Quess Corp Ltd (QUESS) Q4 FY23 Earnings Concall Transcript

Quess Corp Ltd (NSE: QUESS) Q4 FY23 earnings concall dated May. 18, 2023

Corporate Participants:

Rajesh Padmashali — General Manager, Corporate Services

Guruprasad Srinivasan — Executive Director and Group Chief Executive Officer

Kamal Pal Hoda — Chief Financial Officer

Lohit Bhatia — President, Workforce Management

Sekhar Garisa — Chief Executive Officer, Foundit

Pinaki Kar — President, Global Technology Solutions

Analysts:

Vidit Shah — IIFL Securities Limited — Analyst

Vikas Jain — Reliance Securities — Analyst

Chirag Shah — White Pine Investment — Analyst

Vikrant Gupta — ICICI Prudential — Analyst

Raj Bhanushali — Motilal Oswal Financial Services — Analyst

Alok Deshpande — Nuvama Institutional Equities — Analyst

Amit Khetan — Laburnum Capital — Analyst

Mohit Mehra — Guardian Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Quess Corp Limited Fourth Quarter FY ’23 Earnings 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. Thank you and over to you, sir.

Vidit Shah — IIFL Securities Limited — Analyst

Thank you, Diko. Ladies and gentlemen, good morning and thank you for joining us on the post conference — post-results conference call for Quess Corp. It’s my pleasure to introduce the senior management team of Quess who are here with us today to discuss the results. We have with us Mr. Guruprasad Srinivasan, ED and Group CEO; Mr. Kamal Pal Hoda, Group CFO; Mr. Lohit Bhatia, President of Workforce Management; Mr. Pinaki Kar, President of GTS; and Mr. Sekhar Garisa, President of the Emerging Businesses. We’ll begin the call with opening remarks by the management team and thereafter, we’ll open the call for a Q&A session.

I’d like to now hand over the call to Mr. Rajesh Padmashali to take proceedings forward. Thank you.

Rajesh Padmashali — General Manager, Corporate Services

Thanks, Vidit. Good morning, everyone, and thank you for joining our Q4 earnings call. The information data and outlook shared by the management during the call is forward-looking, but subject to prevailing business conditions and government policy. All forward-looking statements are subject to economic growth or other risks faced by the company.

With that safe harbor, I will now hand over to Group CEO, Guruprasad.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Thank you, Rajesh. Good morning, everyone, and thank you for joining us today for Q4 FY ’23 results. Let’s get started. In FY ’23 we added over 73,000 in headcount, an increase of about 17%. Please note this number does not include any additional associates who are being processed as full and final during the month, which is about 30,700 by headcount who are payrolled in the month of March, but not on our rolls by end of the month. This is second consecutive year in which we have added an additional headcount of — incremental headcount of 70,000 in a sequence for last two years, signifies our strong sourcing engine and a relentless focus on our sales. The business environment for the quarter was muted across sectors and key sectors such as IT and retail saw a slowdown in hiring. However, sectors like BFSI and FMCG continues to perform well for us, which led to a total net headcount addition of 7,000 during Q4 across Quess.

Our consolidated Q4 revenue stayed flat on quarter-on-quarter basis. However, for FY ’23 we recorded a revenue increase of 25% versus FY ’22. Our platforms have all continued to demonstrate growth with each of them recording 20% plus revenue growth in FY ’23. One of our major focus area for management in quarter was to reduce the SG&A cost across verticals. As a result, our SG&A cost has declined to 5.4% of our revenue in Q4 from 5.7% in Q3. Excluding Product-Led Business, our SG&A cost has declined by 10 basis points to 4.2% for revenue in Q4. The consolidated EBITDA for the quarter was INR152 crore, a 4% quarter-on-quarter increase and EBITDA margin improved by 16 basis points driven by our focus on cost reductions. Q4 was very good from collection perspective. We achieved an OCF of INR114 crores in Q4 leading to a total collection of INR294 crores in FY ’23, which is 71% of our operating EBITDA. Thereby, achieving our goals of 70% plus OCF to EBITDA for the year.

The sales engine continues to perform well. We acquired 175 new customers in Q4, in which the cross-sell engine contributed about 47 wins in FY ’23 with ACV of INR353 crores. Kamal, our Group CFO, will walk you through the financial performance in detail after I discuss key updates by business. To begin with, let’s start — let’s look at Workforce Management. The headcount in our Workforce Management platform reached 3,87,000, a 22% year-on-year increase. Consequently, platform revenues grew by 25% and EBITDA by 18%. Coming to specifics in General Staffing business. The business added 239 customers — new customers in FY ’23, in which 50% of new sign-ups came from manufacturing, our focused vertical. Manufacturing and industrial is now third largest vertical in staffing. We believe that this vertical has lot potential and will continue to strengthen the sourcing capability.

