Quess Corp

Quess Corp reported Q3 FY25 revenue of ₹5,519 crores, marking a 14% YoY and 7% QoQ growth. EBITDA stood at ₹197 crores, growing 6% YoY, but margins contracted to 3.6% (down 20bps QoQ and 27bps YoY) primarily due to festive season bonus pass-throughs and demerger investments. PAT decreased 9% sequentially to ₹85 crores, influenced by ₹22 crores in demerger-related costs, but was up 34% YoY. The company declared an interim dividend of ₹4 per share.

The Workforce Management platform generated ₹4,047 crores in revenue, an 18% YoY and 8% QoQ increase. However, its EBITDA margin dipped to 2.3% (contracting 17bps QoQ and 34bps YoY) due to seasonal bonus payouts (approx. ₹160 crores) and macroeconomic headwinds, particularly in Singapore due to visa restrictions. Management aims to stabilize margins at 2.5% by year-end, with a long-term 'North Star' target of 3%. The segment added 5,100 associates in Q3, led by consumer, retail, and telecom, and secured 124 new contracts with an ACV exceeding ₹150 crores. The company is focusing on verticalization to deepen service offerings and improve outcomes.

The OAM platform delivered ₹800 crores in revenue, growing 15% YoY and 4% QoQ, with EBITDA at ₹38 crores (up 4% YoY). Growth was driven by telecom and industrial verticals, which grew over 30% YoY. The acquisition of Archer Industrial Services' food and catering business is expected to establish a ₹300 crores exit run rate for the F&B segment. The telecom infra business (Vedang) is on track to achieve an annual run rate of ₹300 crores by FY25 exit, demonstrating robust performance.

GTS reported revenue of ₹646 crores, an increase of 10% YoY and 3% QoQ. The Tech and Digital business grew 5% sequentially, with platform-based services growing 11% sequentially. EBITDA margin was 17.1%, slightly lower by 40bps QoQ due to investments in sales and leadership. The segment secured 61 new logos with ACV up 26% sequentially to ₹147 crores, with BFSI and media being key growth drivers. The focus remains on high-value offerings in digital and large, long-term deals.

The product-led foundit business registered a weak quarter with revenue of ₹26 crores, a 29% YoY decline, and a negative EBITDA of ₹9 crores. This was attributed to seasonal weak hiring, IT/ITeS sector headwinds^🌐, and leadership transition. Despite the challenges, cash burn for the 9-month period significantly improved to ₹25 crores from ₹63 crores in the prior year. Management is confident that foundit will resume a 20%+ YoY revenue trajectory in the near term and aims for breakeven at ₹45 crores revenue per quarter, targeting this within the next 3 quarters.

Quess Corp's 3-way demerger plans are progressing on track, having received NCLT approval and shareholder/creditor consent in December. The company expects final NCLT approval during Q4 FY25, with the demerged entities anticipated to be listed by Q1 FY26. This transition is viewed as a critical step to unlock shareholder value and position each entity for sustainable long-term growth, despite incurring demerger-related costs of ₹22 crores in Q3.

Management discussed the new labour code, noting that rule drafting is largely complete and implementation is expected to aid formalization and ease of doing business. While a national living wage concept could lead to an increase in minimum wages, Quess's contracts are structured to pass on such changes to consumers, ensuring that absolute rupee earnings are protected. This means revenue would increase, though percentage margins might show some temporary stress.