Quess Corp Ltd

Dear Shareholders,

The key building blocks of any economy are its infrastructure capacity, technology & innovation, efficient markets and a productive workforce. Since inception and over the last 17 years, Quess has transformed itself to become the largest business services provider and one of the largest domestic employers. This has resulted in Quess becoming a structurally important company in India's growth engine. FY24 has been a special year. In addition to creating value for shareholders, the board of the company also approved a proposal to demerge into 3 separate listed entities. On the performance front, we closed the fiscal year with our best-ever revenues of Rs. 191,001 Mn and EBITDA of Rs. 6,935 Mn, registering 11% and 18% YoY growth, respectively. India demonstrates strong macroeconomic indicators supporting rapid urbanization, a shift from farm to non-farm sectors, significant investment in physical infrastructure, and the formalization of the economy on the back of initiatives like Digital India and the JAM trinity. The continued pace of formalization will eventually bring more than 10 mn formal contractual workers under the social security net i.e. increased EPFO enrolments and widening bank account & mobile penetration by 2030. A key measure of formalization is the staggering growth of 90x in retail digital payments in India from 1,620 mn transactions in FY2012-13 to over 147,200 mn transactions in 2023-24 (till February 2024). Imagine the network effect that such scale of formalization will bring about to all sectors of the economy! Furthermore, generating new employment in India is a top priority for the current Union Government in its "Viksit Bharat" vision. Our WFM business is supported with regulatory tailwinds emerging from key announcements in the FY25 Union Budget. The announcements for Employment Linked Incentives are encouraging which will enable employers such as Quess to invest in skilling and training of our youth. Together, these schemes expect to generate new employment for 28 mn individuals. We are optimistic about our contribution in the next phase of job creation in India's development journey.

Our GTS business is expected to continue on its growth trajectory propelled by India's technology industry (which is projected to reach USD 500,000 Mn by 2030 vs. USD 200,000 Mn in FY22, as per a NASSCOM report). Within this growth story, GCCs are playing a key role. India is home to 1,600+ GCCs that employs over 1.7 mn professionals and contributes $46,000 Mn to India's outsourcing industry in 2023.

Our OAM business is expected to greatly benefit from the operations and maintenance requirements from the rapid build out of infrastructure in India. We are witnessing significant spends by the government on capex and investment in public goods, with effective capex pegged at Rs. 15,000,000 million for FY25, up by 15%+ from FY24. India's road infrastructure is second largest in the world at 6.3 mn km, expected to grow at a CAGR of 36% from 2016 to 2025. This will in-turn significantly boost manufacturing capacity in the country, with a greater propensity to outsource. Quess is uniquely positioned to leverage opportunities emerging from such favourable macroeconomic trends across its principal operating platforms. Reflecting on our own journey, we raised close to Rs. 19,400 Mn in primary capital since inception, ~90% of which was raised in the IPO and IPP. We invested this capital in majority of our investments anchored on four principles of capital allocation:

1) organic growth,

2) inorganic growth,

3) prudent debt management and

4) cash distribution to shareholders. It is time to take stock of our progress. Our journey can be mapped in 3 distinct phases –

A) The "Roll-up" – Investment Phase,

B) The "Shift" – Organic Growth and Consolidation Phase,

C) Value Unlock Phase & Way Forward.

A) The "Roll-up"

Our investment phase focused on acquiring scalable businesses at attractive valuations. The roll-up model helped us integrate these acquisitions and create synergistic businesses with growth-oriented service lines. Each of our business segments is specialized with a decentralized operating model and empowered management. Some of the key acquisitions in each platform are highlighted below:

• WFM: Our acquisitions of Magna and Comtel enabled us to enter the high-margin IT staffing business in India and APAC, thereby contributing significantly to the WFM EBITDA. Post this, our focus has been to grow organically by capturing market share. In 2024, we rank #4 in the world by headcount, with a largest addition of workforce on an annual basis.

• GTS: We acquired Conneqt and Allsec to create a digital-led CLM, BPM and HRO business. The combined strength of Conneqt and Allsec provided us a substantial base to expand our services, particularly digitally enabled services to customers internationally as part of margin expansion strategy. GTS is now the largest contributor of EBITDA to the Group.

• OAM: We acquired Avon to grow it from a sub Rs. 100 Mn business to approximately Rs. 1,100 Mn in less than 15 years. This positioned us as one of India's largest integrated facility management businesses, managing ~370 mn sqft of sites and facilities. Along the journey, we added specialized service lines and verticals through our acquisitions of Terrier (Security Services), Manipal Integrated Services (Healthcare), Hofincons (Industrials) and Vedang (Telecom) – to eventually offer our customers a comprehensive suite of services for their sites and facilities. We are now the leading operating asset management company by the range of services we provide.

