Ladies and gentlemen, good day and welcome to TeamLease Services Limited Q3 FY 2025 earnings conference call hosted by HDFC 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 dial operator by pressing star then zero on your touch-tone 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, Mr. Chandra. Yeah, thank you, and good evening, everyone. On behalf of HDFC Securities, we welcome you all to the TeamLease Quarter 3 FY 2025 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 Ashok for the opening remarks, post which we can open the floor for the question-and-answer session. Thank you, and over to you, Ashok. Thank you, Amit. Good evening, and thank you all for joining the call. We continue our growth journey. We added about 3,000+ headcount. Revenue is up about 4% quarter on quarter and 19% year- on- year. EBITDA grew by 4%, largely driven by efficiencies in the employment clusters. As called out, the growth in staffing was muted this quarter, given the seasonality element and the BFSI industry call-out that we had made last year, and which Kartik will further refer to in his details. Specialized Staffing, after many quarters, has come to a net headcount growth. So hopefully, we've seen the bottom on the numbers on that front and would be able to kind of deliver to the open positions that are coming in and continue to drive the net headcount growth there. The DA business continues its growth and focus on selling the bundled learning solutions, and we have a continuous growth in the percentage of trainees and apprentices being covered under the learning solutions. Growth in HR Services has also been good on the top line. However, the profitability has been impacted due to further delays in the admission cycles and the downstream payment delays. However, the business is quite confident of a catch-up on both these fronts in Q4. HR tech, which has been a primary focus for us as an area to kind of upsell the element of services and solutions to customers. While we continue our trajectory of organic growth and platform build, we've also made two investments on this front. One is TSR Darashaw, and the second is WalletHR. These two complement the business from a perspective of product clients and the potential for furthering their sales. WalletHR is primarily an HR tech platform solution, SaaS solution, with a little bit of on-prem solutioning driven primarily, I mean, located and driven primarily for business in Tamil Nadu. TSR Darashaw is a payroll outsourcing play, and between the two of them, they have about 4 lakh employee records that are managed between platform and service. We look to build on that as we go forward. Another investment that we are doing is in Ikigai, which is effectively a partnership for the Specialized Staffing business. This gives us a legal entity presence in Singapore and in the Middle East. Small business at this point in time, break-even business, but we believe that the partnership could effectively focus on building larger volumes as we go forward, and that is something that would complement the Specialized Staffing business from a geographic domain and additional client base to kind of deliver to. We would have more details on all of these coming in from Kartik and Neeti and Ramani, further to which we can then move into the questions. Kartik. Yeah, thank you, Ashok. Good evening, everyone. Q3 is traditionally a festive quarter, bringing a temporary surge in revenue due to one-time festive billings. By December, enterprises often start recalibrating their workforce to align with the current demand trends. This quarter, we achieved a net addition of 1,300+ associates, taking our year-to-date net incremental associate growth to a little more than 32,600 and an overall net associate growth of 12% on our opening base. Gross revenue witnessed a 20% year-on-year increase and a 4% sequential growth, underscoring continued momentum in our business and market activity. Feedback from different industry segments has varied. As we had called out last quarter, the BFSI sector remained stable due to tighter norms around lending in microfinance, credit cards, personal loans, and similar areas, resulting in a flat headcount by quarter end. Of course, on an ongoing basis, including for Q4, enforcement of some of the RBI guidelines around KYC will continue to impact us, not just in Q3, but including in Q4 as well. Growth in the consumer, retail, and e-commerce sectors generally peaks in Q2 and the first months of Q3, driven by technical factors. This quarter, that surge was moderated by an earlier-than-usual scale back. We typically see a boost in activity leading up to Diwali, and depending on market conditions, businesses tend to adjust their headcount, often reducing it by late December or early January, especially in years with a later Diwali. This year, of course, with Diwali occurring about 10 days earlier than last year, we observed a sharper-than-usual attrition influenced by known challenges around inflation and subdued customer sentiment in FMCG and some of the FMCG businesses. Manufacturing and telecom saw low single-digit growth, which, while positive, had limited impact on overall numbers. India's mobile manufacturing sector is currently experiencing a degree of slowdown due to weak demand for smartphones, particularly feature phones and entry-level devices in 4G, as highlighted in some of the media reports as well just a few weeks ago. On a positive note, our sales effort brought in 34 new logo signups, primarily in the consumer, retail, and manufacturing segments, out of which 80% on the variable markup. Some of you might recall that this number was 60% for Q4 last year. Recruitment efforts led to the onboarding of roughly about 18,000 associates in Q3. This figure is 30% lower on a quarter-on-quarter basis and 6% lower year-on-year, and it's reflective of the lack of demand across enterprises in Q3. Operational excellence initiatives continue