Quess Corp Ltd (QUESS) Q4 FY22 Earnings Concall Transcript

Quess Corp Ltd  (NSE:QUESS) Q4 FY22 Earnings Concall dated May. 27, 2022

Corporate Participants:

Girish Kumar Sharma — DGM Investor Relations

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Ravi Vishwanath — Chief Financial Officer

Sekhar Garisa — Chief of Emerging Businesses and Corporate Development

Lohit Bhatia — President – Workforce Management

Analysts:

Vidit Shah — Analyst

Mukul Garg — Motilal Oswal Financial Services — Analyst

Sanjay Awatramani — Envision Capital — Analyst

Raghuram NS — Eurindia Funds Management — Analyst

Sidhant Mattha — B&K Securities — Analyst

Sandeep Baid — Investor — Analyst

Nilesh Jethani — BOI Mutual Funds — Analyst

Rushikesh Bhise — MoneyWorks4me Financial Advisors — Analyst

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

Alok Deshpande — Edelweiss Financial Services — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Quess Corp Limited Q4 FY ’22 Conference Call hosted by IIFL Securities Limited. 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. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Vidit Shah from IIFL Securities Limited. Please go ahead, sir.

Vidit Shah — Analyst

Thank you, Peter. Ladies and gentlemen, good morning and thank you for joining us on the post results conference call of Quess Corp.

It’s my pleasure to introduce the senior management of Quess who are here with us today to discuss the results. We have with us Mr. Guruprasad Srinivasan, Executive Director and Group CEO; Mr. Ravi Vishwanath, CFO; Mr. Lohit Bhatia, President of Workforce Management; Mr. Pinaki Kar, President of Global Technology Solutions; and Mr. Sekhar Garisa, President of Emerging Businesses.

We will begin the call with opening remarks from the management team, and thereafter, we will open the call for a Q&A session.

I’d now like to hand over the call to Mr. Girish Sharma, DGM, Investor Relations to take proceedings forward. Thank you, and over to you, Girish.

Girish Kumar Sharma — DGM Investor Relations

Thank you, Vidit. Good morning, everyone, and thank you for joining our earnings call today. Please note that results and presentations are already uploaded on our website. Anything we say which refers to our outlook for the future is a forward-looking statement and must be read in conjunction with the risks that the company faces. These uncertainties and risks are included, but not limited to what we have already mentioned in the prospectus filed with SEBI.

With that said, I will hand over the call to our Executive Director and Group CEO, Mr. Guruprasad Srinivasan. Over to you, sir.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Thank you so much. Thanks, Girish. Let me start by briefly giving you an overview of the business. The business environment remains conducive barring a small pause in January due to Omicron wave. Our major business have all continued to demonstrate exceptional growth, driving consolidated revenues up by 26% year-on-year and 3% quarter-on-quarter basis. We achieved the highest ever revenue of INR13,692 crores and EBITDA for the quarter of INR185 crore, once again signifying our execution capability. Our headcount grown larger where we have closed the year about 473,000 employees on board. These are our FTEs growing at 4% quarter-on-quarter. Please note this number does not include an additional 13,316 who were pay-rolled in the month of March, but not on our rolls by end of the month.

Our EBITDA from operations grew by 3% quarter-on-quarter. Our focus on cash generation continues to remain top priority with OCF to EBITDA conversion at 82% for FY ’22. However, our long-term OCF to EBITDA conversion target will continue to be at 70% going forward.

Our sales engine continues to perform well. We acquired 307 new customers in Q4 versus 249 in Q3 ’22 and 142 a year ago. FY ’22 saw our cross-sell initiative across gradually maturing into a sales culture. It just does not remain as an activity within — I mean, every business, leveraging our service platform to offer solution to our customers. We generated 70 opportunities across business, 38 existing accounts and 32 from new accounts and generated a potential ACV of INR532 crores.

With those highlights at the company level, I would now like to take you all through platform-wise [Technical Issues]. To start with, let’s look at the Workforce Management platform. The platform posted a revenue of 4% quarter-on-quarter growth and 28% year-on-year. EBITDA from operations grew by 17% quarter-on-quarter and 20% year-on-year. The major highlights are as follows. Our headcount across Workforce Management crosses 300,000, an increase of 4% quarter-on-quarter and 19% year-on-year. General staffing headcount crosses 285,000 with the growth coming in retail, BFSI, logistic and telecom and these are the major drivers of our headcount growth in the year. General staffing added 71 new customers in the quarter and the logo added throughout the year about 218 logos that the platform has added and the service continue to grow and accounted for about 20% of gross margin.

Our sourcing efficiency reached a new level and we have hired 10,000 people internally in a month for the first time, which also demonstrates the kind of efficiency that we have built in terms of our hiring engine, which is one of the critical event into our platform. Core to associate ratio stayed almost flat due to strengthening of our core team in order to drive growth. IT staffing continues to grow. Q4 EBITDA grew by 33%. Headcount greater than 10,000. Gross margin now makes up to 33% of our total associate base against 28% a year ago. With loosening of restrictions in Singapore, our Singapore IT staffing businesses saw an increase of 8% in headcount quarter-on-quarter in Q4.

Moving onto global platform, GTS technology platform, which has delivered 20% year-on-year top line growth and a very impressive Q3. GTS has four service components in it. First in customer lifecycle segment. With a rapid growth of Indian consumer demand, a lot of investment are being directed towards virtual interactions due to pandemic post-COVID. Our CLM business has grown 30% year-on-year. Both Conneqt and AllSec has had a very impressive revenue during the quarter with Conneqt crossing a milestone of INR300 crore quarterly revenue in Q4. We have made several business models, innovation in CLM, taking more solution selling approach to our services and driving digitization result in our non-voice CLM revenue, which grew by 61% year-on-year.