• Foundit: In December 2021, Foundit raised Rs. 1,400 Mn in a funding round led by Volrado Venture Partners and Meridian Investments. We recently unveiled Foundit 2.0 with a revamped product experience, enriched database of circa 90 mn job seekers and AI-driven search with smart filters. We are now well underway in our roadmap to upgrade to Foundit 3.0 which is an exciting journey ahead. At an aggregate level, the gestation period of our investments is more or less complete. Quess has 20 key investments with a net investment value of Rs. 21,818 Mn recorded in FY24##. This excludes divestments of Dependo Logistics (FY21), Simpliance (FY23), Qdigi (FY24) and Coachieve (FY25). Since FY18, our investments have recorded a cumulative PAT of Rs. 20,184 Mn, which represents an operating cash yield of 13-14%. We have near about achieved cash break-even from operations in a period of 7 years despite a 2-yr Covid disruption, and thereby creating value-accretive businesses.

Executive Director & Group CEO

Dear Stakeholders,

The financial year 2023-24 has been remarkable for our business. Our year-long initiatives aimed at profitable growth and consolidation of operations, have culminated in our best-ever operating results, marked by the highest annual EBITDA. We have maintained a trajectory of predictable, non-linear profitable growth, with seven consecutive quarters of sequential EBITDA increase—46% growth in EBITDA compared to 15% revenue growth over the same period, coupled with stronger cash conversion cycle, reduced debt level and consistent return to shareholders via dividends.

Business Highlights

Quess Corp ended the year with over 567,000 headcount, adding 56,000 headcount during the year; Quess Corp's performance in key growth sectors has been a significant achievement. Despite the IT sector's softness, we secured 737 new contracts, achieving an 11% YoY revenue growth. Our focus on cost reduction and productivity improvement through investment in technology and process automation reduced the core headcount from 5,500 in Q1 to 5,300 in Q4.

Our WFM vertical's performance has been outstanding. Staffing Industry Analysts (SIA) ranked us 46th globally in 2023, up from 54th in 2022. The platform's headcount reached 452,000, driving a 14% YoY revenue growth. Workforce formalisation was a key growth driver, with approximately 30% of clients using outsourced staffing for the first time. The EBITDA margin remained stable at 2.6%.

In General Staffing, we crossed the 400,000 milestone and are now among the top 5 global staffing companies, aspiring to become the largest. Our vertical-focused strategy yielded results with 60,000 associates added, supported by retail, manufacturing, and telecom growth. The manufacturing and industrial headcount neared 67,000, with an impressive ~50% YoY increase, ranking third in headcount contribution after BFSI and retail. We believe India's manufacturing sector will continue to boom, driven by increased capex and the ‘China+1' strategy. In FY24, 28% of our new hiring and 64% of all associates onboarded were deployed in Tier 2 and Tier 3 cities, reflecting our extensive sourcing and deployment capabilities across geographies. Despite competitive margin pressures and a significant flat fee margin structure, our ‘Value Added Services' showed positive results, with gross margin growth of 23% YoY to Rs. 675 million. Collect and Pay headcount stood at 78%, enabling better working capital management. The IT Staffing business saw visible softness, with workforce additions in India mainly through Global Capability Centers (GCC), now employing over 1.7 million people. We continue to invest in IT staffing sales and recruitment to capture a larger market share in GCC.

GTS maintained its remarkable growth trajectory with focused sales and client retention, crossing the

Rs. 4 billion EBITDA milestone, achieving the highest-ever EBITDA of Rs. 4.25 billion—a 21% YoY growth. The non-voice BPO vertical grew significantly, strengthening our leadership in the collections business, which grew by 25% YoY through mobile apps and digital tools. The high-margin international Customer Experience Management (CXM) business of Allsec continued to grow, with a 40% YoY increase, now accounting for 72% of overall CXM revenue, up from 69% in FY23. The platform-based Employee Experience Management (EXM) vertical of Allsec enhanced market leadership, processing 15.5 million payslips in FY24. Like CXM, the platform-based EXM vertical's share of the international order book increased to 57% in FY24 from 45% in FY23.