to drive meaningful outcomes. Continued productivity improvements in FTE by 1% have moved the needle from 386 to 382. This enhanced efficiency, of course, strengthens our ability to do client servicing without adding additional headcount, and it amplifies operational leverage. As we move forward, a threefold approach continues to inform our BAU strategy. New logo acquisitions through a combination of tech and touch, deeper engagements to ring-fence our larger customers, digitization of hiring processes to extract better efficiencies and candidate search and match. In summary, Q3 was marked by ongoing operational leverage and revenue expansion. We remain committed to delivering exceptional client service, optimizing our operations, and advancing recruitment processes to create value for our enterprise customers. Thank you, and with this, I'll hand it over to Neeti Sharma to take you through the Specialized Staffing growth. Thanks, Kartik. Good evening, everyone. The IT sector continues to witness cautious and selective hiring. However, we are seeing a gradual uptick in hiring requirements from these companies. Meanwhile, GCCs remain a strong growth driver for us, particularly across sectors such as BFSI, life sciences, healthcare, manufacturing, and engineering. Currently, about one-third of our associate headcount is deployed with these GCCs, contributing to about 55%-60% of our net revenue as of the last quarter. Beyond GCCs, we've also increased our focus on hiring for tech and specialized roles in the non-tech industry. While both GCCs and the non-tech sectors are expanding, their growth has not been sufficient to offset the decline in the IT services industry that we have seen in the last few quarters. Q3 is typically a weaker quarter for the IT hiring industry, further impacted this year by fewer billable days and furloughs. Despite these headwinds, we achieved a small but positive net headcount growth for the first time in several quarters, along with an increase in quarter-on-quarter revenue and a marginal improvement in year-on-year profitability, largely driven by expansion of wallet share within existing customers, cost-saving initiatives, and one-time sourcing and absorption benefits. On the sales front, we signed eight key clients in the last quarter, including three very large strategic accounts. Our sales pipeline remains strong, and we're optimistic about sustaining this momentum. We continue to prioritize high-margin clients while refining our approach to lower-margin engagement to enhance both profitability and efficiency. Operationally, our efforts to build a stronger and more resilient hiring team are yielding results, with recruiter productivity improving from 2.5 to almost about 3.3 hours per month as of the end of Q3. Looking ahead, while we expect hiring to remain cautious in the IT services industry in the near term, early signs of improvement are emerging. Our key priorities remain product expansion within our existing clients, sales growth, cost optimization, and digitization. In the next few quarters, we aim to maintain the growth in EBITDA margin by strengthening client acquisition, improving account management, streamlining hiring, and leveraging technology. The Ikigai partnership will support our IT staffing expansion in newer geographies such as Singapore and the Middle East, and we hope to continue supporting their delivery from India. Thank you so much, and with this, I hand it over to Ramani. Thank you, Neeti. Good evening, everyone. We have delivered double-digit sequential growth in PBT at group level, mainly led by productivity enhancement in employment cluster businesses. Profit after tax grew by 14% between Q3 and Q2 this year. Our staffing EBITDA has grown 5% QOQ, even though headcount addition got impacted by BFSI this quarter. On a nine-month basis, we have added 34,500 associates versus 27,000 for the corresponding period last year. Specialized Staffing has turned positive on headcount growth and has been consistent with revenue and profit run rate. Our new IT staffing acquisition, Ikigai Enablers, currently has an annual revenue of INR 20-odd crores and break-even at bottom line. We are not projecting any EBITDA contribution from Ikigai in Q4 FY 2025. However, FY 2026 and thereon will have a meaningful contribution from this entity. We've had a shortfall of our profit estimates in EdTech business due to delays in university billing and collection lag. EdTech revenue has improved 19% QOQ, mainly led by a large mandate in the CSR implementation business, which has 90% pass-through billing and 10% gross margin. On a full-year basis, EdTech can maintain 6%-7% EBITDA this year. Last quarter, we announced the acquisition of 90% stake in TSR Darashaw HR Services and 30% stake in Crystal HR. These two entities are currently at an annual run rate of INR 22 crore in revenue and INR 7.2 crore in profits. Inorganic contribution by these two entities would be about INR 1.1 crore in Q4 FY 2025 EBITDA of TeamLease. All balance sheet metrics are stable and steady. Free cash stands at INR 310 crore as of December 31st, 2024. We can now move to specific questions from the participants. Thank you. Thank you. We will now begin 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'll wait for a moment while the question queue assembles. The first question comes from the line of Deep Shah with B&K Securities. Please go ahead. Yeah, hi. I've had a handful of questions. The first question is around your General Staffing business. So we expected some headcount pressure because of the investing. So one, you did allude that it will continue to 4Q. So I mean, given that fresh hiring already stopped, would there be further declines in hiring on NBFC front, or if you could just give some more color as to how we should think about hiring in 4Q on the General Staffing level? The second question would be on General Staffing margin itself. So what we've