Second, on non-CLM BPO, the collection business had a very strong Q4, an impressive revenue growth of 13% along with domestic F&A continues to be a robust pillar of our non-CLM business. I mean, this is a result of our strong Conneqt management team focusing on productizing and digitizing these two service lines over last few quarters. We are positive about the future outlook on back of strong order book that this team is on.

The third element under GTS is the platform-based services. The number of payslips processed by AllSec platform for the quarter has grown by 25% in Q4. Our Insurtech platform business in US has also had an impressive year-on-year growth. We continue to invest in both sales and technology capabilities in this platform area. We hope that this will help us to expand our margin in GTS further overtime.

The fourth element under GTS is IT services. Our domestic IT services business saw a growth of 53% year-on-year as our strategic initiatives in building our infrastructure management service business in India and Canada have started giving good results.

Next, moving on to the OEM platform where the growth has returned with top line growing by 24%. To start with, IFM business saw a muted growth due to slowdown caused by Omicron wave. We have continued to reduce our dependency on IT industry and aggressively focusing on adding customers in new segment and in other segment and other platforms. The business continues to make strides on efficiency. Process digitization has taken our core to associate ratio up to 84 from 70 a year ago. Our cost to serve is down to 4.4% from 5.4% from the same period. Our security business has witnessed a recovery in Q3 with headcount growing by 17% year-on-year. The revenue grew by 21% and the business added 38 new customers in Q4. As a measure of abundant caution, the segment also took an approximate INR11 crore provision under regular business activity in Q4.

Let’s move onto emerging business where the last quarter had witnessed significant progress. As most of you know, Monster, our online talent platform raised capital up to INR137 crores at a valuation of close to USD100 million. To fund its aggressive growth plans, we have received first tranche of funds and has started deploying the funds from Q4 onwards. Fund raised will be utilized primarily for product development, user acquisition and marketing. Monster turnaround continues to be impressive and with the company ending the year strongly with sales showing 13% quarter-on-quarter growth in Q4 at about 70% year-on-year growth on full-year basis. The new customer acquisition broke new ground with over 3,000-plus new customer contracts in Q4.

Key business metrics like active candidate base is up by 100%. Recruiter searches are up over 144% year-on-year. Value of renewal rates is up by 80%, continue to grow very strongly, giving us the confidence that the business is poised to disproportionate growth going forward. Overseas market like SEA, Middle East that contributes to about 40% of the business, continue to lead growth, which also contributes to better margin profile for the company. We are excited about the potential in this talent management business and Monster’s right to win in this exciting and fast growing market. Our disruptive approach on product first culture and attractive ESOP plan continues to help us to hire exceptional talent at all levels and the future looks bright.

Moving on to Qjobs, we are firmly on path to build the India’s most efficient blue-collar platform. We had a breakthrough quarter where we added 500,000 candidates per month on to the platform. Crossed 2 million active jobs and 5,000 logos of recruiting companies, we are now committed to nurture the platforms to scale and make Qjobs the gold standard in this category.

Last but not least, I want to highlight the progress made on Quess on ESG front. In FY ’22, over 93,000 employees hired by us enjoyed the first time social security benefits. We made progress on diversity with women constituting to 29% of our core workforce, up from 26%. We disposed almost over 10,000 kgs of e-waste and/or 10,000 kgs of paper waste, repaired about 1 million devices hence prolonging usage of its life. As a responsible corporate citizen, we are a firm believer in giving back to society. In FY ’22, we renovated infrastructure for 74 schools benefiting 14,000 students and teachers. 14,000 students and teachers were provided drinking water facility. We signed an MOU with CMC Vellore to provide a CSR grant of INR15 crores over a period of four years towards building a 350-bed pediatric hospital.

So that was an overview of the business. Let me close by saying we are very optimistic about FY ’23. On the basis of feedback from our customers and we will continue to focus on our joint goal of achieving and sustaining a 20% ROE while growing OCF at 20% CAGR. We thank you, the analyst and investor community for your support and — I mean in support to us. I also take this opportunity to thank all my colleagues at Quess and Board for a great support in my first quarter.

Thank you so much, and Ravi, over to you.

Ravi Vishwanath — Chief Financial Officer

Thank you, Guru. Good morning everybody and hope all of you are keeping well.

Before I get down to talk you about the numbers, I must say that I’ve never felt more optimistic about the operating environment that we currently see and notwithstanding the delay related of the labor codes. This is also a validation of the formalization — that the formalization of the Indian workforce is actually gaining momentum. The sentiment we are seeing is strong across all our business platforms, though we could be performing better in the Operating Asset Management segment.

Let me now walk you through the financial performance of the company. Our overall revenue in Q4 grew by 3% compared to the previous quarter and grew by 26% on a year-on-year basis. All the segments posted healthy growth number with Workforce Management, Tech Solutions, and the Asset Management platform growing by 28%, 22% and 24% respectively on a year-on-year basis. Our EBITDA from operations in Q4 improved by 18% on a year-on-year basis and 3% on a quarter-on-quarter basis to INR285 crores. The EBITDA growth has been slower than revenue growth due to the following reasons. Our growth in the Workforce Management platform led largely by General Staffing business has been faster compared to other businesses. And as we all know, the margins in the General Staffing business is much lower than the others. There has been increased SG&A costs due to increased business activity coming back and our own investments in digital assets. The third reason being lower margin in Operating Asset Management platforms driven by delays in offices reopening completely and ECL provisions of INR11 crores during the normal course of business. Our operating cash flow to operating EBITDA conversion was 85% in Q4 and 82% for the entire year, comfortably exceeding the target of 70% that we have set for ourselves.

