Dear Shareholders,
The year gone by saw a rebound in the economy and India particularly
saw a better economic sentiment. Employment saw higher levels and the various measures by
the government has accelerated the formalization of the Indian workforce. The tech sector,
however, saw some headwinds and startup in particular found difficulties due to the
funding winter that has set in. These trends here resulted in increasing our workforce
from 4,37,000 to 5,11,000 by the end of the year, making Quess a leading domestic
employer.
During the last financial year, we created a new segment called
‘Product Led Business' which includes foundit, QJobs and Qdigi. Previously,
their financial performance was reported under Global Technology Solutions (GTS). This was
done to clearly demarcate mature cash generating businesses and those in their investment
phase. The Canadian staffing business, previously reported under GTS was re-segmented to
club all overseas staffing businesses under Workforce Management (WFM). With our stated
goal of structure simplification, we divested our 53% holding in Simpliance during the
last financial year. The transaction valued Simpliance at an enterprise value of Rs.120
crore against the original investment of Rs.4.5 crore. That successful exit gives us even
more confidence about our talent platform foundit. Not only is its SaaS-like business
model gaining market share, the investment in foundit has optionality value. The last
funding round valued it at $100 million and since then the business has only gone from
strength to strength with operational breakeven targeted soon.
All our platforms including WFM turned a good performance in FY23. This
despite the slowdown in IT hiring. As you might be aware, the IT sector has been taking it
on the chin and that has led to collateral damage in IT hiring. However, our strong
sourcing engine stepped up to cover ground in manufacturing as well as infrastructure.
There has been no let down in growth momentum at GTS and the Operating Asset Management
(OAM) platform is also finding its feet post Covid. Our strategy of creating
vertical-specific capability will enable us to provide customer-specific solutions and
lead to higher margins in OAM. On the foundit front, too, there is good news as post
rebranding from Monster APAC & ME to foundit, our talent platform continues to power
ahead in traffic growth as well as new candidate registrations.
This overall improved performance resulted in an OCF to Operating
Ebitda of 71% as well as reduction of debt: equity ratio from 0.23x in FY22 to 0.19x in
FY23. We generated a ROE of 8.4%. That return metric seems understated due to the ongoing
investment in PLB and the ROE excluding that investment was 12.39%. Along with our push on
volume and margin growth, we are committed to reaching and sustaining a ROE of 20%. In
line with our capital allocation policy, we paid a dividend of 8 per share for FY23,
reflecting our confidence in the cash-generation ability of our businesses. This
confidence stems from the underlying change underway in the Indian economy. The gradual
transition from rural and agriculture jobs to formal jobs also present a huge opportunity
for your company. According to the FICCI McKinsey India's Century Report, India has the
potential to create around 90 million non-farm jobs by 2030 with construction, education,
healthcare, financial services and manufacturing being the biggest contributors. On our
own steam, Quess Corp crossing 500,000 associates in headcount puts us on the road to
bigger things in not only the Indian but also the global staffing space. According to
S&P Global Ratings, the Indian economy is expected to clock an average growth rate of
6.7% until FY27 driven by domestic consumption. For FY24, it expects growth to be lower at
6% compared to 7.2% in FY23. Even at 6%, India will be the fastest growing major economy
and there are specific shifts that shall benefit the Company. The most prominent among
them being:
A. India increasingly being favoured as a manufacturing base by
multinationals: Manufacturing has started to see traction compared to previous years.
Sourcing manufacturing personnel has tremendous potential owing to the large manufacturing
units being set up due to the China+1 strategy adopted by multinationals and production
linked schemes introduced by the government. Quess Corp could be a natural beneficiary as
we are the only integrated services provider that can provide large scale staffing,
security and food services, housekeeping services, dormitory management etc under one
roof.
B. Emergence of Tier II & Tier III cities in preference to Tier I
cities: In IT staffing, there is hiring momentum in non-IT sectors and global
capability centers. The former driven by Indian enterprises going digital and the latter
by companies in the US and Europe dealing with the slowdown by outsourcing more to their
India centres. An EY report states that earlier GCCs favoured Bengaluru, Hyderabad,
Chennai, Mumbai, Pune and Delhi NCR but now Tier II cities such as Coimbatore,
Visakhapatnam, Jaipur, Vadodara, Kochi and Chandigarh are becoming popular due to
improving infrastructure, favourable state policies, lower real estate and talent costs.