seen, say, over the last two, three quarters, and if we were to spread it slightly broader to three years, is that margins have rather been flat for the entire year, and then we have a tariff hike in the first, sorry, we have a wage hike in the first quarter of the next year, and then that leads to margin deterioration. And the trend has continued. So how should we think about some form of terminating the business, say, in 2026? And third question is specifically on the EdTech piece. So if I heard correctly, the statement was that this business can still maintain 6%-7% margins for the full year. In the first nine months, it has done about four trillions of loss, which would then mean that fourth quarter would be like 10 trillion-12 trillion profits. Is that understanding correct, or I have missed something in the margin? Thank you. These are my questions. Yeah, Deep, hi, this is Kartik. I think on the BFSI call-out, which was made in Q2 and even now, I think there are two aspects to it, which is separate. One aspect of it is around some of the earlier called-out RBI strictures around KYC and insourcing. So I think that part in separate is a one-time incident which is playing out in Q3 and going into Q4. So that is one. I think the second aspect of it is around hiring, which you called out. As you would have noticed, even in recent times, some of the large listed credit card companies have called out a significant slowdown that they have experienced. I think that playing into aspects around personal loan, even some microfinance companies facing slightly higher than usual NPAs has resulted in flattish to even lack of backfill that is taking place both in Q3 as well in Q4. So I think these are the two aspects which have really hit this particular vertical. Just to add to that, Deep, I think while we did expect a net negative kind of an outlook for Q3 from the staffing perspective on the headcount side, we've actually added about 1,300 resources in Q3. This is kind of a balance between BFSI and other sectors in spite of the seasonality that kind of comes in. However, I think in Q4, we do see some marginal decline in headcount, primarily driven, as Kartik just called out, of the BFSI sector overwhelming the other sectoral additions that could probably come in. I think on a broader level for the business, the productivity play and holding on the PAPM and stuff would continue to be a focus area. Just from the margins perspective, while there's always some element of a salary hike, not necessarily in April, but happening over different cycles for different customers and different profiles, while we have been working on holding at the PAPM level, obviously, when the CTC levels go up, the margins at a net level do come down, which is really where I think the other call-out that Kartik had in the value selling that we can do to customers around other service areas becomes essential. So while some element of selling the HCM solution, learning solutions, and all of that has kicked off, it will be a larger focus for the coming year as a way forward. Also, internally, we are focusing more on absolute profit improvement quarter on quarter because for the reasons which Ashok and Kartik explained, the salary revisions of associates are impacting our net margins. Absolute profits, we have improved both at EBITDA level and PBT level. Even in terms of margin, PBT, we have marginally improved it by five basis points between Q2 to Q3, and PAT has improved by about eight basis points. We are expecting a much better improvement in the last quarter, mainly led by EdTech contribution because most of the university billings, which are scheduled in Q3, got postponed to Q4. There'll be a lumpiness coming from EdTech in Q4. However, we are revisiting the revenue recognition policy since the service delivery is already completed. We'll also see if there is any kind of policy change that is needed. I mean, we do believe there'll be some lumpiness in Q4 given the delay and the seasonality push in the business. The specifics of the lumpiness, quantum of lumpiness, we should know in the next one month as the billing cycle confirmation kicks in from the universities. Thank you. I'll get back in the queue for further questions. Thank you. Next question comes from the line of Amit Chandra with HDFC Securities. Please go ahead. Yeah, thanks for the opportunity. So first, on the General Staffing, just a follow-up on what you said. So obviously, this is the first quarter where the addition in General Staffing has been actually lower than has been actually. Hello? Yeah. Ladies and gentlemen, the management line has been disconnected. Please be on hold while we quickly get them reconnected. Ladies and gentlemen, the management line has been reconnected. Please go ahead. Yeah. I'm audible? Yeah. Yeah. So continuing on the additions that we had in terms of the General Staffing, so this is the first quarter where we had the addition, which is lower than what we had in DA segment. And obviously, you called out that there has been certain pockets where we are seeing slowdown. But the impact of the slowdown has been much higher than what we were anticipating, or is it in line with what we thought? And also, in terms of the pockets where we're seeing the weakness, this is just a temporary kind of weakness, or you see this continuing for one or two quarters more? And also, the kind of uptick that we were expecting on the manufacturing side, what's the update on that? And generally, what the theory was that the margins or the PAPMs on the BFSI side is lower versus what we have on the manufacturing or the other segments. So once we are pivoting or shifting from BFSI to non-BFSI segments, can this change in mix also increase the PAPMs? So this is the first question on the General Staffing. Yeah. So I think while we've had a lesser growth and probably the lowest growth in a few quarters in net headcount growth in staffing, it is a