Let me move on to segment-wise update, starting with Workforce Management. Our General Staffing business continued to grow over 25% on a year-on-year basis and crossed the 285,000 headcount. Workforce Management segment has showed 28% revenue growth, driven by General Staffing, 29% and bolstered by our IT staffing 62% and the selection business at 453%. EBITDA has grown by 20%, which is INR15 crores in absolute terms, largely driven by Selection, Comtel, which is our Singapore subsidiary, IT staffing and Middle East.

Coming to Global Tech Solutions, the segment has showed 22% revenue growth year-on-year driven by Conneqt at 26% and bolstered by Monster 36% and Digicare at 37%. EBITDA has grown by 14%, that is INR10 crores in absolute terms, largely driven by the Insuretech platform, AllSec and Conneqt. Quarterly EBITDA has seen a decline as Monster cash burn has commenced post capital raise and [Indecipherable]. The impact of Monster on Q4 was approximately about INR10 crores. We plan to start reporting digital asset separately from Q1 ’23 to give a clearer picture of the emerging business versus existing businesses.

Moving on to Operating Asset Management. While the revenue has been flat on a quarter-on-quarter basis, due to delay in offices opening up completely, it has grown 24% on a year-on-year basis on the back of facilities management and security business. As explained earlier, our Q4 EBITDA has seen a decline due to increased provisions of INR11 crores, which have arisen normal course of business. The profit after tax for FY ’22 is at INR251 crores, a 241% increase over last year. The reported PAT in Q4 ’22 is INR77 crores.

Balance sheet update. The company has been relentlessly focused on cash collection. As a result, we achieved net cash position of INR16 crores in Q4 ’22 against a net debt position of INR108 crores in Q3 of ’22. The DSO has also been stable throughout the year.

On the corporate structure, our focus on corporate structure simplification continues and you will be seeing a lot more action on this front through the year during FY ’23.

Income tax. Let me give you an update on the current income tax position. As disclosed earlier, the income tax department conducted a survey operation on the company’s business during July ’20. [Technical Issues] survey were largely for the financial year 2016-2017 to 2019-2020 as primarily related to the manner in which we had deductions under section 80JJAA and depreciation on goodwill were claimed by the company post acquisitions and mergers. Post this, a special audit was initiated by the IT department for FY ’17-’18 and following the issue of the special audit report, the department has now issued a draft assessment order. The draft assessment order indicates that the entire 80JJAA deduction claimed by the company has been disallowed. This is consistent with what the IT department has done with our peers as well. Depreciation on goodwill arising on mergers and acquisitions have not been allowed. Further, receipt in the nature of reimbursement of expenses from customers reduced from revenues as per Generally Accepted Accounting Principles and standards have also been added to the taxable income. As per process laid out under Section 144C of the act, the company has 30 days to file objections with the dispute resolution panel. The company intends to vigorously contest its position and the interpretive stand of these sections on merits, including judicial precedents and believe we can strongly defend this position through the legal process as defined under the act. Based on the initial prima facie internal assessment, the company has disclosed a contingent liability of INR16.6 crores excluding interest and penalties if any. This estimate will be updated as developments unfold in the future. Assessments of FY19, FY20 returns is currently underway and we will update you as soon as there is a new material development to the matter.

Once again, I must thank you for your continued support of all through these years. I would now like to open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Mukul Garg with Motilal Oswal. Please go ahead.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Hi, Guru, Ravi, good morning. Just a couple of questions from my side. The first one was on the impact of Omicron. If you can just share how much the impact played out for the few verticals during last quarter? Because if I look at the commentary, it has consistently remained very positive on demand. So if you can just kind of help out whether the quarterly weaker growth compared to Q3, how much of that was on account of Omicron? And also if you can just help with some thought on how should we think about FY ’23 compared to FY ’22, the growth will obviously improve, but can it be very meaningful?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Sure. Mukul, first and foremost, the wave was slightly short than anticipated, so that’s a good start for us in Q4. We thought it would extend beyond January, but I think it limited to buy and large to January, so we lost a month, and net-net we got about two months to operate. I mean, with regard to our Workforce Management, it did not really impact to the great extent. I mean, we had a marginal growth there if you look at about 3%, but this hit however continued for our OEM platform. Companies that were about to [Indecipherable] were supposed to resume the work and expansion were to happen that did not really take place. So which is why you see a very flat growth there. But having said that done, I mean, now we are experiencing — our mandate level with Workforce Management is extremely high and we are having anywhere between about 18,000 to 20,000 open mandates there. Things are quite positive the way we are seeing and we are also — the hiring quantum has gone well between BFSI, logistics, supply chain, telecom opening up around, lot of buzz around 5G. Manufacturing segment doing extremely well. So our demands are coming from these quarters, plus for Q1 and Q2, we would see some level of growth coming in from OEM as well. So that’s the outlook currently what we have.

Ravi Vishwanath — Chief Financial Officer

Mukul, if I may add to what Guru said. We’ve always consistently held the view that we are one of those few companies who can probably say that we will maintain a growth rate between 20% and 25% for the next 10 years and I think we continue to live by that and that’s something that you can hold us on.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Sure. Appreciate that. The second question was on the taxation part. The overall tax rate for FY ’22 was about 28% and that obviously, as you guys disclosed, excludes 80JJAA claim which you have done for about INR200 crore. So how should we look at what really led to the higher taxation this year? And second, how should we think about the tax policy going forward, especially given that the income tax department is obviously aggressively pushing back and would you like to take any buffer there?

