Ladies and gentlemen, good day and welcome to the TeamLease Services Limited Q1 FY 2023 earnings conference call. Host today is Mr. Aniket Pande, Lead Technology Analyst from ICICI Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. On the call, we are pleased to have Mr. Ashok Reddy, Managing Director and CEO, Ms. Rituparna Chakraborty, Executive Vice President, Staffing, Mr. Sunil, Senior VP, Specialized Staffing, and Ms. Ramani Dathi, CFO. We will start off with the remarks from the management, after which we will open the floor for Q&A session. Thank you once again for joining us today. I now hand the conference over to Mr. Ashok Reddy. Thank you, and over to you, sir. Thank you. Good evening, and thank you for joining the call. I think on a broader base, we continue our growth journey. We've added about 9,000 headcount in the quarter. We had revenue and PBT growth year-on-year. Obviously our margin has had a reduction, and this is largely on account of the increased salary hikes that we have seen for the associates and training. An increased investment that we did in our own core teams with the salary hikes for the year and some seasonality that comes in from some of the businesses. While we did see some tightening in some sectors like manufacturing in Q1 and in some other sectors because of the funding freeze that has come about, we did see some layoffs and deferred hiring. We do see that the positions, open positions are increasing as we go forward, and the demand seems to be coming back for hiring in Q2. We've also added over 125 new logos during the quarter. I think on the back of the new logos and the existing clients, we see the continued trajectory of growth happening as we go forward. On the staffing front, it's the first quarter that we have crossed the 2 lakh associate count. I think we added over 13,000 associates in the quarter and maintained most of the metrics of PAPM, DSO, and productivity to be consistent with the previous quarter. Here also we've been adding new logos and doing better on hiring, and we continue the focus on productivity. Obviously, with the increasing wage levels and the consistency in PAPM, there has been a margin pressure, and we largely look to address this to the bottom line by scale and productivity. Various technology products and modules that have been getting ready at our end, which go live over the coming quarters, will drive faster servicing and self-service into the customer and associate base. The vertical strategy continues to play out and deliver to the aspect of demand, client logo acquisition and growth. However, the Q1 slowdown in certain sectors did impact a few verticals. You know, some of the sectors being EdTech, Fintech, eCommerce, and some new age companies. We believe this was a correction in the making, and the opening up of new demand and open positions that we see in Q2 should sustain the growth as we go forward for the staffing industry segment in our business. I will have Ritu cover on the Degree Apprenticeship side and Sunil on the specialized staffing before Ramani gives the cover on the financial side before we get into questions. Thank you. Thank you. Thank you, Ashok. Good afternoon, everyone. Hope all is well at your end. Our vision for Degree Apprenticeship, that is DA, is to move beyond the regulatory terms of NAC, NATS, NEEM, and build the future of higher education with a strong wish to dignify livelihood for our youth. Given we've seen success in staffing, we've chosen to reorganize the DA business as well. Primarily to build intimacy with the industry and academia on one hand and create pathways for the public policy to be in line with the emerging needs of industry and our youth. There are four industry-led business units from Q1 under DA. Auto and industrial, BFSI and technology, consumer, retail, and eCommerce. Going ahead, there is opportunity for two or more business units based on anticipated demand and ever-widening skill issue that corporate India is grappling with. As evident from numbers in absolute terms, there is degrowth from the previous quarter, largely on account of one of our larger customers choosing to shift a large chunk of our apprentices to employment status. Positive outcome for the apprentices is how we're looking at it. Second, we made a choice to focus on higher margin and Degree Apprenticeship programs, and hence most of the additions during the previous quarter at a marginally higher realization than the previous quarter. Third, slowdown in intake and particularly hiring of apprentices in three of the business segments between March and May. We do believe it's a temporary phase. I think most of the pent-up demand from employment and expansion needs, immediate expansion needs were prioritized by some organizations. Nonetheless, we've added about 31 new logos during the quarter with an encouraging appetite for Degree Apprenticeships. The focus ahead for DA are five goals. One, scale up on growth of Degree Apprentices particularly. Two, build a compelling product portfolio by curating industry-led work integrated curriculums and regulatory legitimacy by creating alignment between the UGC, Ministry of Education, and MSDE. Third, rapid innovation in digital learning for apprentices. Fourth, enable a strong supply-side network to onboard students nationwide. Lastly, strengthen brand advocacy around the future of education. That's the way forward. Thank