little better than what we had expected it to be for the quarter because in my narrative for the quarter last quarter, I said we'd probably be negative, and some of those elements of BFSI conversions have partly happened and partly will happen in Q4. But I think post-Q4, we do see normalization coming back, and there are dialogues and feedbacks from companies about looking to add headcount thereafter and so on. So I think at this point, while we've seen it subdued for Q3 and Q4, I think Q1 onwards, at least the initial outlook from the sector and companies is quite positive. The flip of the sectoral play has not yet happened. And I think manufacturing coming to the table with larger volume requirements and stuff is not yet on the table. While there are dialogues with the manufacturing sector, they also come with a lot of demands around service guarantees and indemnities thereon, which we are not necessarily comfortable giving given what they're paying for the same. So the transition of the composition in associate base hasn't happened that much. As Kartik also called out, while incremental contracts or clients are being onboarded, a larger percentage of them are on a percentage model. They're still not the ones driving the volume or the composition. So I think that element of a composition play will take a much longer period to play out. Yeah. Just to add to that, Amit, a couple of things to put it in context. So Q3 traditionally, even if you look at it historically, I'm just trying to recall broad numbers. Last year, Q3 was roughly about 6,000 in General Staffing, and the year before was 2,500 or roughly around that. And especially last year, when you look at it, it came in because of one particular sector, which is largely telecom with their 5G expansion and all that. And that's why Q3 last year did specifically well against the 1,300 that we've added this year. So I think that's one aspect. The other aspect, if you would have heard in my opening comments, I mentioned as well that from a hiring perspective, Q3 has been down. And largely, in our model, 70% of the hiring is done by the clients and 30% is done by us. So from an overall demand perspective, given there has been softening across different segments, even the transitions that we typically end up getting from customers have also kind of come down. So I think that's where the outlook lies. I think in Q3, we are seeing some different segments kind of signaling, like for example, quick commerce signaling positiveness to us. So hoping some of those will kind of pick up going into Q4. Thank you. And secondly, on the Specialized Staffing, obviously, we are seeing some green shoots there in terms of better hiring. And the one third of the segment, which is like GCC, continues to be strong. But in terms of strategy, we are planning to go international with expansion into Singapore and Middle East. But we have seen that these markets have been traditionally very tough for the peers, and it's really very difficult to penetrate there and grow there. So what is strategy in terms of because there's ample opportunity in domestic is what we always believed. So what is the thought process behind going international? So we are not taking our eyes off the domestic market. I think the element of our outlook to saying India is large, India will be consistent, India will be consistently focused play, I think continues to be there. I think the intent to get in here at a low-cost kind of variable was also a function of some of our customers asking for delivery in these geographies and a partner who already had a presence with the customer base and a delivery model which was here to there, which we can accentuate with the larger team that we have. So I think this element of an opportunity is more complementary in nature to the existing business and team. It does not take our focus away from the larger play of India. It is really leveraging our existing capabilities and resources and probably working with the existing customers of Ikigai and also delivering to our customers who are asking for delivery there. Okay. And lastly, on the strategy to invest and focus more on the HR platform side, obviously, we have done two acquisitions, and those will get integrated. So how do we, again, prioritize in terms of focus on the platform side? Because that is a segment which is having higher margins. But again, the strategy, the focus there is totally different. So how we plan to balance that? I didn't understand that question, Amit. So in terms of the HR platforms, we have done some acquisitions there, right, in terms of expanding into the HR platform space? So is it. This again is complementary in nature to what we already do. So today, we have TeamLease platforms, I mean, from the HR Tech side and have a services solution to customers. I think what this does is gives us another platform which we can take to market in a larger way, has a larger base that they are servicing, which we can, again, leverage from a sales perspective. So it's not creating a new opening in the strategy of TeamLease. I think our focus to staying true to the three Employment Cluster businesses of staffing, Specialized Staffing, DA, and our HR Services businesses of RegTech, EdTech, and HR Tech stay consistent. The acquisition investments that we have made complement the existing business and are not a diversion. Okay. And in terms of margin profile, how is the margin profile of the acquired entity? It is in line with what we have, the existing businesses, or is it higher than the company average? Between the two acquisitions that we did in HCM, so the annual revenue is about INR 22 crore with a profit of 7 odd crore, and since our holding in Crystal HR is only 30%, what we consolidate would be about INR 4.5 crore at profit level, Amit. Okay. Ikigai is a break-even business with an element of a 13-member team, but a legal presence in these countries. Other than one promoter