Ravi Vishwanath — Chief Financial Officer

Okay. As far as the deduction in the Section 80JJAA is concerned, I don’t think our stand as far as the deduction has changed whatsoever, no matter what the department maybe saying because we do legitimately believe that the stance taken by us and by the industry is absolutely on track, is actually absolutely correct. So I don’t think there’ll be any change in the position in which we have taken it. Point number one. Point number two; so therefore, we will factor for 80JJAA in all our means going forward as well. The tax for the current year has been slightly more on account of the tax that we had to incur in Manila will be, the foreign tax that we had to write off that we incurred in Manila, we declared dividend from Manila, we got the money from Manila into India. That was a one-time tax charge that we had to take. And thirdly, I think we’ve been a little more conservative on the deferred tax asset creation as well in the current year, which has led to a slight increase in the tax rate. Going forward, pending certain corporate restructuring etc, I would say anywhere between about 15% to 18% would be an appropriate tax rate for us to take going forward.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Sure. I think that was quite clear. Thanks, and I’ll get back into the queue.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Sanjay Awatramani with Envision Capital. Please go ahead.

Sanjay Awatramani — Envision Capital — Analyst

Yeah. Good morning, and thank you for giving me this opportunity. Sir, you’ve given this 15% to 18% of our tax rate, so this will be from FY ’23, I mean, this year itself?

Ravi Vishwanath — Chief Financial Officer

Yes, it will be from FY ’23 onwards. Yeah.

Sanjay Awatramani — Envision Capital — Analyst

Okay. And this 20% to 25% growth, which you have mentioned, this is for revenue and profits or what is this exactly 20% to 25% for next 10 years?

Ravi Vishwanath — Chief Financial Officer

That’s the revenue growth.

Sanjay Awatramani — Envision Capital — Analyst

Revenue growth, right?

Ravi Vishwanath — Chief Financial Officer

Yes.

Sanjay Awatramani — Envision Capital — Analyst

Yes. And anything on margins, I mean, if you can help us with that?

Ravi Vishwanath — Chief Financial Officer

I mean, I am going to refrain from commenting on margins. You can probably estimate what the margins could be because, we work towards improving our operating leverage on a year-on-year on basis.

Sanjay Awatramani — Envision Capital — Analyst

I think that’s all from my end. Thank you so much.

Operator

Thank you. Our next question is from the line of Raghuram NS with Eurindia Funds Management. Please go ahead.

Raghuram NS — Eurindia Funds Management — Analyst

Yeah, hi. This was a question for Ravi. Ravi, you just mentioned as part of your opening remarks, saying that going forward, we will see more what do you call it, simplification of the corporate structure of your various subsidiaries under Quess. Can you please elaborate on that. Is there anything that we should be expecting as to what will unfold?

Ravi Vishwanath — Chief Financial Officer

Yeah. Thanks Raghu. We currently have merger of three, four of our fully-owned subsidiaries currently underway with the NCLT. That’s something that’s currently in the process. We are evaluating simplification of corporate structure of some of our overseas subsidiaries that we have. We definitely want to simplify that. We will not be able to come on anything else apart from this at this point of time, Raghu.

Raghuram NS — Eurindia Funds Management — Analyst

Okay. Because this has been one of the questions that have been, obviously, on the investor, you can say, to-do list for a long time.

Ravi Vishwanath — Chief Financial Officer

Absolutely, yeah.

Raghuram NS — Eurindia Funds Management — Analyst

At some point of time when you guys feel it appropriate I think you should come overall kind of okay, you want to have two subsidiaries or three subsidiaries or you will say that one company will be the main company for every operating, you can say, stream that you have like what you have for GTS or what you have for WFM or OAM those kinds of things.

Ravi Vishwanath — Chief Financial Officer

Sure. Good idea. We’ll definitely consider that, Raghu. Thank you.

Raghuram NS — Eurindia Funds Management — Analyst

Okay, thank you.

Operator

Thank you. Our next question is from the line of Sidhant Mattha with B&K Securities. Please go ahead.

Sidhant Mattha — B&K Securities — Analyst

Yeah. Hi, good morning everybody. So basically my question is to Ravi. So we could see some pressures in OAM margins as you alluded to that INR11 crore provision taken for the normal course of business. So you have a food business, which is a very high margin business and we’re seeing schools and everything going back to normal. So what expectations are there from the food business because it’s a very high margin business, especially because it drives the OAM margins also? So that was my question.

Ravi Vishwanath — Chief Financial Officer

You’re absolutely right, Sidhant, in the sense that the food business is definitely high margin business for us. Q4 again was slightly impacted with Omicron wave because some of the schools and colleges really opened up only in month three, not in the first two months. So actually it did impact us. Considerably, in fact, in Q4 and even during the year, we do believe that the food business should come back quite strongly in FY ’23. It is a high margin business for us. And some of the provisions that we took are — I mean, in the normal course of business with regard to certain other dues on which we were — some delays in collections actually. So I think we should be able to put this behind us and get back to doing business as usual going forward from Q1 onwards.

Sidhant Mattha — B&K Securities — Analyst

So basically we can assume the margins to go back to pre-COVID levels or there might be some pressure in FY ’23 onwards — in FY ’23 also.

Ravi Vishwanath — Chief Financial Officer

Our intent is clearly to take the margins back to pre-COVID level as far as OAM is concerned. We do see some headwinds in the particular business, but we are working around it.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Just to add, Sidhant, specifically to OAM, I think we also have some our own homework to be done. So a) we are shifting our — for example, there are direct and indirect businesses that we do like, I mean, indirect is where we work with the larger players or secondary. So we are reducing exposure to our indirect and becoming more direct. Second, our acceleration in sales has to increase in that business, which we are putting all effort to ramp-up our sales team because our dependency from IT sector will have to completely take off, which was almost about 35% of our exposure to IT and considering partial working, hybrid way of working, the things are going to change. So that is another set of activities that we are working for ourselves. Plus we are bringing in lot of digital initiatives, which will enable us to bring our SG&A costs down. I mean, these are like site management or site survey, where we have not deployed to many people, but how can we do it much more efficiently and cost it right and cost it well much quicker, faster to our customers. So these are few things that we are putting together to ensure as and when we step into this financial year, it’s going to help us to accelerate this business better.

