Ladies and gentlemen, good day, and welcome to the TeamLease Services Limited Q4 and FY24 earnings conference call, hosted by HDFC Securities. As a reminder, all participants line will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Amit Chandra from HDFC Securities. Thank you, and over to you, sir. Yeah, thank you, operator. So good evening, everyone. On behalf of HDFC Securities, we welcome you all to the TeamLease Quarter 4, FY24 earnings call. Today, we have with us the management team of TeamLease, represented by Mr. Ashok Reddy, MD and CEO, Mr. Kartik Narayan, CEO, Staffing, and Mrs. Ramani Dathi, CFO. I will now hand over the call to the management to start off with the initial commentary, and post that we can hand over the floor for the Q&A session. Thank you, and over to you, Mr. Ashok. Thank you, Amit. Good evening, and thank you for joining the call. I think broadly, we have stayed on track to growth in head count with about 10,000 additions in Q4, and overall, about 37,000 head count additions for the year. The total revenue grew by nearly 18% for the year and EBITDA by 7%. While growth has largely come from staffing, and Kartik will cover that in a while, the DA and specialized staffing have been a mixed bag for the year. You know, we started the year with specialized staffing, the IT industry having headwinds and a reduction in head count from element of demand and onboarding that we were seeing across the services sector. That has continued to play out. The rate of reduction has come down, as we enter the new year, but the uptick in demand is still not very strong. We did complement the element of the slowdown in the services side with acquisition on the GCCs and demand from that side. While that has been healthy, it still doesn't compensate in head count, for the services side. So I think the year was on a negative for the head count, deletion on the specialized staffing side. At this point in time, we still believe that Q1 and Q2 will be muted for the specialized staffing from a demand perspective, and hopefully there'll be some uptick as we enter the second half of the year. From a degree apprenticeship side, the NEEM losses got started into the Q4 of the prior year, carried into this year. We had a majority of the NEEM off-boarding happening over the quarters. We enter Q1 with about 6,000 NEEM apprentices trainees, who we think will also exit in Q1 of this year. So with that, we should largely be done with the backlog or the residual of the NEEM trainees. But I think the good thing is, by virtue of additional sale in other areas of apprenticeship options for corporate, we have been onboarding new numbers there, and over the last two quarters in excess of the losses that we have had in NEEM. I think that trajectory will continue to play out, and hopefully, again, into the second half of the year, we'll gain more traction with the comprehensive exit of the NEEM trainees, as I called out in Q1. I think the seasonality of HR services also played out in Q4, but overall, on a year-on-year basis, we have grown in revenue by 14% and EBITDA by 92% on a full year basis in the HR services. But the seasonality element will come back in Q1 specifically, and a gradual pickup all the way into Q4, as has been the norm in the past. So I think overall, the element of holding our cost structures around head count, around the element of focus to productivity, technology investments have played out. We do believe that the growth trajectory will play out as we go forward, as it has this year, and hopefully also play into the profits in a larger way into the second half of the coming year. But just to recap on the past year and the quarter, I'll have Kartik come in on the commentary for staffing. Thank you, Ashok, and, good evening to all of you. General staffing registered a near 43,500 net additions to our associate base, which is the highest number we have reported in any given year. Headcount growth, therefore, has been 20% over last year's closing and a 51% increase over last year's net addition. The good part is nearly 30% of our net addition this year is contributed by new logos acquired during the year. Out of which nearly 60% has been on variable markup. Overall revenue growth year-on-year has been 23%. The challenge however remains, as we have called out in the past few quarters, that with some of our larger customers growing, there is a pressure on PAPM, which saw a marginal dip, you know, in Q4 over Q3, which we are looking to offset by cross-selling and alternate revenue streams and acquiring new logos. For quarter four, we added about 8,500 associates and a 23% increase in revenue over Q4 last year. A word here about Q4 performance. Typically, Q4 is about enterprises pruning their OPEX spends, and our experience over the last decade shows a relative slowdown on sequential basis, combined with the fact that in some of the verticals there has been relative conservatism, especially BFSI, which has been flattish since December 2023. However, one trend which has been particularly encouraging is continued