite happy the way the unlocking would happen as we move forward.
10:34
Is there a timeline in mind for this process to be completed or it's a wait and watch Mr. Srinivasan?
10:40
So, it will take about 12 to 15 months, as I said. So, we have already filed. So,
10:46
probably next year by this time, we should be definitely there.
10:50
Just want to get a trend check. And let me come to Mr. Hoda on this question.
10:55
I just want to understand what is happening with ITES. The commentary we're hearing tells us that
11:01
there is an initial sort of an uptick in hiring in this space. Are you seeing it as well? Can
11:07
you give us some color on what your expectations are here? Yeah, sure. So, see we are seeing that
11:14
as well, some green shoots. So, the open mandates are up 36% as far as the IT business is concerned.
11:20
So, it used to be around 1,000 to 1,100 positions. We are seeing right now around 1,400 positions in
11:26
the IT hiring space. And within that, our share on hiring has been more focused towards GCC. So,
11:33
almost 70% of the open mandates that we are working is towards GCC, which are
11:37
high margin businesses for us. So, and follow the results of all the IT companies which have
11:42
recently come. They've also started hiring. So, yeah, it's all looking that the IT hiring
11:46
should be back and that should also further boost our profitability and margins.
11:52
All right. Okay. So, green shoots in ITES. That's good news, definitely. Thank you so much for
11:57
joining us, Mr. Srinivasan and Mr. Hoda. We're speaking to Quest Corp Management there.
Recommended
11:12
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