And the second element under OAM is Terrier, which is our security business. We have done some changes in leadership there and that’s going to fire well in this financial year. So there are few homework for us to do, which we have already started implementing for this year [Indecipherable] well the way market reacts to us.

Sidhant Mattha — B&K Securities — Analyst

Okay, thank you. And my second question is regarding, so during our conferences, during your Analyst Day also and on your calls also you have mentioned that the GTS business basically contributes to maximum percent of your margin. So we could see this time that the GTS business excluding the emerging business was doing really well, but there were some loss on the emerging business side on the EBITDA front. So was there some one-offs here or do we expect some — because we are increasing our digital investments, so do we expect some loss in the near term?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

That’s the planned number what you are seeing, Sidhant. It’s part of the investment that we have raised capital specifically for Monster and we are deploying those funds for marketing and the product development. So it’s a planned activity.

Sidhant Mattha — B&K Securities — Analyst

Okay. Thank you so much.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Sandeep Baid, an Investor. Please go ahead.

Sandeep Baid — Investor — Analyst

Good morning. My question is on depreciation. I think you on a quarterly run rate basis now it is trending above INR200 crores even if you exclude amortization while our net worth is about INR500-odd crores. So if you can give some color on that? And what is likely to trend going forward?

Ravi Vishwanath — Chief Financial Officer

It should be in the range of what we have declared in Q4. It could come down slightly. I don’t think it will actually come off dramatically, actually lower than that. There could be a slight lowering of the numbers going forward, but it will not be very different actually.

Sandeep Baid — Investor — Analyst

Ravi, how much is the addition to our gross block every year?

Ravi Vishwanath — Chief Financial Officer

The addition to gross block would be region of about INR60 crores to INR70 crores a year. And this what you see largely is an account of certain leases, large premises leases that were renewed in Q4 and this is the IndAS accounting standards we got amortized some of the rental actually.

Sandeep Baid — Investor — Analyst

Okay. So out of the INR54-odd crores for this quarter, how much would be on account of IndAS?

Ravi Vishwanath — Chief Financial Officer

About INR6 crores to INR7 crores will be on account of IndAS actually.

Sandeep Baid — Investor — Analyst

Only INR6 crores to INR7 crores.

Ravi Vishwanath — Chief Financial Officer

Yes.

Sandeep Baid — Investor — Analyst

You think INR50 crores is the normal depreciation as per the old account.

Ravi Vishwanath — Chief Financial Officer

Correct. Exactly.

Sandeep Baid — Investor — Analyst

Ravi, so this does not add up. If you have INR50 crores of normal depreciation that means about INR200 crore annually and you are adding a gross block of only INR60 crore, INR70 crores a year. So somewhere the numbers are not adding up.

Ravi Vishwanath — Chief Financial Officer

No. See, we also have the goodwill, etc, which we actually amortize, right? So we have intangible which are fixed assets, all of these put together. All put together —

Sandeep Baid — Investor — Analyst

Amortization of goodwill is separate, which is I think INR8 crores or so right?

Ravi Vishwanath — Chief Financial Officer

Yeah.

Sandeep Baid — Investor — Analyst

That is separate. I’m talking of only the depreciation part. If I remember correctly, it is INR54 crores for this quarter and if you remove the INR6 crores, INR7 crores on account of IndAS and you’re left with about INR48 crores, which at annualized will be INR190 crore plus while your gross block addition is only INR60 crore to INR70 crore.

Ravi Vishwanath — Chief Financial Officer

Yeah. I’m not able to understand the question, so let me just take it offline with you because this is actually in line with the asset block that we have and I mean, the incremental amount that you’ve seen in this quarter is on account of the increased — the new lease rental that we have taken, the new leases that we have signed.

Sandeep Baid — Investor — Analyst

Fine, Ravi. I’ll take it offline with you.

Ravi Vishwanath — Chief Financial Officer

I’ll take it offline with you and we will clarify, it’s not a problem.

Sandeep Baid — Investor — Analyst

Right. And secondly we were targeting 20% ROE by the end of FY ’23. So I just wanted to check whether we are on track for that.

Ravi Vishwanath — Chief Financial Officer

Yes, we are on track for that. That’s actually without the burn in Monster, which is that — we are on track for the 20% ROE.

Sandeep Baid — Investor — Analyst

So you are saying that sometime in the second half of this financial year, we should hit that target, is that possible?

Ravi Vishwanath — Chief Financial Officer

Yes. Because again, like I said, Monster would be — we raised capital in Monster for increased expenditure on product development, sales and marketing for the year. I mean, those expenses, if excluded we will be able to get to the 20% ROE number.

Sandeep Baid — Investor — Analyst

Right. And lastly, any update on fundraising for Qjobs, I think you are working on that?

Ravi Vishwanath — Chief Financial Officer

I’ll let Sekhar to — Sekhar?

Sekhar Garisa — Chief of Emerging Businesses and Corporate Development

So we continue to work on that. We had a fantastic year for Qjobs and blue-collar asset platform in terms of performance and we have some interesting conversations happening with the prospective investors. So we’ll keep you updated on that. They have a lot of inbound interest, but the process is going as per plan.

Sandeep Baid — Investor — Analyst

Okay, thank you. That is all from my side

Sekhar Garisa — Chief of Emerging Businesses and Corporate Development

Thank you.

Operator

Thank you. Our next question is from the line of Nilesh Jethani with BOI Mutual Funds. Please go ahead.

Nilesh Jethani — BOI Mutual Funds — Analyst

Hi, good morning, and thanks for the opportunity. Two questions from my side. One on this 80JJAA. So want to understand how did we arrive at this INR16 crore contingent liability and what was the 80JJAA benefit which we availed in FY ’17 to FY ’20?

