Quess Corp

Quess Corp successfully completed its 3-way demerger ahead of schedule, marking its first earnings call as an independent entity. This transformation aims for sharper focus, value unlocking, and sustained growth. The company has also achieved 'Great Place to Work' recognition for the sixth consecutive year, underscoring its commitment to organizational excellence.

The company significantly reduced its debt levels post-demerger, achieving a net cash position of ₹255 crores as of March 31, 2025, with gross debt at a minimal ₹12 crores. The Board recommended a final dividend of ₹6 per share, bringing the total FY25 dividend to ₹10 per share. A new dividend policy commits to returning up to 75% of free cash flow to shareholders over a 3-year cumulative block, reflecting strong financial confidence.

For Q4 FY25, Quess reported a revenue of ₹3,656 crores with an EBITDA of ₹67 crores, maintaining an EBITDA margin of 1.8%. The reported PAT was negative ₹95 crores due to exceptional item^📎s, but adjusted PAT stood at ₹63 crores. For the full year FY25, revenue grew 9% YoY to ₹14,967 crores, with EBITDA increasing 12% YoY to ₹262 crores. Adjusted PAT for the full year was ₹210 crores, a healthy 52% YoY growth.

The General Staffing segment reported Q4 revenue of ₹3,149 crores, up 3% YoY but down 10% sequentially. The quarter saw 89,000 new associates added, but a ramp-down of 38,000 associates from an NBFC client impacted growth. This client-specific move, driven by an NBFC circular for in-sourcing, caused a 7% revenue and 4% margin impact. Management is confident in offsetting this loss within the next 1-2 quarters, supported by 49,000 open mandates.

Professional Staffing delivered its best-ever performance, with Q4 revenue up 26% YoY to ₹219 crores and EBITDA growing 34% YoY to ₹20 crores, achieving a 9.4% margin. This was driven by a focus on GCCs and niche technology roles. The Overseas business reported Q4 revenue of ₹287 crores, down 5% YoY, facing visa-related headwinds in Singapore. However, growth in the Middle East and APAC (Malaysia, Philippines) helped mitigate some impact, with Overseas EBITDA growing 41% YoY to ₹17 crores.

Quess aims to improve its overall EBITDA margin from the current 1.8% to over 2% by the exit of the current fiscal year. This will be achieved through a strategic shift towards high-margin core segments, enhanced capital efficiency, and operational improvements leveraging AI and automation for sourcing productivity and job fulfillment. The company's focus on higher-margin businesses is expected to accelerate profitability growth beyond revenue growth.

Q4 FY25 included ₹158 crores in exceptional item^📎s. This comprised ₹119 crores for accelerated expected credit loss on discontinued projects (utilities and skill development), ₹26 crores for goodwill impairment (₹7 crores in Stellarslog and ₹19 crores in Quess International Services), and ₹13 crores for demerger-related expenses. Management clarified these are non-cash items with no impact on operational liquidity, and collection efforts for discontinued projects will continue.

Quess highlighted India's large market potential for formalization, with the staffing industry growing at 13-14% and penetration still low at 1.1-1.2%. Management is keenly awaiting the final rules for the government's Employment-Linked Benefits (ELI) scheme, which could reduce costs for employers, aid associate mobilization from rural to urban areas, and improve attrition rates, benefiting large staffing companies like Quess.