who is driving the sales and the customer relationships in that location, everybody else is based in India. Okay. Thank you all. Thank you. Thank you. Next question comes from the line of Vikas with Antique Stock Broking. Please go ahead. Hi. Thanks for the opportunity. Can you hear me? Yes. So my first question is, sir. You talked about consumer, retail, e-commerce sectors have already peaked into Q3 and also FMCG being subdued. And even on telecom and manufacturing vertical, we talked about some weakness. And BFSI, obviously, going into Q4 would be weak. So is it a right understanding that Q4 we may see some decline in the headcount in General Staffing, or you see some particular vertical kind of compensating for the weakness? I think there will be a net decline of a small number that we do foresee for Q4, and I call that out in my narrative. While we will have BFSI contributing to a larger element of the decline, some of the other sectors will compensate that decline, but it will be a net marginal decline. Okay. Sure. And the second question is, obviously, this quarter, good to see some improvement in Specialized Staffing. If I look at from the peak, the headcount is roughly down around 35% for specialized staffing from the peak. So if we assume, let's say, next 12 to 18 months as things normalize, is it right to assume that we will have that kind of a headcount coming back? And secondly, if I compare between GCCs and these IT service providers, I assume the margin mix would be better with GCCs. Thanks a lot. Yeah. So I think unless services comes back in a big way with open positions, recovering the element of the headcount to earlier peak is a little difficult in the immediate term while we still stay optimistic to the long haul. The GCC clearly is what has compensated for some of the headcount losses and some of the margin portfolio. But also, in the last 18 months, we have let go of two large mandates with larger numbers out of clear choice from a pricing perspective. So I think our continued focus will be to drive the net headcount up at margins and effectively also leverage the productivity angles from the team side. Okay. Now, the earlier question, what I was alluding to was a few of the service companies have started talking about a normalized year in FY 2027, and FY 2026 is going to be a year of recovery. So I was just trying to understand if things will come back. We will also see a similar kind of we may go back to what we. Yeah. That's what we are confident of. I mean, roughly, we can. There's no permanent loss to the account, is what I was trying to understand. As the services companies have also started calling out about single-digit growth, even in headcount from last year to this year, and their projections of hiring freshers as well, our growth will also start seeing improvement, which is what we're calling out today, and as we see growth in the services industry, in parallel, GCCs and the non-tech companies will also continue to hire, so yes, we will obviously have a good growth from this year to next year. Probably will not get to the peak in the 12 months-18 months. But if the industry turns around rapidly, yeah, we could aspire for that. Thanks, Ashok. Thank you. Thank you. Next question comes from the line of Kaustuv Bubna with BMSPL Capital. Please go ahead. Hello. Yes. Hi. Thank you for the question. So there are talks of change in the Labour Codes in the budget or introduction of a new Labour Codes in the budget. So just wanted to understand, let's say there's a big increase in minimum wages, how does that financially impact our company? Does it benefit us, or is it bad for us? From a margin perspective, it's bad for us also. But from a top-line revenue perspective, it's good because we pass on any of the statutory payment liabilities onto the customer. So it will be, if, say, a INR 1,000 minimum wage went to INR 2,000, our billing to the customer will become INR 2,000. But given that our PFEMs are on a fixed price model, as a percentage, our realizations will seem to be dropping. No, so on an absolute EBITDA basis, could you speak? EBITDA would not have an impact. No, that's the margin, right? Today, if you're. Margin percentage will have an impact, not absolute EBITDA. Oh, yeah. Okay. This is where Ramani earlier called out, saying that we are focusing on growing absolute profits on a consistent basis. Is there any update on this Employment Linked Incentive? I feel like the government announced this in the budget, the Employment Linked Incentive, and nothing has come out. No further details have come out till today, right? Yes. So any views? There's a lot of talk, but the element of timing around when it will get done is still out in the air from a perspective of predictability. It's a lot of talk, but we don't have firm views. But what is the stock since you obviously at the helm of things? What is the stock? I mean, what are you hearing? How can it? No, the intent is there. I mean, frankly, I think the intent coupled with the ability is there. It's just something that hasn't gotten done. So outside of the aspect that in the confines of the four walls, they're very clear that they'd like to do it. It's the right thing to do and all of that, and will be supporting the element of formalization and so on. It's just not got the traction that it deserves. Okay. Thank you. Thank you. Next question comes from the line of Riya Mehta with Aequitas Investments. Please go ahead. Thank you for giving me the opportunity. My first question is with regard to what we've been saying that we'll be seeing a little slowdown on BFSI. So what sectors do you see would see growth coming from? I understand Quick Commerce being one, but other than that? Yeah, so Riya, Quick Commerce is one. Pockets within the consumer business also see cyclicals. Q3, there has been an uptick and then subsequent shedding of manpower, like I kind of called out. Going into Q4, I