Ravi Vishwanath — Chief Financial Officer

Yeah, sure. The INR16 crores of contingent liability was arranged at on the basis of what we call as PPR study of the draft assessment order. The PPR is basically, they do a probable possible remote assessment of the different items that it consists of. And based on that, on a conservative basis, we felt that INR16.6 crores is probably where [Technical Issues] that might come up. This is again a very, very conservative estimate, and we have to probably, I mean, this is something that we have probably done. And from ’16-’17 till ’20-’21, the total 80JJAA claim of the company is in the region of about INR700 crores.

Nilesh Jethani — BOI Mutual Funds — Analyst

Okay. So INR700 crores which we claim from FY ’16 to FY ’20, so broadly on [Technical Issues] basis number will work out to be much larger than the INR16 crore number.

Ravi Vishwanath — Chief Financial Officer

No. This is only for the particular year for which the assessment order we received. Even here we do believe that our claim is absolutely valid and legitimate, and again, that’s by legal opinions of experts in the field.

Nilesh Jethani — BOI Mutual Funds — Analyst

Okay. Because when I see our estimated tax rate, effective tax rate, so for ’16-’17 this works out to be in the range of 30%, 34%. Only in ’18, ’19, ’20 where ’18-’19 tax rates and the range of 3% and 10%. Even if I include these two years’ number, then also the number tax paid expected comes out to be a much larger number than INR16 crore. So I wanted to understand the number seems to be too conservative to be included as INR16 crores in contingent liability. Is the assessment right?

Ravi Vishwanath — Chief Financial Officer

No. So the way to look at it is the total liability, we do have MAT tax payments in those years also, right. You’ve not considered the MAT tax that we have paid. So after adjusting for the MAT tax payment of INR41 crores in ’17, ’18, the differential amount is about INR16.6 crores.

Nilesh Jethani — BOI Mutual Funds — Analyst

Okay. Got it. And second — yes, can I go ahead? Hello.

Ravi Vishwanath — Chief Financial Officer

Go ahead. Yeah.

Nilesh Jethani — BOI Mutual Funds — Analyst

Second question was on the investments into Monster. So when I see our GTM business EBITDA, ex emerging businesses, the number is pretty high. But when we reported on a consol basis, when we include the emerging businesses, Monster, Qjobs etc, the number seems to be slightly lower. So on a quarterly run rate sometimes it is INR8 crores also, effective Q4. So want to understand how should we look at these expenses going ahead. Any guidance on this or any color on this what are we intending to expense on the emerging businesses to understand the steady state margin for the GTM business going ahead?

Ravi Vishwanath — Chief Financial Officer

You’re absolutely correct. Like I said earlier, we will be reporting emerging businesses separately from Q1 onwards. And I mean, so that should give you a clear picture of what the cash burn or what the burn is in such businesses and how the existing businesses are performing on a regular basis.

Nilesh Jethani — BOI Mutual Funds — Analyst

Yes. I want to understand what the burn would be, what is the incremental expenses would be per quarter per year going forward in the emerging business, any color on that?

Ravi Vishwanath — Chief Financial Officer

I can talk about the burn that we had for Q4 was about INR10 crores. For the total year, I mean, for FY ’23 we expect the total burn to be — I mean, including ESOPs etc to be in the region of about INR110 crores to INR120 crores.

Nilesh Jethani — BOI Mutual Funds — Analyst

Okay. Got it. Yeah. Those were the two questions from my side. And thank you so much for replying to each one of them.

Ravi Vishwanath — Chief Financial Officer

Yeah, thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Rushikesh Bhise with MoneyWorks4me Financial Advisors. Please go ahead.

Rushikesh Bhise — MoneyWorks4me Financial Advisors — Analyst

Hello. Yeah. Thank you for the opportunity and congratulations on the wonderful numbers. I just had a question that — and this for one quarter, we have seen a change in the management wherein we saw the CEO resigning. So I just wanted to ask, is there any change in the strategy by the new management that has come in, with a new CEO, is there a new strategy that is in place or is it more or less the same?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Rushikesh, thanks for bringing this up. So I mean, we had set our goals under the three elements of Quess starting from customers, people and investors. So there is no change. Whatever we have committed 20% ROE, our OCF growth remains same. And as part of our investor meeting again on 29th, we have reiterated the fact. So I mean, there is no change in strategy or there is no change in goal. All of that remain same. So I mean, at the moment, what we are doing is a) we are continuing to stay committed on all the parameters that we have put across, plus incrementally we are working on the growth. In Workforce Management, we are setting up the growth, plus we are setting up the new future kind of streams like manufacturing where we are penetrating more, construction is another area where we are putting our effort. So overall, strategy remains and we are continuing to focus on our growth.

Rushikesh Bhise — MoneyWorks4me Financial Advisors — Analyst

All right. Thank you. That answers my question. Thank you.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Vidit Shah with IIFL Securities Limited. Please go ahead, sir.

Vidit Shah — Analyst

Hi, thank you. Just wanted, if you could share some light on the margin expansion in Workforce Management. I mean, the margin expansion has been healthy year-on-year. But even quarter-on-quarter, it’s better than what we had anticipated. So what exactly has been the driver of this improvement?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Vidit, one of the key driver there is our selection business while overall technology business is doing well, as part of the great recognition, we have seen a fantastic traction coming up in our selection business, which has grown phenomenally well and adding to our — I mean, boosting up our margin. In fact, just to give you whatever we used to do annually in terms of EBITDA for the business, we have done it in one quarter. So that has driven the margin expansion there.

Vidit Shah — Analyst

Okay.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Lohit, do you want to pitch in there?