you. Sunil, over to you. Thanks, Ritu. Good evening, everyone. We have been able to maintain a consistent year-on-year growth story for specialized staffing, despite some amount of delay in hiring decisions in early part of the quarter. The revenue grew by 26% year-on-year, while sequentially there was a drop by 1%, as most of the headcount additions happened in the later part of the quarter. The impact of the additional headcount can be seen in the subsequent quarters. The PBT grew by 25% year-on-year, while sequentially, again, we saw a marginal drop of 30 basis points as there was an increase in the wage bill post annual appraisals, which impacted, as well as we also made some investments in talent and technology. Overall, the demand for tech talent across IT and non-IT companies continued to be robust due to the super cycle of digitization post-pandemic across the industries. What we are witnessing is that, you know, despite the macroeconomic situation, we believe we are in a multi-year super cycle of growth rather than a 1-year spurt. This shall mean there would be tech talent requirement on an ongoing basis. While we have been the partner of choice within IT sectors over the past few years, we have now started focusing on becoming the tech talent supply expert across non-IT companies as well. What this will do is that this will put us in a position, where we will be, you know, tech talent supply experts across the sectors. We have been constantly revisiting the product portfolio in our telecom and engineering business by replacing the non-tech mandates with tech mandates. Over the next few quarters, this change of portfolio will get completed, and we can surely expect some more improvement in our margins. As mentioned earlier, the pandemic has accelerated digitization and technology spend. This is also evident from the 15 logos we bagged in this quarter. The logos were a mix of IT and non-IT companies, keeping in line with our strategy. The requirement is for tech talent supply across sectors. Just to give a flavor of the logos we bagged, we have clients from IT, engineering, healthcare, pharma, and logistics, where obviously we have to supply the tech talent. Our ability to supply quality tech talent across industries, strong sales and account management teams, ever-improving operational efficiency, and focused approach to gaining market share makes us believe that we will continue to deliver great results in the subsequent quarters. Thank you. Thank you, Sunil. We are back to 100% capacity in terms of core employee plans, headcount, office infra, travel, printing, et c. We are not expecting any material increase in costs for rest of the year, and the current run rate shall continue. FTA productivity and TAPM in staffing business have remained flat between Q4 and Q1, and funding exposure, DSO, has been maintained at Q4 levels. Sequentially, there is a drop in margins, which is mainly on account of two to three variables. We had a 12% hike in core employee salary, translating to about INR 5 crore-INR 6 crore on a quarterly basis. Historically, this number used to be 7%-8% of annual hike. And this time, in line with the market correction and inflation, we have taken a 12% overall appraisal. There is also a seasonal impact in our EdTech business to the tune of INR 5 crore in revenue. This is in line with the student admission cycle. There is an Ind AS 116 impact of INR 2 crore. Regarding the 80JJAA matter, we are waiting for the hearing date on the writ petition filed with the High Court of Karnataka. During this quarter, we have also received Lower Deduction Certificates from the Income Tax Department on withholding taxes, including our claim on 80JJAA. PF Trust data migration is currently in progress and is expected to get completed by end of September. We continue to remain debt-free barring INR 10 crore-INR 15 crore of working capital limits at subsidiary level, and we currently have a free cash of INR 250 crore. We have an active M&A pipeline mainly in specialized staffing and HR tech solutions, for which some of the internal cash accruals may be deployed. That's it from my side. We can take questions now. Thank you. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on the touch- tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Thank you. We take the first question from the line of Vidit from IIFL Securities. Please go ahead, sir. Hi, thanks so much for taking my question, and good evening to everyone. My first question was, you know, on the NETAP program, and the reorganization of it, you stated that, you know, you now focus on higher margin apprentices and customers. Could you indicate what sort of margins that we were making earlier on these apprentices and what we can look at now and going forward? The new NETAP program, roughly INR 550-INR 560 rupees was our realization per month on a training. Majority of the NETAP program had a training program attached to it, which was around creating employability development. I think the linkage that we are trying to do in conjunction with the regulatory authorities is a Degree Apprenticeship program, which is to say that it's just not a certificate program, but can align all the way up to a degree. This also, we believe, will help the retention of the trainees with the company, during that 3-year period where the program is being paid for. Hence, I think what we are looking at is an over and above