75% of all new deals have come from in some form either through consolidation or either through the local contractors or the first-time customer — I mean first-time clients creating additional production capacities. Value-added services contribution remained stable at 21% gross margin. The per-associate-per-month, which is also known as PAPM, stayed stable in a range of about INR670 to INR700. Coming to specific sectors. We are seeing tailwinds in auto engineering, electronics and consumer durable, and BFSI segment in coming months. To ensure market-leading growth and to acquire greater market share, our General Staffing business will continue to focus and strengthen its digital backbone. Our investment in cutting-edge technology platforms built over last few years, which is also a center of experience for us; which enables faster fulfillment, quality of associate experience, compliance edge, and customer satisfaction; we hope will eventually contribute to lower attrition and higher customer stickiness.

Specific to IT staffing business, the Indian IT staffing business and selection business stayed flat during the quarter in line with market slowdown. FY ’23 revenue growth for domestic IT staffing business was at 10%. However, I’m pleased to inform that Quess Singapore had an exceptional year with 45% revenue growth in FY ’23 on the back of easing of travel restrictions post-COVID. Our IT staffing mandates are down by 80% in volume terms against Q1 FY ’23. To improve the margin, we are currently focusing on efficiency ratio that is productivity of margin delivered per recruiter per month. In addition, we see greater opportunity in high and mid-margin range of skills rather than junior at entry level. Moving on to our Global Technology Solutions platform. The segment posted its highest revenue and EBITDA growing by 23% year-on-year and its EBITDA growing by 11%. This enabled GTS to become the largest EBITDA contributor to Quess this year replacing Workforce Management.

Some of the key highlights of the platform. Our order book continues to be strong and Conneqt had its highest-ever order booking during Q4 with an ACV of INR121 crore booked during Q4 FY ’23. The Customer Lifecycle Management business in Allsec grew by an impressive 28% year-on-year driven primarily by 6.3% quarter-on-quarter in North American business. Going forward, in Q1 the focus of this vertical will be: one, accelerate the growth momentum achieved in North America over last two years to enable overall margin enhancement. Two, build and consolidate on success in healthcare vertical in North American market through omnichannel offerings. Three, expansion of global delivery footprint in Manila to enable margin rich growth. In our non-voice BPO, the business grew significantly during the quarter with 34% year-on-year and 13% quarter-on-quarter due to excellent growth in collection business, which grew 39% year-on-year and 14% quarter-on-quarter.

In the current year, we will continue to focus on sustaining the growing of our leadership position in collection business through ongoing platform and digital tools. In our platform-based business, payslip processed in HRO business crossed a mark of 1.2 million payslips per month establishing a clear leadership position. In our insured tech platform, we achieved revenues per FTE of USD110,000 during FY ’23 leading to the highest-ever quarterly EBITDA in Q4 and highest-ever EBITDA by margin. Moving on to our OAM platform. I’m happy to inform you that we have registered a robust topline growth of 24% year-on-year. IFM saw revenue growth of 23% year-on-year and major sector contributing to the growth are manufacturing, BFSI, and public infra. For coming quarters, the business will focus on following areas: logistics and public infrastructure such as airports, ports, and railways, and healthcare.

We are in process of creating vertical-specific capability in our facility management business. This will enable us to provide customer-specific solutions for leading higher margins. One of our focus area in improving is the entire back office efficiencies through technology. This has given us some early wins in terms of our core-to-associate ratio improving to 113 in Q4 from 100 where we were in Q1. Security business continues the headcount addition with the end of the quarter increase. We increased by 12% year-on-year. Going forward, the business will focus more on margin improvement by increasing market share in existing cluster with specific focuses on Top 10 cities. Moving on to our Product-Led Business. We continue to make significant progress. Foundit had another strong quarter of growth in Q4 despite of headwinds in recruitment space registering 36% growth year-on-year in sales. For full year, we ended a robust revenue growth of 33% year-on-year.

The product enhancements and growth interventions have resulted in crossing 50,000 recruiters on the platform while maintaining 90% plus CSAT throughout the year. The candidate experience has been significantly through multiple product features like adaptive registration flow, mobile-first design, contextual career guidance. We have added more than 5 million new candidates to the platform during the year. Our strategy of doubling down in terms of the candidate services has been validated thoroughly with 4x year-on-year growth in candidate revenues. Our investment in products such as Zuno and Skillist has paid off significantly with all new initiatives showing great traction. We are excited about FY ’24 as our core products continue to grow aggressively and investment in product in last year will start contributing to the revenues in FY ’24. We remain focused on ensuring that this growth is sustainable. We will deliver our EBITDA commitments along as we go.