Lohit Bhatia — President – Workforce Management

Yeah. Good morning. Hope I am audible?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Yes.

Lohit Bhatia — President – Workforce Management

So I think there will be four things that you will have to see as far as WFM is concerned whenever you see a margin trajectory. I think the first is where is general staffing business. I mean general staffing, we’ve been saying that they are putting immense focus on our value-added services. Today, value-added services, good to report that in Q4 FY ’22 that we exited is already at 20%. So while general staffing remains the low margin business overall, but PAT continues to be doing better bottom line.

The second thing is like Guru rightly said, we immediately realized about post the first year of COVID there is a huge amount of tech spend happening and we refocused both our IT staffing as well as our IT selection and recruitment business, And under the two leaders, Kapil and Vijay we’ve had immense growth there in that business as well. In IT staffing, we’ve expanded on the higher margin digital and niche segments, which today contribute 33% of our entire high margin product as well as like Guru also rightly mentioned that we have doubled our overall EBITDA from this book, which is IT professional recruitment and professional staffing.

The third element for WFM always would be the color coming out of APAC and within APAC, you know our largest unit is Singapore. As also mentioned in our commentary and the investor deck, Singapore has opened up in the Q4 and that has been good for us. The steady state growth both on improving margin trajectory in Singapore as well as new headcount addition and new Visas which are being allowed in Singapore is definitely beneficial for us. So that’s overall how WFM trends on these products. And for each of the business units, I think those are important parameters that they’re following.

Vidit Shah — Analyst

Understood. And just staying on with WFM, we’ve seen like a 4% quarter-on-quarter headcount growth and a similar growth in revenues. So I mean, when can we expect to see some sort of wage inflation kick-in and like how can we — and what’s the impact on margins for associate as such like how is that trending this quarter versus last?

Ravi Vishwanath — Chief Financial Officer

Wage inflation should not really impact the general staffing business because we follow a cost-plus model. And in most cases, I mean, our margins should be able to, I mean, the margins we earn should be able to take care of some basic wage revision, I mean, wage increases, but the wage increases are very substantial, we also go back to our customers and we can increase in ROCs that they have to pay to us right now.

Vidit Shah — Analyst

Understood. But I agree that it’s a cost-plus model, so our margins for associate stable quarter-on-quarter and should we expect similar levels in FY ’23 as well or will there be some sort of improvement given the strong demand witnessed across?

Ravi Vishwanath — Chief Financial Officer

We are always constantly working towards improving our margins. I mean, even if it means 10 basis points, 20 basis point, whatever it is, given that we have such low base to work with, we’re constantly working towards improving our margins in the general staffing and across all businesses that we actually operate in. And so therefore, you will see some more productivity kicking in and margins going up over-time and that’s the operating leverage that we actually have developed over-time actually.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

So one key indicator there is our core to associate ratio that we constantly keep a tab on. And if you see we have phenomenally grown well there. We’re about 1:428 and that also explains the kind of digital intrusion that we are doing into the platform to reduce our SG&A cost. So the cost to serve would be a focus always.

Vidit Shah — Analyst

Okay, understood. Thank you so much. Good luck.

Operator

Our next question is from the line of Shyam Sundar Sriram with Sundaram Mutual Fund. Please go ahead.

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

Yeah. Hi sir, good morning. Thanks for taking my question. Sir, my first question is on the — we have spoken about client wins in the IFM segment about 20-odd clients in the quarter and 27 new logo addition in GTS per se. Generally, as a trend, I wanted to understand how to read these client wins per se, at least say in the context of this OAM business, should we think of each client can scale to an x amount of headcount per se, what would be that aspiration number for a client that we usually win, any perspective that you can share?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Sure. The way to read this is a) there is a new contract that we signed. So when you put in those numbers, that many number of individual contracts that get signed. Now, the way it works in this industry is, at the moment we sign a contract, there will be some level of deployment that would [Technical Issues] not necessary that we start with 100% from day one right? So there’ll be partial deployment and these would nurture over a period of quarter. So for example, whatever we have signed, I mean, 148 contracts last year, they would actually start coming into full blow after, say, six to eight quarters. I mean, that’s how to be read. So I mean, the number of incoming contracts will tell us the quality of revenue that is going to come over quarters to us. So that’s how we measure. And of course, there will be few contracts which will ramp-up quickly and there will be few contracts which will gradually come into, but these are kind of hard-coated order book for us. So that’s how we read internally.

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

So is there any average headcount per contract that we usually look at on a per contract basis?

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Not really. Would not be. Because each platform would have its own measurement of this. For example, when it comes to workforce, there’ll be an average headcount that we would be looking at. But when it comes to facility management, we will be looking at the number of square feet that we are adding. When it comes to GTS, we will be looking at number of seats, customer lifecycle, number of seats that gets occupied. So the measurement is different by business. Would be happy to take you through in detail whenever if we can meet.

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

Sure. Sir, the other question is on the OAM provision, while you did talk briefly on that, there was a 340 bps provision. What was it related to? Sorry, I didn’t quite fully understand that part.

Ravi Vishwanath — Chief Financial Officer

This is related to some old projects that we are continuing with some of the industrial and some of the other infra projects etc. When I say infra, this is not Trimax. Certain other projects that we were actually operating in where there has been slight delay. And out of abundant caution and prudency, we have considered a small provision in the current quarter.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

So these are — I mean, typically will not be a write-off. These are kind of expected credit loss that we take. As and when we work on it and recover, this will also be written back soon.

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

Okay. So this is for some — for an infra project.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Correct.

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

Sir, one last question from my side. Sir, so you did give this 80JJAA claim that around INR700 crores per se that we have put in as claim. So similar to your probabilistic assessments that you have done for FY ’18, what would be that similar amount if the claims were to come for the remainder years as well? Just to hazard some what could be the maximum amount that can come as claims process?