fee that we will charge the corporate, for the degree linkage and learning for the trainee while they're deployed there for the three years, earning the degree program. At this point in time, I think the pricing is still being worked out and will be in conjunction with the authorities. We believe, another INR 200, INR 300,and INR 400 is something that we would be able to move the needle, as we go aggressively up on the numbers towards the Degree Apprenticeship program. This INR 200-INR 300 would be after factoring in the higher costs involved with, you know, moving to the degree. Yes. This is what it is. Yeah. This is essentially after all the pass-through costs that one can factor in. Yes. I think we will have to have open architecture with universities to the aspect of providing the degree linkage. The charge to the corporate would be the comprehensive cost, including what has to be passed through to the university, and then there'll be something left at our end. Okay. Understood. Also, just in terms of the average salary per associate, if I calculate. Your general staffing headcount has grown roughly 7% YoY. The increase in quarter-over-quarter, sorry, not year-over-year, but the increase in the revenue is roughly 4%. However, you mentioned that, you know, there's been a hike in associate salaries. It's not really being reflected in the numbers. Are these is this hiring happened in the back end of the quarter and is it just a mathematical thing, or are you hiring at a lower level or lower salary mix? Hi, Vidit. This is mainly on account of timing of the hiring. Some of these additions happening at the end of the quarter, so that would reflect in the 10% QoQ growth, whereas revenue is based on the billings of full quarter. Okay. Understood. Just one last clarification I needed in terms of the disclosures in the presentation. You know, if I deduct the consolidated EBITDA of the quarter on slide four, sorry, and I reduce the segmental EBITDA, I get a massive increase in the unallocated EBITDA for quarter and quarter. You know, the unallocated stuff is increasing from INR 6 crore in 4Q to roughly INR 14 crore in 1Q. Could you just explain what this increase is because of, and, like, is this the number to work with going forward? In this quarter, we have a higher other income, almost to the tune of INR 14 crore, out of which close to INR 11 crore is relating to the businesses. These are some of the provisions which have been created during the last two years during COVID times. Now, with the follow-up, we got collections and those provisions have been reversed. That's what is contributing to higher other income. Overall, in terms of unallocated expenses, our run rates are more or less in line with Q4, and we are not expecting any material increase in upcoming quarters as well. I was talking of the other expenses only, which is going up from INR 6 crore-INR 14 crore. If you look at the presentation, slide four, you know, the EBITDA before is on a consolidated basis INR 25 crore, whereas the segments add up to roughly INR 40 crore. We typically have anywhere between INR 6 crore-INR 7 crore of quarterly allocated. This time it is slightly on a higher side because of Ind AS 116 adjustments and few other timing differences, wherein the items have been allocated between businesses and unallocated. Okay, got it. This is a run rate that you would have. Is it a one-time Ind AS impact or is this what? Yes, it's a one-time impact. Going forward on a quarterly run rate basis, we should be back to INR 6 crore-INR 7 crore per quarter. Okay, got it. Thank you so much for taking my question. Thank you, Mr. Vidit. A reminder to all the participants, anyone who wishes to ask a question may press star and one on their touch-tone telephone. We'll take the next question from the line of Mr. Aniket Pande from ICICI Securities. Please go ahead, sir. Hi, sir. Thank you for the opportunity. You know, like, we have seen moderation in hiring in tech companies in this quarter. Just wanted to understand how the open positions have moved in this quarter and outlook for the same. Also any initial comment on hiring trend for the upcoming festival season. Sunil, you want to take the. Yeah. Hiring in the IT, and then I'll cover the festival season. Sure. Regarding the hiring, we saw some slowdown in the first half of the quarter. As you could see that most of our additions have started happening in the latter part of the quarter. Currently we are seeing a good number of open position and decision-making is very quick. We don't see, you know, a slowdown at our end. You know, as of now, we don't see that. Moreover, even if there is any kind of hiring slowdown on the permanent positions, it is a good opening for us because during these times, contract staffing, which is the preferred mode, because you know that's what organizations do. Going by our discussions with the customers, the talent strategy is clear from all our customers that, you know, they're going to continue ramping up the contract staff hiring. Just to add to that, Aniket, I think Q1 did see some softening and internal stock taking by corporates on the hiring front. The exuberance that we had last year on the IT front didn't carry through in Q1. Towards the end of the quarter and going forward into Q2, the open positions have started coming in and, like Sunil was calling out, the customers have been faster in trying to drive the