formalization, which is taking place in some of the industry segments, largely consumer and manufacturing verticals. As some of you would have observed, the consumer business during this year has really not grown in terms of volume, partially due to inflation and lack of offtake in the semi-urban and rural markets. Despite that, it's been a good year for us with increased preference among enterprises for working with established staffing companies and efficiencies related to formalizing the workforce. On banking finance, it's been a mixed bag for us this year. Beginning of the year, we experienced, you know, robust hiring. However, post caution expressed by RBI around November, if you recall, especially around KYC and a bit of caution around NBFCs and Fintech giving out small ticket loans. We have seen some caution coming in reflecting hiring slowdown, which we are expecting to correct coming into Q2 of FY25. Telecom as a vertical which comprises equipment makers, ISPs, telecom operators, have seen growth largely around service providers expanding their network and investing in both consumer and B2B businesses around SME and MSME. Expansions around these have helped us grow in double digits this year. As 5G network expansion continues to take place, we are strongly placed to be able to grow alongside this expansion. In terms of absolute growth, our top three segments would be consumer, financial services, and telecom. Consumer has registered a year-on-year volume growth of 31%, followed by telecom, 27, and BFSI, 20. Our sales acceleration continued with us, you know, closing the year with over 142 new logo sign-ups, and 30 being in Q4 alone. One important point that I mentioned, you know, earlier on, which is, you know, 60% of, you know, these new logo sign-ups are coming on variable markup, which also will, you know, help us offset, the challenges we are having on PAPM. On the hiring side, for the whole year, we have delivered about 77,000 new joinees who were hired by us. This is a 23% increase over last year. 30% of them hired through non-recruiter channels. The important thing, of course, in hiring, we consistently prioritize our investment in hiring, ensuring that, you know, we maintain a cost-conscious approach, you know, in this key area. One of the other really important aspects of our business is around optimization and leverage, doing more with less. Our SPE has improved to 372, owing to a 4% increase in associate headcount in Q4. Some of our digital transformation efforts have yielded significant improvements in operational efficiency, allowing us to support an expanded customer base with our current workforce. We anticipate this momentum to persist into FY25, enhancing both our client response times and operating efficiency. I'm sure many of you are already familiar with the various insights we regularly share. If you haven't yet, I encourage you to download these from our website and follow our LinkedIn page to stay updated. To just share you a glimpse into the employment market, our recent report covering the consumer, telecom, and financial services sector indicates an improvement in hiring sentiment within the services sector. While metro and Tier One cities are, you know, going to be having a much higher intent to hire, we are also seeing demand coming in from Tier Two and Tier Three cities for both financial services and manufacturing. Entry-level jobs in the services sector and junior level jobs in the manufacturing sector are exhibiting a high intent to hire for experienced levels. Looking forward, our business is positioned for growth in the first half of the year. We have a clear view, robust pipeline, and rising demand among many of our clients. The interest shown by potential customers is also promising. Several, you know, proactive sectoral shifts are set to shape our business's future, including a sustained push towards formalizing the workforce that I called out earlier. We anticipate an expansion in manufacturing capacity, particularly in electronics for manufacturing, which is expected to generate multiple job opportunities, including temporary positions. Overall, we had a good year in general staffing and our ongoing emphasis on productivity, particularly in sales and hiring, alongside the advantages emerging from digitalization and process enhancement, positions us to anticipate an impactful year ahead. Thank you, and with this, I'll hand it over to Ramani. Thank you, Kartik. Good evening, all. During the year, we had 44,000 associate addition in staffing and overall 37,000 addition at group level, net of NEEM loss. We have managed to keep overall costs and core employee base flat for the whole of FY24. Effective April 1, 2024, core employee costs will go up by 9.5% on account of annual increases. Because of withdrawal of NEEM scheme, we had an overall profit depletion of INR 20 crore, including the final leg impact in Q1 FY25, with 6,000 scheduled releases. To offset the PAPM loss on NEEM trainees, our sales team is focused on upselling learning solutions and education-linked apprenticeship