Quess Corp — Q4 FY25 earnings call

Call held 20 May 2025

Management summary

Quess Corp reported a strong full year FY25 performance, marked by a successful demerger, significant debt reduction, and robust adjusted PAT growth. Despite a transitory volume impact in Q4 due to an NBFC client ramp-down, the company is confident in regaining momentum and achieving double-digit revenue growth with improved margins. Strategic focus on high-margin segments and operational efficiency initiatives are expected to drive future value creation.

Highlights

  • Full year FY25 revenue stood at ₹14,967 crores, up 9% YoY.

  • Full year FY25 adjusted PAT was ₹210 crores, a healthy 52% growth YoY.

  • Q4 FY25 revenue was ₹3,656 crores, with an EBITDA margin of 1.8%.

  • The company is now net cash positive with ₹255 crores as of March 31, 2025, and gross debt of ₹12 crores.

  • Board recommended a final dividend of ₹6 per share, bringing total FY25 dividend to ₹10 per share.

  • New dividend policy targets returning up to 75% of free cash flow to shareholders over a 3-year block.

  • General Staffing added 89,000 new associates in Q4 but saw a ramp-down of 38,000 from an NBFC client.

  • Professional Staffing delivered its best-ever EBITDA and operating margin, with Q4 revenue up 26% YoY.

Key financials

2 periods

Headline

  • Net Cash (Mar 31, 2025)
    ₹255 Cr
  • DSO
    37 days

FY25

  • Revenue
    ₹14,967 Cr
    YoY +9%
  • Adjusted PAT
    ₹210 Cr
    YoY +52%
  • EBITDA
    ₹262 Cr
    YoY +12%
  • EBITDA Margin
    1.8%

What they filed

Q1 FY27: revenue up 14.5%, net profit up 60.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue3,705 4,019 3,656 3,651 3,832 +3%3,930 −2%3,892 +6%4,182 +15%
EBITDA69 62 67 70 77 +12%80 +29%86 +28%85 +21%
Net profit51 42 -95 51 52 +2%55 +31%64 +167%82 +61%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

Share of Revenue (FY25)
₹14,962 Cr Total
  • General Staffing ₹12,995 Cr 86.9%
  • Overseas Business ₹1,142 Cr 7.6%
  • Professional Staffing ₹825 Cr 5.5%

Guidance & targets

Dividend

  • Free Cash Flow Payout Dividend · next 3 years cumulatively · High confidence up to 75%
    the company expects to return up to 75% of free cash flow to shareholders in the form of dividend or share buyback over the block of 3 years cumulatively

    — Guruprasad Srinivasan

Profitability

  • Adjusted ROE Profitability · from this year onwards · High confidence crossing 20%
    Our adjusted ROE for the year stands in high teens, and we are confident of crossing 20% mark from this year onwards

    — Sushanth Pai

  • EBITDA Growth Profitability · coming years · Medium confidence non-linear
    Quess is now fully focused on delivering double-digit revenue growth and a non-linear EBITDA growth trajectory.

    — Sushanth Pai

Debt

  • Debt Status Debt · coming quarters · High confidence debt-free
    We are on track to becoming debt-free in the coming quarters.

    — Sushanth Pai

Margin

  • EBITDA Margin Margin · by exit of this year · Medium confidence over 2%
    By exit of this year, we should be somewhere over 2%.

    — Guruprasad Srinivasan

Headcount

  • NBFC Impact Recovery Headcount · next 1 to 2 quarters · High confidence offset loss
    we are quite bullish that we should be able to, in the next 1 to 2 quarters, be able to offset from the kind of headcount loss that we've had in this one-time event.

    — Lohit Bhatia

Working Capital

  • Cash Flow Conversion Working Capital · coming year · High confidence 70% or 75% plus levels
    So that sort of operating cash flow will continue for the coming year as well. 76% of our business is in the collect and pay model, and that will continue as well. So we have a very strong mechanism to generate cash flows for the coming year at 70% plus levels.

    — Sushanth Pai

  • DSO Improvement Working Capital · moving forward · Medium confidence 1 or 2 days
    we would definitely want to aim at getting it better, but would it further drastically come down from here? It may not be, but we can still better by 1 or 2 days as we move forward.

    — Guruprasad Srinivasan

Market context

  • Revenue Growth Revenue · coming years · Medium confidence double-digit
    Quess is now fully focused on delivering double-digit revenue growth and a non-linear EBITDA growth trajectory.

    — Sushanth Pai

Risks & concerns

  • NBFC Client Ramp-down

    medium

    A client-specific move led to a ramp-down of 38,000 associates, impacting Q4 revenue by 7% and margins by 4%, but management expects recovery in 1-2 quarters.

    Management acknowledged

  • Overseas Visa Restrictions

    medium

    Singapore, the largest overseas geography, continues to face visa-related headwinds for IT staffing, leading to a 5% YoY revenue decline for the segment.

    Management acknowledged

  • Transitory Volume Impact in General Staffing

    low

    Q4 saw a transitory volume impact in General Staffing, primarily due to the NBFC client ramp-down, but management is confident in regaining momentum.

    Management acknowledged

Q&A highlights

3 direct
Exceptional Items and Discontinued Projects Direct
So, the projects are specifically to utilities and the skill development area where we are working. So, it is not something that, while we are accelerating the provision, as Sushanth said in his speech, we'll still continue to drive whatever the collections that are pending there.

Clarifies the nature of discontinued projects (utilities, skill development) and the components of the exceptional item, assuring no cash outflow.

Asked by Deep Shah

NBFC Impact and FY26 Headcount Growth Direct
this is an NBFC circular, which required the customer to do what is called in-sourcing. And because of that in-sourcing, that 38,000 numbers have been there. But when you look at our open mandate book even today at 49,000... we are quite bullish that we should be able to, in the next 1 to 2 quarters, be able to offset from the kind of headcount loss that we've had in this one-time event.

Explains the reason for Q4 headcount decline (NBFC in-sourcing) and provides a clear timeline for recovery, indicating confidence in future growth.

Asked by Deep Shah

Medium-to-Long Term Margin Aspiration and ELI Scheme Direct
on the margin front, what we have said is for the full year, our margins will accelerate in terms of growth far ahead of the revenue growth. However, like we explained because of the onetime impact of the NBFC client, it will take some time to recoup those revenues, and it will come during the year. So, the margin profile as we go along, slowly will come from 1.8%. And like Guru alluded to, it will be close to 2% as we go along.

Addresses the future margin trajectory, linking it to higher-margin business mix and recovery from the NBFC impact, while also providing insights into government's ELI scheme.

Asked by Deep Modi

3 min read 8 chapters

Detailed narrative

Successful Demerger and Strategic Transformation

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.

Robust Financial Health and Shareholder Returns

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.

Q4 and Full Year FY25 Performance Overview

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 items, 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.

General Staffing: Headcount Dynamics and NBFC Impact

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 and Overseas Business Highlights

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.

Margin Trajectory and Operational Efficiency Initiatives

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.

Exceptional Items and Discontinued Projects

Q4 FY25 included ₹158 crores in exceptional items. 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.

Market Potential and Government Support

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.

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