closure of those positions. I think going forward, the outlook for hiring in the specialized staffing still seems to be healthy. As was called out earlier, I think we continue to focus on letting go of some of the lower margin mandate in the specialized staffing side and focus on the higher margin mandate. While, you know, that strategy would also continue to play out. I think the aspect of the festive hiring we normally get to see towards the end of Q2 and start of Q3. As of now, you know, hopefully, with the good monsoon, the expectation of the FMCG and other companies is that the retail demand, especially from the rural areas, will come into play. They have started planning for their headcount growth for the festive season. We will hopefully start seeing more of that coming to play, as open positions on the table for hiring towards the second half of the quarter. We see, we stay optimistic that, given no surprise on anything else, that the demand should play in, which should play to the requirements on open positions leading to more hiring as we go forward. Yeah. You know, just one clarification on I mean, from ma'am, Ramani ma'am you said on the earlier question that the big difference which is there in sum of segmental EBITDA and reported EBITDA, it is almost like around INR 14 crore this time, okay? I mean earlier used to be at around INR 4 crore-INR 5 crore on a quarterly basis. Going forward, you said it will remain at around INR 6 crore-7 crore? Yes. Going forward, the quarterly run rate will remain around INR 6 crore-INR 7 crore. Okay. Thank you. Thank you, sir. We'll take the next question from the line of Mr. Manish from Solidarity. Please go ahead, sir. Thank you for the opportunity. I have three questions. The first one, sir, I wanted to understand that in the specialized staffing business, what is the value proposition for an employee? Because would an employee not prefer a more permanent job with an IT company rather than, you know, be on the rolls of a company where the contract could expire and then, you know, they have to look for another job? Yeah. I think, you know, in all of temping, Manish, I think the preferred choice for individuals would be to be on the rolls of the company rather than through a staffing company. I think it's not a lifestyle choice yet in India to be a temp. I think the aspect of hiring and onboarding temps is more a corporate choice at this point in time. What it does for a candidate is give them an opportunity to work with some of the big brands, which otherwise they might not have access to. Also what happens is a lot of the companies use the element of temping as a way to take the employee on a test drive to see how performance is. As permanent open positions come in from their end, they do convert a large lot of these people onto their roles because they've already worked with them, know how they are performing and delivering, and hence there's a higher comfort level on that front. I think in all, at this point in time, it's more the element of staffing is driven more by employer choice than by employee choice. It's not a lifestyle choice to be a temp for most candidates. The fact that we have marquee clients and good open positions effectively drives the candidates to opt in and kind of expose themselves to the customers to the big name, so that they can get onto their roles in the longer run. When an employer will convert a temp employee to a permanent position, does TeamLease earn any revenue on that? We have a sliding scale of an absorption cost, depending on the tenure that the temp has been with us. When they get absorbed, if they get absorbed earlier, we get a higher amount. If they get absorbed at a later period, we get a lesser amount. Got it, sir. My next question is on 80JJAA. In our general staffing business, you know, given that this section is only applicable for employees who earn less than INR 25,000 a month, what percentage of our general staffing business, you know, would the employees be earning in this bracket, which entitles us to this benefit? Second is that as minimum wages go up, by which year do you think that, you know, this tax benefit will actually become marginal and not relevant? Yeah. Hi, Manish. While the average salary in our general staffing is upwards of 22,000 INR per associate per month, the median is still around 18,500, 18,600 kind of number. Majority of our associates, almost 70%-72% of our staffing associates are under 20,000 INR of monthly salary. In terms of increase in minimum wages and when we can hit that number, at this point in time, we don't have a concrete visibility on that. For a long time under 80JJAA section, when it was extended for manufacturing entities, the limit was kept at 10,000 INR per month for almost 10-12 years, and later got now increased to 25,000 INR five years back. As and when the minimum wages go up, we expect that the, I mean, this particular limit of INR 25,000 can also be increased further on that. Okay. My third and last question is that, you know, in HR tech, are we doing anything today which is revenue generating? What investments are we specifically making in HR tech, which can add revenue beyond the core staffing function? Our HR tech business currently is about INR 35 crore in revenue, primarily on the back of what we call compliance and payroll outsourcing. These are outsourcing services that we provide to corporates. Work with about 