programs in both degree and non-degree categories.... As far as specialized staffing is concerned, it has been over a year, with hiring demand being sluggish, which has impacted our growth and profits in FY24. Also, at this stage, we are not seeing any immediate recovery in IT services demand. With our sales efforts targeting GCCs and non-tech companies, we are maintaining the revenue run rate, but margins can only resume with pick-up in overall hiring trends. We are making investments to improve our hiring capabilities in both tech and non-tech space. Corporate training business, which was earlier reported under EdTech vertical, will be grouped with specialized staffing starting FY25 for better alignment. EdTech business has reported 30% growth in profits during FY24 and is expected to accelerate the profit momentum in FY25 as well, largely led by improvement in student ARPU and operating leverage. Given the billing cycle in EdTech, more than 100% of profits typically get booked in H2. Accordingly, there'll be a sharp drop in profitability between Q4 to Q1 every year. The expected seasonality impact of EdTech business in Q1 FY25 is about INR 6 crore-INR 8 crore, which would get offset in the subsequent quarters. RegTech business, coupled with compliance services, is currently at INR 40 crore of annual revenue with an EBITDA potential of 4%-5% starting H2 of FY25. HR Tech vertical, including payroll services and HireTech, is currently at INR 20 crore of annual revenue. We went live with our HCM platform on April 1, 2024, and will continue tech investment on building product capabilities. We are also actively looking for M&A opportunities in HR Tech space, which are profit accretive and can accelerate our client acquisition in this vertical. Our balance sheet metrics, like receivables ratio, DSO, working capital ratio, ROCE, debt ratio, are all steadily maintained. EBITDA to operating cash flow conversion is over 90% for the year. Our closing cash balance is INR 265 crore, post disbursement of INR 120 crore towards buyback and related expenses during the year. TDS receivable balance is INR 264 crore as of March 31, 2024, of which substantial refund is expected in H1 of FY 2025. We do not have any pending income tax refunds for the periods prior to assessment year 2021, 2022. Thank you. Yeah. With that, I think our opening commentary is done. Amit, we are open to questions. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone 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. The first question is from the line of Deep Shah from B&K Securities. Please go ahead. Yeah, hi, so, thank you for the opportunity. So the first question is around telecom that you called out. So we've seen telecom companies commenting that a large part of their 5G rollout is over. So, given that telecom is one of our three largest segments, do you expect any slowdown there as we go into FY25? On the same lines, the second would be on industrials or manufacturing. What would it be today as a part of our overall portfolio? And I, I hear your very positive outlook on that space, so you don't-- anything you think that it could probably come at a higher realization or higher PAPM, given the large demand, or that clients there need a lot more organized workforce, we could have less competition. Any color on that manufacturing or industrials would be very useful? Yeah. Thanks, Deep. So on the telecom side, first of all, there is an element of, you know, consolidation, which is taking place. So I think some of the service providers who are there are now looking at, more larger, formal, established players, and we are seeing the benefit of that, you know, coming through to us. There is also, you know, some element of, you know, rollout, which is still, you know, carrying on to Q1 and Q2, given the open positions that we have. So we are still very positive about, you know, that playing out, you know, going into Q1 and Q2. On the manufacturing part, you know, you are right. I think there are, you know, open positions, especially, which are coming to us because of the manufacturing companies in electronics and, you know, mobile manufacturing, which are opening up in the south as a sector. Having said that, I think the larger challenge in this space continues to be, to be able to mobilize the workforce and being able to get them. Is there a pricing power in this entire thing? It's, it's a bit of a mixed bag as we see. You know, because there is a challenge around being able to source some of these candidates and being able to get them. There are customers who are willing to pay, you know, for the sourcing, and in many cases, given the volume, you know, there are certain customers who are not willing to, you know, pay for sourcing. I would say slightly better than, you know, some of the other, you know, verticals which are there, but overall, pretty much along the same line. Just to add to that, Deep, our current exposure to manufacturing industrial is about 12%-15%. And effectively, we believe that there is a lot more that we can do on that