Ravi Vishwanath — Chief Financial Officer

We haven’t done that exercise, Shyam. We will probably get it done and probably share that different time. Because we focused our attention only on the draft assessment order for ’17-’18 right now.

Shyam Sundar Sriram — Sundaram Mutual Fund — Analyst

Okay, understood sir. Thank you very much. I will call back.

Operator

Thank you. Our next question is from the line of Alok Deshpande with Edelweiss Financial Services. Please go ahead.

Alok Deshpande — Edelweiss Financial Services — Analyst

Hi, good afternoon to everyone. First question for Ravi. Ravi, I just wanted to understand this tax assessment little bit. What is the real bone of contention here? Is it the fact that reimbursements are getting added to the salaries when the associates are getting paid. Is that what is creating that different perception in interpretation or is there a couple of more dynamics to this whole confusion?

Ravi Vishwanath — Chief Financial Officer

So I mean, the prima facie disagreement that we have with the department is that the department believes that the associates are not our employees and so therefore we should not be eligible for the claim per se. That’s the prima facie disagreement that we have. And then of course — I mean of course, and then you have the other — the INR25,000 a month average salary, reimbursements, the second and third year claims and so on and so forth, but the prima facie disagreement is on the fact that they believe that they are not our employees. We have every reason to believe that they are our employees, because we are the legal employer on record. We pay provident fund, we pay ESI, we take care of all their retiring benefit like gratuity etc. And we have made a very strong case, which has been supported by very, very strong legal opinions as well, Alok.

Alok Deshpande — Edelweiss Financial Services — Analyst

Ravi, but — I mean, just the fact that you are paying gratuity, provident fund, that alone shouldn’t that suffice in most cases, I mean, for any permanent employee?

Ravi Vishwanath — Chief Financial Officer

That’s what even we thought, but obviously, they have probably chosen to look the other way. I would say, they have actually chosen to look the other way and just stick to whatever they’ve said is right. That’s it. And this is, I mean, in a way, I think this has now become an industry issue and so we will probably take it up at the appropriate forums and get this issue redressed suitably.

Alok Deshpande — Edelweiss Financial Services — Analyst

Sure. Understood. And my second question is regarding general staffing. So we’re targeting about 18%, 20% growth there. So essentially about I think a number between 55,000, 60,000 associates to be added next year or this year rather now. So can you share some color on what are the sectors that you’re most optimistic on in terms of getting these additions this year?

Ravi Vishwanath — Chief Financial Officer

I’ll actually get Lohit to answer it. Lohit?

Lohit Bhatia — President – Workforce Management

Good morning, everyone. and thanks Alok for that question. I think what we have to take it in context is Q1 this year at least after two years has started on a much more positive note. If you remember, the first quarter when we were hit with COVID for the first time, there was a lockdown, there was almost 14.5% headcount reduction, which translated into some 30,000 people lost. Last year [Technical Issues], we barely grew because of Delta wave — in spite of Delta wave, we grew by about 2,000 headcount. This time Q1 has opened with a lot of robust color from across industries and segment as Guru was mentioning. Some of the ones, which we are very bullish about is manufacturing and industries. We doubled the sales team and made a huge investment in the year gone by. In fact, our sales team today is twice the size of the sales team we had just six quarters and it is 55% more than what we had four quarters ago. So there is a huge investment in that.

Second, as Guru mentioned there is construction, we are focused on that industry in a big way. The third is telecom, which is already a large industry for us and growing very well for us. The fourth for us is e-com and logistics, which again Quess plays a huge role in e-com and logistics and we are growing significantly there over 40% in this year itself. The fifth, which we are extremely bullish and we are thankful is that retail is coming back. And if you remember, for the last eight quarterly calls, I was saying, we are waiting for retail and consumerism to come back, so we are very, very happy that retail is also back to the party. So I think these are the sectors that we would remain bullish on.

On a medium to long term, I would continue to personally watch-out for manufacturing in industries because that with PLI, with what the government is doing, with lower tax rate in India, all of those things and labor code, as Ravi spoke about, all of these are potentially very high beneficial segments for the staffing segment.

Alok Deshpande — Edelweiss Financial Services — Analyst

Additional one on this e-commerce. Are you seeing any signs of any pullback in staffing count there given what’s happening in the whole funding winter coming along and all those things?

Lohit Bhatia — President – Workforce Management

So this question, I think you’d remember from our various past years we’ve been mentioning that we don’t operate too much in the early business start-ups, which are still on bringing pre-funding series or angel investment or Series A or Series B. When I say, e-commerce, logistics and all, we actually work with the country’s largest, we work the globe’s largest. And our focus on customer acquisition has been in fact, there are three levels of checks which happen before a customer actually gets added to the Workforce Management platform or for any matter in platform within [Technical Issues]. We do significant amount of due diligence. We don’t go after a lot of small start-ups. So at the moment, we don’t see that as an issue. For our Quess IT staffing business and Quess permanent recruitment business and information technology, in some ways, we feel that the supply side, which was constrained could possibly give us more tangible and will be able to help manage this resolution which is happening. So in some ways, it could also be positive for us in times to come.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Alok, overall, our exposure to start-up is extremely, extremely low as a Group.

Alok Deshpande — Edelweiss Financial Services — Analyst

Sure. Thank you, Guru, thank you, Lohit, and thank you Ravi for all the responses. Thank you so much.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. And I would now like to hand the call back to the management for closing comments.

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Great. Thank you so much. Thanks for joining us. And all we can say, we are quite optimistic in terms of what we are hearing from our customers and the kind of experiences that we are going through in terms of things opening up across. So look forward for an upcoming great quarter and look forward to talk to you all and meet you soon.

Ravi Vishwanath — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]