500 corporates on the compliance outsourcing. We administer their entire compliance, labor law compliances and help them out on that front. We also do payroll processing for corporates. We have BPO services that we offer both to our internal employment clusters and operate as a service to outside clients. A combination of that is about a 30+ crore revenue top line. We believe that, you know, a larger focus on that front to drive sales and client acquisition can, you know, the upside opportunity in that is quite high, and that's something that we are looking at. Also, I think while we will focus on organic growth by adding on more sales people and delivery capabilities, there is opportunity for inorganic growth in HR tech, primarily from the aspects of technology platforms that can complement. Today, while we are largely driven on service delivery, I think what we are looking at is also platforms that can move towards self-service. SaaS solutions for the longer tail of the customer base. I think that is really where we believe inorganic can complement the element of the organic business growth that we have. Is this more of a software business or would this be more of a service business supported by software? It will be a combination of the two. As of now, what we have internally other than DWS is all a service business. The DWS is a product business. I mean, as we go forward, we want to have a combination of product and services. Right. My last question. Sorry, I'm delayed at this point. Mr. Manish, may we request you to turn back to the question queue, sir? We have participants waiting for their turns. Sure, ma'am. Thank you, sir. We take the next question from the line of Mr. Hiten Jain from Invesco. Please go ahead, sir. Yeah, hi. I've got questions on margins. This unallocated part, I've not been able to clearly understand that what is this one-time INR 10 crore of impact. It's a large number, given a quarterly EBITDA of around INR 25 crore. At the same time, when you are guiding that on a steady-state basis, it will go from INR 4 crore-INR 5 crore to INR 6-INR 7 crore. I think, I mean, ideally, there should be some operating leverage and this number should ideally keep going down. Why are you on a steady-state basis? What is leading to that increase? At the same time, I would also like to understand the drop in margins in staffing. While on year-on-year your revenue growth is 37% in staffing, but on EBIT-EBITDA basis it's near 12% growth. There has been some investments here also this quarter, which look really high. At the same time, even other HR services, there was hardly any profits compared to last quarter. Hi, Hiten. First, let me address your question on staffing margins. There are two to thear variables which have impacted the margins in staffing business. One is inflation in associate salaries. It is higher than what we have planned for. While the PAPM has remained flat, it is around INR 700 for the last two to three quarters. The gross salaries of the associates have been consistently going up quarter on quarter. Also, between Q4 to Q1, we have our own core employee hikes. In the past, we used to have about 7%-8% annual hikes to our core employees. This time it went to almost 12%. This is in line with the market corrections that are happening. Also, as we have called out earlier, we made investments in expanding the teams, especially in the hiring and account management. Now all the teams are up to full capacity. We are not expecting any further increase in our current capacity, be it in team size or office rent and other costs. Coming to the other question on unallocated EBITDA. This quarter, there is an Ind AS 116 adjustment. We are moving to a new office nearby. We have to terminate our current lease contract and enter new ones. On account of that, there are some one-time impacts. Also when we re-create a provision and write back a provision upon collection, depending on the timing, whether we write back in the same financial year or in a subsequent financial year, it can hit the unallocated of the business. Maybe we can connect separately and walk you through the details on that front. Otherwise, as I have indicated, going forward, the quarterly unallocated EBITDA would be in the range of INR 6 crore-INR 7 crore. Other HR services? Other HR services, we have mainly two businesses, EdTech and HRTech business. EdTech, there is a seasonality impact in line with the student admission cycles. This is again in line with our internal plans. Q2 onwards, there will be a higher revenue and, I mean, we are expecting a much higher year-on-year growth in other HR services compared to the other two verticals. Got that. Thanks. I'll get back to you offline for this unallocated part. Thank you. Sure. I'll guide you. Thank you, sir. Ladies and gentlemen, in order to ensure that the management is able to address all the questions from all the participants in the conference, please limit your questions to two per participant. Thank you. We take the next question from the line of Ashish Chopra. Please go ahead, sir. Yeah, thanks for the opportunity. Ramani, before my question, just a clarification. This provision under Ind AS 116 that you are explaining explains the entire INR 7 crore of delta that we saw this quarter in unallocated or was there anything else also to it? This is about half of that impact. The other half is in terms of increase in other