think, largely some aspects of retail in the run-up to Q1, summer season, FMCG, I think those will be the areas which will see growth for us. Sorry, you said retail, right? Yeah, retail as well as FMCG, because typically, companies start hiring sales folks, service folks, etc., and all that for the upcoming summer season, which typically starts around April onwards. This will be from Q1 around, right? Oh, yeah. That's into Q4. Yeah, end of Q4, Riya. End of Q4, right. And then specialized staffing, since we are hearing that IT is not seeing great numbers. So in GCC, however, the pickup is great. So when do we see double-digit kind of a growth there, upper double-digit? At GCC or at the IT companies, Riya? GCC. GCC is 60% of specialized staffing, right? That's right. Our net revenue is 60%. Our headcount is 1/3, actually. So about 30% of our headcount is at GCCs currently. So that growth continues because of newer GCCs coming in, and for us to be able to deliver and across various models at GCCs, so that growth actually is currently even double-digit. Even from last year to this year, we've actually grown substantially with GCCs. Got it. So however, the slowdown in IT is overcompensating for the growth in GCC, is my understanding. Yes, and like Kaustubh also called out, we had to let go of two large mandates because of the lower margins. So we haven't been able to come back to those numbers, but whatever growth is happening in GCCs is, in a way, enabling us to stay flattish from last year to this year. Got it. And then General Staffing, are you saying the new orders are coming with a percentage basis? Could you elaborate more on that? Yeah. So, Riya, as we are signing up new logos, and obviously, these new logos come with largely specific, smaller associate headcounts. Almost all of them are pretty much coming in what we call a percentage markup to the salary that we pay to the associates. So what that does is basis. So it comes into some extent on the wage inflation towards our realization. Got it. Also, on the newer acquisition, could you elaborate more on what HR Services and what typically would be the business model there? We have announced two acquisitions in HR tech vertical, Riya. One is TSR Darashaw, which is mainly into payroll services. It's a managed payroll business. There, we operate about 1.6 lakh of payroll records monthly with an annual revenue of INR 9 crore and profits of about INR 3.5 crore. The second acquisition, Crystal HR, is a SaaS platform for HR admins. This business is currently handling about 3.5 lakh of payroll records with a revenue of INR 13 crore and profitability of INR 3.5 crore. We are integrating these two businesses into our existing HCM business in terms of sales, marketing strategy, as well as the technology platforms. Over the next 12 months, we'll be focusing a lot on this integration and driving synergies for these two entities, as well as for our internal HCM business. With this contribution, we should be able to get to an EBITDA margin of 6%-7% after a 12-month period in this vertical. Got it. 6%-7%, right? Yes. Okay. And in terms of introduction of AI, because we are seeing that people have been using a lot of AI, so how is this impacting our demand straightaway on the number of employees people are wanting to hire? Are we seeing a decline structurally because of AI? Not much of a direct impact at this point in time in the kind of profiles that we do, Riya, because a lot of our volume comes from feet on street, comes from sales, and so on. That demand or that profile of workers at this point in time are still not impacted. Got it. And do we integrate AI in our processes or when we are giving services? Yes. So from the technology end at our end, some of the levers to productivity come from the element of the platforms and process re-engineering that we do. And towards that, AI, LLM, all of those are variables that get factored. Got it. Also, for all the consumption and the FMCG players specifically, we've been seeing a 20% growth in the sales and marketing budgets. So does this lead to higher advertisement, or does this lead to more manpower for sales? Combination, but I think, I mean, we will not be able to distinguish between the two in terms of where it is going for them. But it will be a combination, which is really, again, the seasonality element that Kartik alluded to, where the summer coming and so on, there will be an element of hiring. There's also been a focus in FMCG kind of companies around formalization. So consolidation from smaller vendors, from their distributors, and so on. So I suppose the budget would go into multiple pockets. Riya, if you'd noticed, I think, in the last 12 months or so, typically, all the larger FMCG companies which have reported results, I think one particular aspect has been flattish volume growth. So I think some of the advertising, etc., is going on, obviously, to spur the market, sachet package becoming smaller, and so on and so forth, depending on the business. So as we speak, I think, unless and until enterprises perceive significant volume uptick, I don't think so there's going to be an expansion. I think some of the growth which has been happening for us has been happening largely on the formalization part, where some of these businesses have come back to us in order to kind of bring in better compliance, better retention of their extended workforce. Got it, and how much would be FMCG for us, FMCG and retail, around 10%? It's about 20% contribution from retail and consumer verticals put together. Okay. So entire consumer vertical would be there. Also, we are witnessing slowdown in manufacturing. So the labor which we were applying away with the growth trigger for us has been on a declining trend there. So how are you seeing actual on the ground? Riya, if you could repeat that question. Didn't get it. How are the things going out in the manufacturing hiring? I mean, it's a smaller portion