front from a logo acquisition and number growth perspective. The average realizations are higher than for the BFSI and other verticals, but as Kartik called out, there are also a lot more of delivery expectations that are on the table that we need to innovate on to get it right. So and I think from that perspective, the call-out earlier of saying while we grow the big, we do want to grow the logos and get more medium and small clients on board, in order to effectively drive our realization to be stable of net growth, is something that will play out through the industrial vertical contributing. And as of now, on telecom, the open positions and demand is still visible. Right, sir. Thank you for that, for that response. So the next question actually is for Ramani. So we've seen our unbilled revenue continue to remain high, around INR 80 crores. So that was at the same level in 2H or rather at the end of second quarter this year, and we see that remain there. So, anything here, is there some change in mix of business from, say, a higher share of, say, pay and collect or anything like that, given that these numbers remained elevated? So there is no change in the mix of our funding exposure as far as staffing is concerned. With drop in revenues in specialized staffing business, there has been some change in the working capital cycle. Otherwise, the increase in trade receivables or the overall mix is in line with the business growth. The unbilled revenue is just an effective timing difference. Actually, everything that is largely showing in unbilled revenue into April has gotten billed. Also, for the same value of unbilled revenue, there is a corresponding liability also for the same value, which got fully billed in April and reversed. Right. Thank you so much. That's all from my end. Thank you. The next question is from the line of Amit Chandra from HDFC Securities. Please go ahead. Yes, sir, thanks for the opportunity. Sir, we have seen, you know, very strong volume growth on the general staffing side, but obviously the EBITDA margins have been subdued because of, you know, you know, because of the DA program. So how do you see the EBITDA margin moving on from here on? So with, we have seen some recovery there in DA side, and obviously the profitability, there is on the higher side, and also, you know, the incremental growth that we're seeing from the MAP program. If you will comment on how the profitability is there, and how do you see the EBITDA margins, you know, from here on for the general staffing segment? Yes, Amit. As I called out in my opening remarks, Q1, we have the highest impact coming from NEEM headcount release, which is close to 6,000 trainees, plus the full impact of employee appraisal effective first April 2024. So we expect the recovery in EBITDA starting Q2, and more importantly, in H2 of next year. Also, while we are adding headcount in DA business, this headcount is getting added at almost, like, 50% PAPM of NEEM. So, we have to add volumes double of what we are losing on NEEM to compensate for the EBITDA loss on that account. So to your question, yes, H2 onwards, there'll be a steady improvement in EBITDA margins. Okay, and in terms of cost, you said that the last year, you know, the overall cost was almost flat, and we are taking hikes in 1Q. So how do you plan to increase our, you know, core staff, you know, from here on? Do we need to add more core staff in the, like, in next year to you know support the 20% kind of volume growth we are seeing? No. So it will not be a linear element of headcount growth at all. Some of the businesses will actually stay flat on headcounts. Specific to certain projects and enterprise clients, where there is a large requirement for hiring, we will be adding some resources on the hiring side. But broadly, we believe that as we go into this year, the continued focus through the technology interventions and process changes will play to the productivity angle. So we will have marginal headcount increases, but nothing substantial. Okay. And then on the general staffing side, you mentioned that, you know, the, like, new logo addition has been strong and, you know, there are also the new clients that have been added is on the variable markup model. So, you know, this should eventually reflect into higher PAPM and higher margins. So how the mix is going to change, as in, is it, is it being done, you know, from our side, or is it the, like, demand from the clients to have a variable markup model? No, no. We have been working on this element, Amit, of trying to get more customers on the percentage model for a long time, and all our sales activity is aligned to rolling out the proposal on percentage basis as a starter. On feedback from clients, we do have to move to a PAPM fixed price model. But a large number of these clients that are being acquired are still small. So in the overall mix, it will not change substantially, but I think it's kind of laying the grounds for the future, where over a period of time, if we stay with that traction to getting more customers at, on