allocations to corporate this time and the timing difference, as I mentioned, in creating the provisions and write back. Okay, maybe that's something that we probably understand from you in detail separately. Secondly, out of the total INR 1,806 crore of employee expenses that you have, would it be possible to just give a ballpark sense on how much of that would be the cost towards your core employees versus the staff associates? For the current quarter, our core employee cost is roughly about INR 48 crore, INR 48.5 crore, and the rest, the balance is for the associate employees. Okay. This you mentioned would have gone up by INR 5 crore-INR 6 crore this quarter, based on the high. Yes. This is Q4 to Q1. Yes. This number going forward should not move materially. The INR 48.5 crore is what should be there and about. Yes. Yes. We are at almost close to 100% capacity, and this number should continue for the other three quarters of the year. Understood. Lastly from my side, could you just explain, you mentioned, I think in the opening remarks, the reduction in NETAP due to one particular large customer. Just in details in terms of what transpired there. Actually, the customer wanted to convert them and take them as employees. That's pretty much what happened. Essentially, it in many cases a natural progression. Usually it's not 100%, but in this case, the customer made a choice to kind of move them to regular form of employment or the apprentices. Okay. Would that have been a very large number? I mean, X of that, would we have grown in this quarter because it's overall negative number and the segment was growing quite handsomely in the past few quarters. Yeah. Even if this conversion would not have happened, I think the quarter would have remained muted for us. That's the reason I kind of explained a little bit on account of the fact that we are choosing to kind of not pursue low. I mean, essentially we're looking at higher margins and looking at the apprenticeships mandate specifically. Also hiring in three of the verticals were muted. I think it's something which is not likely to be. I think just to add on to that, I think, I mean, even if that client had decided to stay on, we would have been kind of flattish on numbers on the NETAP front. Some of the muted demand and slowdown in some sectors and the concentration that the apprenticeship program has did put a demand pressure for growth. I think the current approach that the business has taken to verticalize and drive a focused element of sales industry-wide should get the momentum of open positions back on track. I think again, in Q2, we do look at a net growth coming about. Sure. Got it. Thanks. Thanks so much for answering my questions. Thank you, sir. We take the next question from the line of Mukul Garg from Motilal Oswal Financial Services. Please go ahead. Thank you. Ramani, I just wanted to follow up on the margin aspect itself. You know, the drop in the margin on quarterly basis has been, you know, quite sharp, even if you adjust for, you know, the Ind AS 116 and other corporate level impact. Maybe, you know, it probably makes sense to look at the wage inflation both on core and associate side on a YOY basis instead of, you know, versus what the last figure was. If you can just help us understand what is leading, you know, cause for the margin drop here. Is it more to do with your core employees or your associate level inflation is also, you know, kind of continuing and kind of creating a headwind on your profitability? Ashok, how should we see this going forward? Do you think there is scope for, you know, taking up our markup, given that, you know, the cost of associates is going up and our markup is not increasing by the, you know, by the same quantum? I think both elements that you called out earlier account for the element of the percentage margin drop. One is that the wage hike has been higher on the associate front, hence our billing goes up, while our PAPM doesn't go up in the same proportion. Hence, at a percentage basis, it does end up being lower. We've also had our own core employee revisions factored into the cost, which lead to a depression in the margin front. I think the element of our core employee cost getting factored in happens in Q1, will stay for the next three quarters, so we'll not have that impact carrying over. From that perspective, I think you know, going forward, we should see a margin improvement as scale happens. On the PAPM front and realization from customers, as we've always called out, we, the staffing business has been under pressure. While we do get some hikes from certain customers, we do get discount requests and, price reduction requests from others. There has been a tough fight to stay at a PAPM realization while we are looking to cross-sell, additional services, upsell to realize more and all of that. It is a fight against the element of falling short, and competitive play on that front. Having said that, I think, in absolute profits, we will continue to grow, and the portfolio mix that plays up over the quarter will also adjust for the margin improvement. I think the other businesses, like, say that, EdTech, which has seasonality, starts to contribute from Q2 onwards. You know, the specialized staffing business has maintained its margin and, again, with the demand coming in, will continue to grow. I think in absolute profits, staffing can also grow. At a margin