for us, and as we've called out, the element of I mean, manufacturing is a high-capital upfront kind of a sector which then leads to employment growth. We have not seen a huge jump in the hiring at our end for manufacturing. Our continued focus and trend continues to play out. Got it. And in terms of BFSI, we would see an uptake from Q1 onwards? I mean, as of now, the indications from companies seem to be hinting at that. Got it. And in terms of improvement of margins in the General Staffing business, what measures are we taking? Are we going through any cost reduction exercise, or are we planning to increase our PAPM? Cost reduction, productivity, these are things that are continuous focus, and if you would notice that our FTE ratio has been improving and all of that, we're trying to hold on the PAPMs, obviously exploring ways in which we can get higher realization by selling more and stuff of that sort, but I think, and this is really where Ramani was alluding to, saying the key focus being how do we increase the absolute profits getting driven by the staffing business. Thank you. Ms. Mehta, please join the queue for more questions. Next question comes from the line of Nikhil Choudhary with Nuvama. Please go ahead. Hey, hi. Thanks for the opportunity. My first question, I just want some clarity on the comment that this quarter was better than our expectation. Even in Q2, Ramani Dathi highlighted that Q3 will be weaker, but sequentially, we have delivered decent growth in General Staffing. So is it because the other segment grew faster than our expectation, or some of the headwinds in BFSI actually shifted from Q3 to Q4? Some of the headwinds shifted on this front, Nikhil. Got it. This is what I called out, saying some of it is continuing into Q4 rather than having all happened in Q3. Got it. Understood. Second, just want to understand, get some clarity on specialized staffing. The comment regarding that we let go two of the large contracts. So the thinking is that we want to manage or maintain the current margin even if it comes at a cost of lower revenue growth? Yes. And also, these mandates just economically were not working out after a point in time due to change in service expectations on the customer end. So continuing with them would be a huge drag on the element of the margins. We also, at points, explore the possibility if it's becoming lower margin, whether the same mandate should be handled by the General Staffing business. So there have been instances where we have shifted one or two customers in the past from specialized staffing to General Staffing depending on the margin profile. But however, these two specific mandates had turned negative from a margin perspective, which is why we decided to drop them altogether. Sure. Just last one from my side on margin. You have clearly mentioned that you will be looking to grow EBITDA on an absolute basis. But as the percentage of revenue, EBITDA had been declining, right? Now you are able to hold it to 1.1%. Now, is it fair to understand that or assume that going forward, EBITDA as a percentage of revenue should decline further? It may not decline further, Nikhil, because we are focusing on higher contribution coming from businesses like HR Tech, EdTech, and since these businesses are at 7%, 8% EBITDA margin, eventually, at groups level, there will be an improvement in EBITDA and PPG. Specific to staffing, the margins are a lot dependent on the average salaries of the associates, depending on which profiles, which locations we are hiring these associates. That impacts our margin levels in General Staffing business. However, in terms of absolute EBITDA number, we are focusing that there should be, I mean, a double-digit growth sequentially at group level. Sure. Sure. Very clear. Thanks a lot. Thank you. Next question comes from the line of Harsh Chaurasia with Vallum Capital. Please go ahead. Hello? Yes. Yes. Good afternoon, sir. So I have a couple of questions. So I wanted to know what is the contribution of BFSI from a headcount perspective and revenue perspective in the General Staffing business. And if you can throw some light on how much does the MFI and the Affordable Housing combined contribute to the BFSI? And since the slowdown has started to happen in BFSI, what was the peak this number was contributing? So this is my first question. And second question is on the specialized staffing business. So in the Q3 result, the majority of the IT company has started to put a commentary that historically, the model there was a connect between headcount growth and the revenue growth. But in future, because of AI, there would be some disconnect. So how this would impact our specialized service business, where we are expecting that there will be an uptake in IT services business? And my third question is on the, and this needs some clarification from earlier participant question on the labor code. So how this will be benefited on the margin side if you can explain that? These are my questions. Yeah. BFSI, in terms of revenue on headcount contribution, is it about 22%? And I didn't get the second part of your question regarding BFSI, but I'll come back to that later. Within specialized staffing, regarding your point on AI impact and IT companies talking about, I mean, maintaining higher profit with lower headcount, we are also moving up the value chain. Like two years back, our average salaries in specialized staffing business were at INR 40,000. And now, with more contribution from GCCs and we catering to a higher experience profile, our average salaries are currently at INR 70,000-INR 75,000 rupees per month. We believe at this segment, the impact of AI may not be as much as it is at the entry level. The last point on labor codes, we need to understand, I mean, the finer points on what are the impact areas in the short term. However, in the long run, the main impact is that it will drive more formalization, eventually