percentage, and these customers over a period kind of start to grow, we'll see a composition mix. But I don't think that's going to happen in the short term. Okay. And on the specialized staffing, so you mentioned about the headwind that is there, and we have also been hearing. But you know, some of the peers and we have been hearing in some pockets, the hiring has resumed in the IT sector. And you know, what's your take on that, whether the specialized staffing weakness is because of some issues in, like, some specific clients, or is it overall weakness? No, so like I called out, I think in IT, in non-IT and GCCs, there is demand and hiring, which we are delivering to. I think from the services, even on the product side, it's kind of stabilized, where unless there is a project closure, the general element of a reduction in headcount is not coming in anymore. On the services side, while demand has come in and is better than Q1 of last year, I think it's still getting more or less offset with the attrition that is happening. So I think we're at least a quarter or two away from a net addition growth as we see it at this point in time. Okay, thank you. Thank you. Ladies and gentlemen, you may press star and one to ask questions. The next question is from the line of Dhwani from Investec. Please go ahead. Hi. Yeah, hi, thank you for giving me this opportunity. Just had a couple of questions. One was, you all, could you share the, share of large clients and, small and medium clients in your, client portfolio? No, sorry, Dhwani, what do you want? I didn't understand. The share of large clients, the ones which are facing PAPM issues, fixed prices. The large accounts account for about, in overall, about 100 odd clients, accounting for about 70% of our business, and the long tail of the SMEs account for the balance. Okay, understood. Also, you mentioned there was a marginal dip in the PAPM for general staffing associates. Could you share the number, please? Again, sorry, your voice is... Your point, question was, what is the PAPM? Yes, the PAPM for general staffing. It's INR 679 for the quarter. Okay, understood. Just one last question: In the quarter, we have other expenses increasing as a percentage of revenue from 2.2%- 2.82%. Could you explain the reason for the same, and how should we look at it going forward? So these are direct expenses relating to EdTech business. So with the corresponding increase in revenue and billing in EdTech for the quarter, there is a like-to-like increase in operating expenses. So this is in line with the historical trend. Again, in line with drop in revenues in Q1, the operating expenses will also come down in that vertical. Okay, understood. Thank you. Thank you. A reminder to all the participants that you may press star and one to ask questions. Ladies and gentlemen, you may press star and one to ask questions. A reminder to all the participants that you may press star and one to ask questions. The next question is from the line of Aasim from DAM Capital Advisors. Please go ahead. Hi, just one question. In your current general staffing associate base, how many associates would be on the variable markup? Variable Markup will be about 22%. 22%. And, the newer customers who are coming on variable markups, are these still smaller customers generally, or are there at least some of your larger customers are also opening up to the reality of, variable markup, maybe on the manufacturing side? Most of them are small. Then, we do not have large customers coming on board on a variable markup, percentage basis, which is really where I was calling out earlier, saying that though we are signing a larger percentage of clients relatively, on the percentage model, it will not make a difference in the short run to the composition. It will play out over a period of time. Also, the large clients, as we have been calling out over the last few quarters, are the ones that have been growing larger or driving the element of the, associate growth in the staffing, side. So that still continues to kind of skew, the overall percentage towards the fixed markup. Okay, so then, just, I think maybe from, maybe you can give a slightly quantitative answer on the EBITDA margin improvement. So you did mention that Q2 onwards, we start to see some improvement. H2 is when improvement will actually come in. I don't know if G, general staffing margins can go back to the old 2% anytime soon, but maybe from a 1.5, 1.6%, how far are we from current levels? Since we don't have visibility on the gross billing that we do, it's very difficult to put down any sort of timeline on the recovery of margins. Because at this stage, since the name loss is impacting the margins, we are focusing on sequential improvement. But getting back to the 2% EBITDA margin, the exact outline, we have no answer. So we are focusing on a steady 5-10 basis point improvement on a sequential basis starting Q3 of next year. But I think if the PAPM is the only lever left, right, in terms of margin expansion? Because I think the, on the OpEx side, whatever efficiencies