The EY report states that 1,600 GCCs in India have a staff strength of 1.9 million and
around 70 new GCCs are being set up every year. As per EY estimates, by 2030 India could
have 2,400 GCCs employing 4.5 million people. This represents a significant opportunity to
Quess to provide a range of business services to the GCCs being set up.
C. Consolidation in commercial real estate: Private equity giants
such as Blackstone and Brookfield are now the biggest landlords in Indian commercial real
estate and the rising popularity of REITs is only adding to the formalisation in real
estate upkeep and maintenance. Blackstone and Brookfield prefer outsourcing facility
management services and will increasingly favour integrated service providers for the
maintenance and upkeep of their properties. As we bid adieu to a milestone year in which
Quess crossed 500,000 in headcount, we just might experience the occasional hiccup that I
have earlier referred. With central bankers split on whether the tightening cycle has run
its course and the Federal Reserve not ruling out further hikes, the global economy
playing the guessing game. The tightening of monetary credit not only affects consumer
demand but also inflicts higher borrowing costs on companies.
The prospect of El Nino has the RBI worried as well. Already, due to
delayed rains the price of vegetables and fruits is on the rise raising the scepter of
food inflation. Since Quess has successfully faced multiple economic headwind, we are
approaching this financial year with confidence. During the past year, we also engaged the
services of BCG for a strategic review of our business and capital allocation in order to
drive long-term value creation. Our optimism is further buoyed by the faith reposed by our
largest shareholder who increased their shareholding by 4.45% to 34.52% in FY23. Along
with the 22.16% held by me, the overall promoter holding in the company now stands at
56.68%. Fairfax Group increasing its stake in Quess Corp during the year is an endorsement
of the strategic direction of the company.
All our business services providing platforms are integral to our
customers and continued growth in the economy along with efficiency measures should result
in improved operational cash flow for the company going forward. Needless to add, our
customers and our employees form the bedrock on which we have delivered so far. At Quess
Corp, we have always prioritized our people and for the fourth year running, we have been
certified as a 'Great Place to Work'. This successive certification demonstrates our
commitment to employee wellbeing. In addition, our people initiatives include:
Promoting inclusivity and diversity: We currently have 92,000 women
employees across our organization, including core members and associates. Our goal is to
increase the representation of women in our core workforce from 29% to 50% by 2025. To
achieve this, we have introduced GROW 2.0, a digital app-based learning program that
empowers women in mid-management roles. Furthermore, our 'Sthree' benefit program allows
women returning to work from home during their menstrual cycles, and we actively seek out
women returning to work from career breaks through our hiring policy. As part of our
commitment to addressing menstruation poverty, we have partnered with Sustainable
Menstruation Coalition (SMC), a global alliance of companies & NGOs that use
innovative financing and on-ground activation to end period poverty.
Equity and fairness: Our Equal Employment Opportunity Policy
ensures equal opportunities for growth and development. We are proud to employ 6,692
persons with disabilities across nine categories, embracing diversity while delivering
exceptional service.
Learning and development: Last year, our employees dedicated
over 197,590 hours to learning through programs like 'Crucible,' which develops leadership
skills through true-to-life scenarios, and 'Catalyst,' a training module designed for the
development of young leaders. We offer level wise learning and gateway programs accessible
to all employees through digital and classroom formats.
Listening to our employees: We highly value employee feedback
and incorporate it into the development of our policies, fostering a culture where every
voice is heard and respected. Based on the insights gathered from our O.X.I Meter Survey,
we have designed our Employee Value Proposition, OCEAN: Opportunities in Abundance,
Champion, Entrepreneurial, Agile, and Nurturing.
Holistic wellness: To ensure the holistic wellness of our
employees, we embrace a comprehensive approach across seven dimensions: physical,
emotional, financial, societal, intellectual, spiritual, and occupational. We have
implemented various initiatives for each dimension, supporting the wellbeing of our
workforce. We empower work life balance by offering unlimited leaves, rejuvenation leaves
for wellness, happiness leaves for family celebrations, and parental leave for board
exams.
We take great pride in our employees as they lay a solid foundation for
Quess to reach new heights. As we continue to build upon our initiatives, we remain
committed to fostering an environment of learning, enjoyment, and unparalleled success.
We again thank our employees for all their effort, our customers for
being partners in our growth and our investors for their confidence in the company.