Our focus remains BFSI, manufacturing, retail, and healthcare, with value-added services like Customer Experience (CX), Revenue Cycle Management (RCM), Finance & Accounts (F&A), Human Resource Outsourcing (HRO), and upselling to top clients powered by digital tech solutions such as conversational AI, sentiment analysis, agent assist, and bots. OAM saw an 18% EBITDA growth in FY24 compared to an 8% YoY revenue growth. This was driven by our focus on margin expansion and productivity improvement through rationalising low-margin contracts, shifting towards more integrated services, and reducing the cost to serve. The business mix positively shifted, with increased share of Food and Beverage (F&B) and Telecom. F&B business saw an 18% gross margin improvement on an annualized basis with a 10% revenue growth YoY.

The telecom active infra services business achieved its best-ever revenue and EBITDA, up 30% and 32% YoY, respectively, driven by peak 5G deployments, further penetration in 4G, and new IoT projects. In FY25, the facility management business will drive growth through tech-enabled integrated offerings, specifically focusing on BFSI, healthcare, and public utility verticals.

PLB saw foundit achieve operational breakeven during the year, reducing burn from Rs. 0.9 billion in FY23 to 0.6 billion in FY24, while Q4-exit ARR crossed Rs. 2 billion. We launched our disruptive AI product, foundit 2.0, for the SEA and Asian markets, migrating 100% of our single geography user customers to 2.0. This provides recruiters with significantly improved profile relevancy, access to talent on and off the market, enriched candidate profiles with intelligent insights, AI-powered contextual search, and personalised outreach.

Operational metrics for both candidates and recruiters remain positive, with 21 million profile updates (up 78%), 23 million job applications among 120 million candidate profiles, and 53,000 recruiters on the platform, with NRR at 123% in the last quarter of FY24. We will continue to focus on enterprise sales with foundit 2.0 to aid in sales wins and pipeline growth.

People

As a people-centric business, our greatest resource is our employees, and we are committed to providing an exceptional employee experience throughout their hire-to-retire journey with us. Our latest pulse survey, covering 156,000 associates, showed that 88% rated themselves as ‘very satisfied' or ‘satisfied', up from 85% the previous year. Furthermore, 78% of our employees are ‘likely' or ‘very likely' to recommend Quess to their peers. Our efforts have led to significant achievements and external recognition. We have been certified as a 'Great Place to Work' for the fifth consecutive year, underscoring our commitment to a superlative work environment. Quess also ranked among the best places in Health and Wellness and was recognised as a Leadership Factory by the Great Management Institute, reaffirming our focus on employee well-being, career growth, and development. Our inclusivity and diversity efforts are evident—we employ over 100,000 women and over 500 differently-abled individuals.

In FY24, Quess' MSCI ESG rating improved to BB from B in FY23, with our ESG philosophy deeply integrated into our operations. Quess Foundation distributed educational kits to over 14,000 students, provided life skills education and annual health screenings to more than 12,000 students, and renovated infrastructure in 75 schools benefiting over 15,000 students. We also planted 251 trees and responsibly disposed of over 1,500 kg of paper waste and 4,000 kg of food waste.

Corporate Structure Simplification

Aligned with our objectives, we continued to simplify our corporate structure in FY24 with several key steps: Divestment of non-core assets: We completed the divestment of Qdigi Services at an enterprise value of Rs. 0.8 billion, resulting in an aggregate gain of Rs. 0.4 billion, yielding an IRR of ~15%. Additionally, we divested the Labour Law Compliance division of Allsec at an enterprise value of Rs. 0.27 billion, yielding an IRR of ~12%.

Corporate structure streamlining: Conneqt, Greenpiece and MFX India have amalgamated into Quess post-NCLT approval in Q3 FY24.

Strategic consolidation: We combined Heptagon Technologies with Conneqt Digital practice to strengthen our market presence and enable a joint go-to-market strategy in the digital space under the GTS platform. We invested in Heptagon to develop solutions and create a sustainable impact in the digital front for business enterprises.

Eliminating non-performing units: We consolidated loss-making business units such as BCPL, TaskMo, and North America to eliminate burn and effectively turn around these businesses.

Way Forward

On 16 February 2024, we announced a three-way demerger of Quess Corp into three independent listed entities, each capable of executing its business strategies. We are confident this will significantly augment the value creation journey, providing each business with enhanced management focus and an optimal capital allocation strategy.

The process is on track and is expected to be completed within 12-15 months of the announcement. As I look forward, I remain confident in our continued endeavour to create impact for all our stakeholders—clients, employees, and investors—and scale new heights. I extend my gratitude to the Board for their guidance, to every Quessian for their passion, perseverance, and commitment, and to our shareholders for their trust and support.

Sincerely,