you needed to juice out, that's already there in the base. So I mean, if- We will continue to play to the operating leverage also. Like this year, we didn't have an element of cost increase and headcount flatness. And I called out earlier also that they will-- we will add some headcount this year, but not in line with the overall growth. So there will be some more productivity improvement that will play out. And also, as I think the DA business starts to get net growth coming in, that would again help. Also, our hiring investments will bring in productivity and more cost optimization in our hiring as well. Currently, we are spending close to 12%-13% of staffing profits in hiring costs. With more investments and technology initiatives in hiring, we believe that, those costs can also come down in future, contributing to EBITDA margins. Okay. So I mean, I mean from a steady state perspective, what in your sense can general staffing business deliver in terms of ROCE? Because I think the EBIT margin lever is, or rather, or EBITDA, is the only lever technically in hand, right? Because working capital-wise, whatever can be done is done. So, I mean, basically, it's effectively the same question on margins, but, maybe on a steady state basis, can you just talk about what, ROCEs can this business deliver in the current reality? So ROCE only within the general staffing business is upwards of 75%, and that can be maintained given the fact that the funding mix is maintained steady. And EBITDA margins, as I mentioned earlier, maybe Q3 onwards, we can steadily improve 5-10 basis points quarter-over-quarter, owing to operating leverage and other tech investments and increase in overall volume, cross-selling those initiatives. Sorry, ROC is 75%? Only general staffing, because we fund only 12% of our receivables in general staffing. Okay, because I think on a consolidated ROC, we are still maybe a high single digit ROC company, at least from reported numbers. If general staffing margins... Sorry, general staffing ROC is 75% like a steady state ROC you're talking about, right? Not the current ones. Because the overall ROCE at group level, that has- Mm-hmm. the cost of M&As that we have done Mm-hmm. and high working capital in our- Mm-hmm IT staffing business and tech business. Mm. But purely within general staffing, our working capital cycle is only 6 days, and we have a sort of negative working capital for 85% of the business. So considering that, it's 75% in that vertical. Okay. Just, just last question on the general staffing headcount front. I mean, we did a good 20% growth this year. Would that momentum at least continue into FY25, or would FY24 be a year of high base and we go to the 15%-18% that you saw earlier guide? Yeah, so I think we have as we speak, you know, going into H1, we have open positions to kind of reflect that we can still kind of maintain an 18%-20% headcount growth going into this year as well. Unless something external plays out in the industry verticals, I think at this point in time, with the outlook that the industries and customers are, kind of having confidence in, we believe the associate growth momentum can be sustained. Okay. Thank you very much, everyone. Thank you. Ladies and gentlemen, you may press star and one to ask questions. A reminder to all the participants that you may press star and one to ask questions. Ladies and gentlemen, you may press star and one to ask questions. Amit, if there are no more questions in the queue, we can conclude the call with closing remarks? ... Yes, ma'am. As there are no further questions, I would now like to hand the conference over to Mr. Ashok Reddy for closing comments. Thank you. In closing, I think we continue to have the volume growth trajectory for the coming quarters. As you know, Kartik has called out, the demand in open positions across, verticals is still, quite strong, and we continue to deliver on the hiring, for customers. So and the specialized staffing is, not going to play out for growth in the first half of the year. But we believe, and hope, there clearly that, the second half, will see some improvement on the demand side. The DA business is clearly, come up on the net additions front, but with the entire element of the NEEM, exiting in Q1, we hope to expedite that element of growth, on the DA front also. I think as we look forward, we are optimistic about growth, productivity, technology, innovation, and the portfolio playing out to profit growth over the year. In spite of the lower expected Q1 numbers for the various reasons that we've called out, primarily on account of the wage hike, seasonality, full NEEM dropout, et cetera. But we believe and are confident that this will get adjusted and more than compensated for in H2, where the continued element of growth will lead to improved profits. I think overall, as a team and a team lead, we stay focused for growth, profits, cash flow, governance, and the portfolio play kind of coming in over the years. Thank you very much. On behalf of HDFC Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.