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00:00 We have team Lees which is in the spotlight at the moment. We have Ramani Dutty, CFO of team Lees who is joining us on the show.
00:08 Ramani, good afternoon. Thank you so much for joining in. It's been a fairly steady quarter if I consider the year on year growth in terms of your top line, in terms of your bottom line.
00:19 And this is perhaps despite a lot of challenges with the churn that we've seen over the course of the year, specifically with a handful of your larger sectors.
00:29 I just want you to give us your assessment of the quarter gone by as well as what we can expect as we move into the new financial year.
00:38 Sure. So firstly, it's been a mixed bag for us because while the general staffing business is doing extremely well in terms of new headcount addition, new logo addition,
00:48 and across all non-IT sectors, be it FMCG, FMCD, pharma, e-commerce, telecom. So we are seeing very good traction.
00:58 So what is kind of offsetting the profit expansion for us is on the specialized staffing because for us it's mainly the IT services vertical that gives the maximum margin across all the entities,
01:10 all the verticals that we have and that has been sluggish for the last five, six quarters that has impacted the margins and expansion of margins at overall group level.
01:20 Going forward, FY25 as well, we believe that general staffing business will continue to grow on volume 20% with margin expansion happening on a quarter on quarter basis.
01:34 However, specialized staffing at this stage, the recovery seems to be still kind of delayed.
01:41 And we have initially expected that maybe by end of Q1 that we can see some green shoots. Looks like as of now within IT services, we are not seeing any major pickup.
01:51 However, the good news is we are able to maintain the run rate in IT staffing with a lot of demand coming in from GCCs, both from the new GCC acquisitions that we are doing as well as organic growth within the existing GCC clients that we have.
02:07 And on an overall basis, yeah, sorry.
02:11 No, no, please go on. Please complete your point. Yeah.
02:13 I'm saying on an overall basis for FY25 at group level, we are expecting the top line growth to be anywhere between 20 to 23% with a decent profit expansion.
02:26 And margin expansion can be reflected only after Q1 because Q1 we have impact of employee annual salary appraisal and seasonality coming from our HR services.
02:37 So I understand. My question then is in what sectors are you seeing increased traction?
02:43 Also, if you could give us an idea about demand from IT, what kind of trends are you witnessing here going forward as well as perhaps an idea on pay scales and salaries going in?
02:59 How are things expected to shape up out here?
03:03 Sure. Let me start with the general staffing verticals first.
03:06 So there we are seeing demand coming across all segments.
03:10 So we are not seeing any concentration with one or two specific segments.
03:15 So across consumer verticals, retail, telecom, e-commerce, BFSI, across all verticals, we are seeing very good momentum in the hiring demand.
03:25 And also in the past, almost 70 to 80% of the demand used to come only from metros and tier one cities.
03:32 But now we are seeing an increased demand coming from smaller cities and towns as well, especially at entry level jobs, at junior profiles.
03:41 In the organized space, we are seeing a lot of new demand coming up.
03:45 And BFSI, while for the last couple of quarters was a little slow because of the RBI restrictions on unsecured loans, it went a little slow.
03:55 But by end of Q1, looks like we can have full pickup and recovery in BFSI as well.
04:03 Coming to your point on IT, within IT, as I mentioned earlier, GCCs are giving us very good volume and they continue to grow for the rest of the year, FY25 as well.
04:15 However, within IT services at this stage, we are not seeing any momentum barring the backfilling for the edition.
04:23 We are not seeing any net growth in the headcount within IT services segment.
04:28 In terms of skill set, the traditional skill sets mainly into coding and engineering still take like 50 to 60% share.
04:37 However, there is a higher demand for niche skill set, be it in AI, ML, those kind of new age technologies.
04:43 We are seeing a higher demand and also a higher pay scale in those profiles.
04:49 Overall, in terms of salary inflation post-COVID, within IT pay scale, we have consistently seen upwards of 15 to 20% increase in salaries for two years in a row.
05:01 But looks like now that got corrected to a single low-digit number, again, within IT services as well as GCC.
05:09 So we are not seeing any unusually high salary inflation trends as far as IT professionals are concerned.
05:17 Alright, and in terms of the upcoming year, are you anticipating any sectors which could actually lead hiring and lead growth for the company as well?
05:29 What is your expectation coming in?
05:33 Sure. For the upcoming year, we are still begging on BFSI and consumer.
05:39 These two would be the topmost sectors for us in terms of headcount edition.
05:43 However, we are also focusing on building the manufacturing vertical.
05:48 So far, we have an exposure between manufacturing and industrial all put together.
05:52 We have so far about 10% exposure.
05:55 But we believe this can be increased substantially in the next couple of years.
05:59 And we are targeting a lot of new companies which are in the space of smartphone manufacturers, chip manufacturers, electronics, EVs, these kind of new age companies also we are targeting.
06:13 And there the demand for entry-level jobs and contract employees is very high.
06:18 Alright. A final question then is actually to do with your margins coming in.
06:25 I want to understand better the profitability because what I am seeing is that EBITDA margins stand at around, if I am not mistaken, 1.2% for general staffing and 1.6% on a year-on-year basis.
06:40 And I am talking about the annual numbers.
06:41 When it comes to specialized staffing as well, we have seen a little bit of a contraction in margins.
06:45 It is the other HR services which have actually seen an improvement on a year-on-year basis.
06:50 Is there a scope for further improvement in your overall group margins going in?
06:57 If that is the case, where would that impetus come from?
07:01 Yeah. No, definitely.
07:03 From Q2 onwards, we have a clear path and plan to margin expansion.
07:08 Because the main impact that we had in our staffing business as far as EBITDA margins is concerned is coming from the withdrawal of an apprenticeship program called MEEM.
07:18 We had close to 40,000 trainees under that program and we have to release all of them over a period of five to six quarters, with the last quarter happening to be the current one, Q1 FY25.
07:29 So, with that last leg, we will be completely out of the MEEM loss which is impacting the staffing margins.
07:37 And within specialized staffing, we used to maintain an EBITDA margin of upwards of 8%, but because of the overall drop in headcount, it is now hovering around a little short of 7%.
07:49 But once we see the volume getting picked up by mid of this year, we are confident of taking the margins back to 8%.
07:57 HR services, yes, we are growing the margins year on year at a rate of 30% kind of growth rate and this kind of trend can be continued into future as well.
08:10 Alright, Ramani, we will leave it at that. Thank you so much for joining us and for taking us through those many details with respect to team leads.
08:18 [Music]