Our revenues are turning around exceptionally well in product-led business: Guruprasad Srinivasan, Quess Corp

For the quarter gone by, revenue is up 17% but there seems to be a stress on profitability and margins and EBITDA is down. Is this a cyclical downturn, do you think, which has hit Quest Corp for the quarter gone by largely because of what is happening in the IT space?
Guruprasad Srinivasan: In a sequence for the last two years, we have been able to add 70,000 plus headcount year on year. And that is a kind of milestone and sequentially we are able to deliver that. And our revenues have been up by 25% year on year. And our OCF has been upward of 70%, operating EBITDA to OCF conversion in terms of 71% year on year. So PAT, when it specifically comes to Q4, we have an exceptional item, which is largely related to a sale of an asset that we did in Q3, which is also kind of the taxation on that is impacting in Q4. But it is a one-time impact which is coming into.

Otherwise, the way to look at overall, I mean, we have invested cautiously. We have invested into product-led business, which is almost about Rs 100 crore of investment that we did throughout the year in FY23, specifically for Foundit, which is our job portal business which we are into.

I mean, that business is really turning around well. And that investment is also kind of responsible for reduction impact for FY23. And FY24, we would have lesser burn coming in because our revenues are turning around exceptionally well in our product-led business. So yes, it is an investment phase that we had to go through.

But the slowdown in IT is real and the slowdown in IT is something which is a universal fact. And the fact that Indian staffing/hiring firms, they get a lion’s share of their profits from IT is not new. How realistic is the concern? And how much do you think the slowdown in the IT services sector could impact QuestCorp in this financial year?
Kamal Pal Huda: So it is having some amount of impact on our results, as it would be evident from the results, that the IT staffing sits in the workforce management platform for us. The open positions are definitely down to what the normal levels it used to be. So this business has had an impact on our results but what we have done in this time is we have actually tried to right-size our cost. We have worked on our IDC cost. And I am happy to state that we have been able to bring down our IDC cost from 5.7% to 5.4% to compensate for the margin reduction which is coming due to the slowdown in the IT hiring space.

What is the out-of-jail card then, the slowdown in IT is real, I will go by the commentary of large-cap IT companies, they are not even keeping up with the campus offers? I look at startup hiring, it is almost at a multi-year high. I look at Google/Alphabet, Amazon, even SaaS companies all of them are saying that we need to cut costs to manage our profits. All of them are laying off. If the backdrop is not hiring, it is layoffs, how will you come out of this? What is out-of-jail card?
Guruprasad Srinivasan: Let me give you a little background on what are IT sectors that we work with. Our exposure to IT services business is about 35%. If I roll back to FY23 Q1 and Q4, the way hiring happened in IT services sector was phenomenal. And that also impacted us in H2 because obviously, that demand tapered down. Having said that, we also have good exposure and we work with product companies, engineering companies, and auto companies is where our demand is coming from currently.

And if I were to be a little more comparative there, earlier, the tech talent was hired by largely IT services companies but we are also getting a lot of demand from non-tech companies like banks, back office management, BPM management companies, so where we are doing substantial hiring like AIML, RPAs and a large process on SAP in itself.

So that is part of the product for us. So our demand would not be as expected. I mean, it is right that IT services definitely continue to contribute. We are eagerly waiting for them to get back into hiring but our demand is down by 60% in a normal, comparable way. But however, in that 60%, we are ensuring our fulfilment gets better. So we are progressing from a low margin to a high-niche kind of fulfilment that we are currently doing and sustaining this phase. That is what is keeping our overall bottom line healthy at the moment.

Kamal Pal Huda: And to add to what Guru said, IT staffing in India contributes 7% of our overall workforce management revenue. So that way, we are, to that extent, rightly de-leveraged because we have huge exposures to BFSI, which contributes such a 31% to the general staffing revenue, retail, which does 22%, telecom, and industrial sector. So while there is, like Guru said, a bit of a slowdown in IT, but then there are other sectors who are doing well for us.