Informist, Thursday, Sep 19, 2024

--Quess Corp CEO: Hiring by IT cos likely to pick up from Oct-Dec

--CONTEXT: Quess Corp CEO Srinivasan in interaction with Informist

--Quess Corp: Expect co's growth in Oct-Mar to be better than Apr-Sep

--Quess Corp CEO: May get NCLT nod for demerger of 3 ops by Mar, Apr

--Quess Corp CEO: Expect all 3 demerged cos to get listed in Apr-Jun

By Anjana Therese Antony and Apoorva Choubey

MUMBAI – Hiring by information technology companies is likely to pick up soon, as suggested by green shoots of recovery in the segment, according to Guruprasad Srinivasan, executive director and group chief executive officer of Quess Corp Ltd. The Bengaluru-based staffing solutions giant expects IT companies to ramp-up hiring from Oct-Dec.

"Management commentaries of many IT companies indicate that their utilisation is almost 85%... In my experience, the moment utilisation is left by 15%, they have to start hiring for the next wave," Srinivasan told Informist in an interaction.

Demand for information technology services around the globe is widely expected to revive with the reduction in interest rates in the US, which will mean banks and other clients could start spending more on IT, including discretionary projects.

The US Federal Reserve on Wednesday cut the federal funds target range by 50 basis points to 4.75-5.00%.

While the overall IT mandates were subdued in Apr-Jun and haven't picked up yet, Srinivasan believes IT companies could hire as many as 30,000 freshers from campuses during the current year. "They will also need three-to-five-year experienced ones, the hiring of which will happen through a partner like us," Srinivasan said.

Hiring by IT companies took a hit for more than a year, especially due to a sharp decline in discretionary IT spending amid an unfavourable macroeconomic backdrop. However, major players in the technology space, including Infosys, Wipro, and HCL Technologies, said at the time of detailing earnings for the June quarter that they will ramp up hiring in the current financial year.

While IT is a small vertical in terms of headcount, its contribution to Quess Corp's revenue is substantial. The overall staffing or workforce management division, accounts for nearly 50% of the consolidated earnings before interest, tax, depreciation and amortisation of the company. For Apr-Jun, the EBITDA of the division was 890 mln rupees while Quess Corp's consolidated operating profit was 1.84 bln rupees, up 19% on year.

Of the workforce segment's operating profit, 50% comes from general staffing business which is purely in India, Kamal Pal Hoda, chief financial officer, said. The remaining 50% is split between IT staffing in India and overseas, Hoda added.

The company's IT headcount is about 6,000 people, Srinivasan said. This includes staffing for Global Capability Centres or GCCs, which the company is targeting as a high growth area.

Last month, the company crossed the overall headcount level of 600,000, which is head-to-head with some of its major global competitors whose headcount is 600,000-610,000, the CEO said. The company's headcount rose by over 30,000 in Apr-Jun and by 61,000 in the last financial year ended March.

OVERALL GROWTH

Srinivasan also reiterated the view that Quess Corp will witness better growth in Oct-Mar compared to Apr-Sep, as general staffing vertical picks up in the festival season, including segments like banking and manufacturing, which were weak in the previous quarter.

For the June quarter, the company reported 8.8% on-year rise in consolidated revenue to 50.03 bln rupees while profit after tax was 1.04 bln rupees, up 117%, aided by a one-time gain. Apr-Jun is a seasonally weak quarter for the company, as some of the high margin businesses, especially in asset maintenance segment, are soft due to holidays in educational institutions.

"Our high-margin platform GTS (Global Technology Solutions) and food business will see a lift in Oct-Dec and Jan-Mar, and is on track while the workforce management division will continue to recover, Srinivasan said.

The growth in Apr-Jun was partly led by consumer, retail, and logistics sectors as companies are gearing up for new product launches, big billion days, and other such events, Srinivasan said.

However, growth in the manufacturing vertical was a bit slow due to some delays from manufacturers having bulk production lines such as iPhone, LCD, LED, he said. Though the hiring process has gone a bit slower in some production lines, Srinivasan sees some green shoots from September. The banking and IT services hiring is also seen picking up soon.

This, coupled with jobs portal Foundit's performance, could improve the company's margin by a few more basis points and bring it back to 4% by the end of Jan-Mar, Srinivasan said. For the June quarter, Quess Corp reported an EBITDA margin of 3.7%, compared to 4% a quarter ago.

CAPEX

Quess Corp has earmarked 900 mln rupees to 1.10 bln rupees for capital expenditure during the current financial year, largely unchanged from the 1-bln-rupee spend last year. Of this, about 50% will be for IT infrastructure, laptops for employees, and some software, Hoda.

"None of our businesses are capex heavy... There are some investments when it comes to our food business in terms of kitchen and equipment. None of them is significant enough to be called out separately," Hoda said.

The company is also investing in artificial intelligence to improve the business process management operations, which helps in recording a live call to summarising the call for the customers. "There is a lot of detailing that we are building in our applications for internal purposes to ensure that we bring our cost down but digitally handle them much better," Srinivasan said.

For now, the company is not looking at any acquisitions for workforce management and original equipment manufacturing. Though the company does not have a major list of deals or acquisitions in its global technology solutions business, it "might look for some global acquisition over a period of time," Srinivasan said.

The hiring company aims to bring its debt lower to near 2.50 bln rupees. Hoda said the company has been reducing its days sales outstanding, or DSO, across India as well as cost of businesses. As a result, operating cash flow grew, using which the company has been trying to reduce its debt, he added. A one-off refund from the income tax department has also helped the company to reduce debt levels, Hoda said.

In Apr-Jun, Quess Corp reduced close to 900 mln rupees of debt. In an investor presentation for the June quarter, the company said it reduced debt by more than 2.45 bln rupees in the last four quarters.

DEMERGER

Quess Corp reiterated that it is on track to demerge its three business divisions and expects to get the National Company Law Tribunal's clearance by March or April, with all the three companies getting listed on the stock exchange in Apr-Jun. The company also said it "got really good feedback from investors" about the demerger.

Once demerged, the three business divisions--workforce management, global technology solutions, and integrated asset maintenance--will be known as Quess Corp Ltd, Digitide Solutions Ltd, and Bluspring Enterprises Ltd, respectively. The company's board had approved the demerger in mid-February.

Along with asset maintenance, Bluspring will also manage product-led business, which includes Foundit. For this year, the company sees cash burns in Foundit to be "far less than" the 560 mln rupees last year and expects it to breakeven this year. In June, the company had told Informist that it expects Foundit to turn profitable on a net basis by 2025-26.

Talking about the return on equity, Srinivasan said both workforce management and Digitide should be in a range of 18% to 20% on the day of listing. "Bluspring will take some time because we await some investments there," he added.

At 1214 IST, shares of Quess Corp were down 2.4% at 820.80 rupees on the National Stock Exchange. The shares have risen 18% in 30 days and 89% in 52 weeks. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Ashish Shirke

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