leading to improvement in gross margins in staffing. Can you please repeat your question? The first question you had. The question was around MFI contribution and NBFC, so 22% was called out by Ramani, Harsh on the BFSI contribution. MFI for us is smaller at 5%, but NBFC and all put together is roughly about 25-odd% of that 22%. Okay. So in the labor code margin side, you mentioned the margin would be going down. So we expect the absolute EBITDA would be stable, or is the net positive? Harsh didn't say it will go down. The question was, will it lead to minimum wages going up and being higher, and what would happen if that were to happen? I said it will be a pass-through liability for us. But obviously, if wage levels keep going up, the margin is impacted. That has nothing to do with the labor code specifically. Okay. Understood. Thanks. Thank you. Next question comes from the line of Bhargav with Ambit Asset Management. Please go ahead. Yeah. Good afternoon, and thanks for the opportunity. Just wanted to know what is the share of manufacturing in General Staffing and how has it moved in the last four years? And related to that, what is the PAPM in manufacturing that we earn? Manufacturing has been at around 10%-12% and broadly been at that level over the period. And I think if we look at the PAPM specific to manufacturing, it would be around INR 800. Okay. Within the Degree Apprenticeship segment, we also do learning and connectivity. I think close to about 13,000 people are within this segment. You think the share within DA of apprenticeship should sort of consistently increase? And given that PAPM here is higher, it will actually be favorable for us? I think the key focus for us in the DA business has been to ensure education linkage to the apprentices and trainees. From the start of the year, when we were at about 12% of the associates and trainees being on learning alongside the apprenticeship, we've now moved it to about 30% being there. We will continue to focus on it being a continued sale and increasing the percentage of apprentices under learning coverage. We believe that adds value, and it also is a better realization from an element of the business. How higher are the margins here versus the normal margins? Typically, if the realization is about INR 300 for a pure apprenticeship, the element of integrated learning apprentice is anywhere between INR 700-INR 800. Oh, okay. Double of it. Yeah. And lastly, sir, in HR Services, we've obviously reported a loss of about INR 7 crore in nine months. Is it fair to say that we'll end up negative in FY 2025? Because earlier, I think the guidance was to come back to profitability in the full year. No, HR Services, I think with the seasonality element of EdTech getting pushed is really why the loss is there. With the catch-up, we should turn positive back in Q4. No, so for the full year, will it be positive or in? For the full year, we will turn. For the full year, we should turn positive. Okay. So we'll expect more than seven crores EBIT in four years. Fair to assume, right? Yes. Okay. Thank you. Thanks. And all the very best. Thank you. Next question comes from the line of Aniket Kulkarni with BMSPL Capital. Please go ahead. Yeah. Thanks for taking my question. So coming back to that wage increase situation, so you said if the minimum wage increases, you pass on the hike to the customer, right? So does it directly pass through? Can you explain how is it detrimental to our margins? Because if it is a direct pass-through, then it shouldn't affect our margins, right? No, there won't be any impact on absolute profits. We are talking about margin as a percentage. So for example, if the salary is INR 10,000, on that, we are earning INR 700 PAPM. And if the minimum wages go up, if the average salary goes up from INR 10,000 to INR 15,000, then 75% of our clients are on fixed markup model. We'll earn the same INR 700 even on a INR 15,000 salary. So that would directly dilute margin as a percentage, but not absolute profits. Oh, okay. But now, if such a situation comes in, are you in a position to, let's say, for newer contracts, get into a floating kind of commission for you? Because after a certain point, it would not be ideal for you to continue that contract, right? No. I mean, like Kartik mentioned, 60%-70% of our new sign-ups this year have been on the percentage contract, but they are not the volume drivers. Most of the volume-driving clients take a PAPM pricing. Also, Aniket, our average salaries are currently at INR 26,000 per month. So. It's already above the minimum wage. It's much higher than the minimum wage levels, even considering a hike in the near future. Okay. Got it. Thank you so much. And best of luck. Thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of the question-and-answer session. I would now like to hand the conference over to Mr. Ashok Reddy for closing comments. Thank you. In closing, we continue to focus on growth in our existing businesses and also will be focusing on working the synergies with the three entities that we have invested into. The investment into these entities is not a diversion in strategy or focus. It continues to create opportunities in a complementary nature in our Employment Cluster and our HR Services business. We believe that these could augment the pace of sales growth and contribute to the bottom line in a meaningful way as we go forward. We also look to the HR Services turning positive this quarter as a year statement with the element of the seasonality billing and collection loops in the EdTech business closing out. There's an element of a commitment from the universities on that front, and we believe that that should play out. From our perspective, the focus on growth, productivity as levers to profit growth will continue, and we will drive on those fronts. Thank you very much for the support. Thank you. On behalf of HDFC Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.