level, it will be the portfolio that will contribute to the element of the margin improvement. Sure. Just to, you know, two-part follow-up here. First, if you look at the 38% increase in the employee benefit expenses, YOY, was the core employee cost a meaningfully large portion of this? Or was this mostly derived by the associate cost, because, you know, that continues to go up. Second, how should we think about the margin improvement going forward? You are obviously, you know, quite far from the previous quarter number of 2.3%. Do you think you can sharply, you know, kind of recover the cost which has increased this quarter over the next two to three quarters, or will it take longer than that? Yeah. Our core employee cost on a year-on-year basis has increased by close to 33%. This is in line with what we have indicated over the last few quarters, that we are making investments across our teams in improving our hiring capabilities and sales capabilities. Now we are up to 100% capacity. Between Q4 and Q1 also, the core employee headcount has remained flat, while there is a salary appraisal impact of 30%. However, on a year-on-year basis, both in terms of core headcount and core employee costs, there is a 33% growth. In terms of margin improvement, from Q2 onwards, we have a clear roadmap to improve the margins by a few basis points quarter on quarter, and we should be able to close the year with what we had done last year. Sure. Thanks a lot for taking my questions. Thank you, Mr. Mukul. Participants are requested to limit their questions to two per participant. The next question is from the line of Mr. Sumeet Jain from Goldman Sachs. Please go ahead, sir. Yeah, hi. Thanks for the opportunity. Just to probe on the margin question, was there any one-off expenses in this quarter which you can actually recoup in the next quarter? Except for the Ind AS 116 adjustment, Sumit, we don't have any other one-off costs in this quarter. As I mentioned earlier, the current run rate of costs, all costs put together, should continue for the remaining quarters in the year. Regarding the unallocated expenses you mentioned, it will go down back to INR 6 crore-INR 7 crore. Based on INR 14 crore unallocated expenses, it boils down to around 80 basis points of margin impact. Should we assume that this 80 basis point of margin impact will come down to 40 basis point in the coming quarter? Over the next two quarters it would have to, yes. Okay. Lastly, if I heard correctly, you mentioned the FY 2023 margins should be similar to FY 2022. Yeah, we don't give an exact guidance, but yes, we should come closer to that. Got it. Got it. That's all from my end. Thanks a lot. Thank you. Thank you, sir. We take the next question from the line of Mr. Abhay from Bajaj Allianz Life Insurance. Please go ahead. Hi. Thanks for the opportunity. I'm sorry to bother you on margin again, but you called out three things, wage rise, revenue seasonality in EdTech and the Ind AS impact. What is this Ind AS impact? Can you explain that? I think that's around INR 2 crore that is impacting, right? Ind AS 116 will not have an impact on PBT, it's only on the EBITDA. This quarter we have terminated our existing lease contracts, and we are moving to a new office. That alone, just Bangalore office building alone has a INR 2 crore impact. Overall, Ind AS 116 adjustment is little upwards of INR 3 crore. Okay. Around INR 5 crore-INR 6 crore impact each of wage hike and the revenue seasonality, around INR 2 crore-INR 3 crore here. That comes to around INR 12 crore-INR 13 crore, around INR 13 crore-INR 14 crore total impact, right? Of all these three things. Now, if I see quarter-on-quarter, your EBITDA actually should have increased by around 3% because that's your associate increase. Instead of INR 42 crore, you have done around INR 25 crore. That is close to INR 17 crore. It's still a INR 4 crore-INR 5 crore gap still. Can you explain why? What's the gap? The associate headcount growth has happened relatively in the later part of the quarter, and the headcount drop in GA business has impacted the net revenue, the gross margins for this quarter. That's the main reason why the overall net revenue has remained flat between Q4 and Q1. Okay, thanks. That's it from my side. Thank you, sir. That was the last question for today. I would now like to hand the conference over to Mr. Ashok Reddy for closing comments. Over to you, sir. Thank you very much. I think as we go forward, we'll continue to look for growth in volumes and work back up on the margins front. As I had called out earlier, the staffing business does have a pricing limitation. At a portfolio level, we will rebound back on the margins front. The industry verticals have started to give open positions, and we now have a much higher capability to deliver to them, which should feed our growth as we go forward. Also, hopefully, some of the sectors and companies where we saw layoffs in quarter one are behind us and so we should not see any more of that. We believe the investments that we've been making in the team, in capabilities, in technology, are also paying off and will prepare us for the future of the opportunity that we have, as, you know, growth comes back into the market and as more, temping, comes to play, for corporates in the organized sector. We look to continued growth and working back on the margins front. Thank you all for joining the call. Thank you.