Moving on to the corporate updates. Our assets — I mean our greatest assets are our people whose welfare has always been our utmost priority. It gives me immense pleasure to inform you that Quess was declared a Great Place to Work for fourth year in a row. This shows our continued commitment towards the well-being of our employees. So, that was an overview on the business. I would like to conclude by saying that last year was a lot of heavy lifting and streamlining our internal processes, investing in new geographies, and creating capacity for future revenues. This process will now enable a greater margin realization and an increase in productivity levels. In result, this investment we expect to show up in this full year and as a management, our focus is completely on FY ’24.

To hear more about financials, I’ll now hand over to Kamal. Kamal, over to you.

Kamal Pal Hoda — Chief Financial Officer

Thank you, Guru. Good morning, everybody, and thank you for joining us today. I extend a very warm welcome to everyone who has logged into this call. Let me now walk you through the Q4 and FY ’23 financial performance. Revenue grew by 25% in FY ’23 to INR17,158 crores compared to last year due to strong growth across all platforms. EBITDA dropped year-on-year by 6% to INR585 crores, which is largely due to growth investments of INR95 crores made into Product-Led platform. Excluding PLB, EBITDA for Quess grew by 7% on a year-on-year basis. Q4 revenue stayed flat quarter-on-quarter due to muted market conditions especially in IT sector. However, EBITDA grew by 4% to INR152 crores mainly on account of cost reduction initiatives started in Q3. OCF for the quarter is at INR114 crores driven by a reduction of five days in our DSO. This takes our full-year OCF-to-EBITDA ratio to 71% and this is in line with our annual guidance of 70%.

Further, I’m pleased to inform that our gross debt levels have come down by INR57 crores year-on-year to INR531 crores and net cash has increased by INR66 crores. For the financial year ’23, our PAT is down by 11% to INR223 crores. This is largely due to two reasons. One, growth investments in Product-Led Business of INR95 crores. And two, increase in depreciation due to additional equipment for INR21 crores and INR42 crores towards additional rental space taken. Please note that the additional investment in rental space is reflected — is reflective of the growth in the CLM business. Now moving on to segment-wise updates starting with Workforce Management. Full-year revenue grew by 25% to INR11,831 crores and corresponding EBITDA grew by 18% to INR345 crores. The growth is attributable to headcount additions in staffing in India and increased business in Singapore due to easing of travel restrictions post-COVID.

In North America, we made an investment of about INR11 crores in the financial year ’23. We expect the business to breakeven by H1 of FY ’24. While the headcount quarter-on-quarter grew by 2%, platform revenue and EBITDA remained flattish as majority of the additions did not account for full quarter revenue. While our General Staffing business grew by 28% for the year, our collect and pay ratio of the customers remained constant at 76%, which is in line with our goals. Our SG&A for the platform dropped to 5.4% from 5.9% last year. Coming to GTS. Full-year revenue grew by 23% to INR2,168 crores and corresponding EBITDA grew by 11% to INR353 crores, a new milestone achieved by the platform by posting highest EBITDA mainly driven by steady growth in CLM and non-voice BPO business. While the revenue quarter-on-quarter grew by 2% to INR571 crores, EBITDA grew by 5% to INR95 crores mainly on account of cost initiatives and customer margin improvement.

Our non-voice BPO business achieved 34% year-on-year growth on the back of 39% growth in collection business. Moving on to Operating Asset Management. Full-year revenue grew by 24% to INR2,622 crores, however, EBITDA remained flat year-on-year. This is because of renegotiation of contract and commercials with one of our major customers in ISM business as called out in Q1 of FY ’23. Platform headcount, revenue, and EBITDA remained flat quarter-on-quarter because of muted demand in the asset management space. Core to associate ratio has improved by 27% to 110. Also revenue per headcount per month also increased by 10% year-on-year. Other financial updates. We recorded INR30 crores of PAT for the quarter, down by 65% versus quarter three. This is mainly because of few factors which are as follows. One, we had a one-time gain on sale of Simpliance, an exceptional item in quarter three. The tax provision for which was taken in quarter four.

The effective tax rate for financial year ’23 is at 22%. However, our blended ETR guidance was around 18% and the increase in the ETR is due to the incidence of long-term capital gain on account of our divestments of Simpliance. Number two, depreciation and interest has gone up by INR8 crores attributable to Ind AS 116 accounting for new facilities mainly for our GTS business. Income tax update. As mentioned in our previous quarterly call, for the year ’17-’18 we have completed the DRP proceeding. For residual matters in the year ’17-’18, our appeal is at ITAT and hearing dates are expected in mid-June 2023. For financial ’18-’19, our matters are at DRP stage and we expect the hearings to start soon. Please note that there is no change in the contingent liability of INR74 crores on account of such proceedings as disclosed in last quarter.

We thank you all for your continued support and I would like to now open the floor for questions.

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 Vidit Shah from IIFL Securities Limited. Please go ahead.

Vidit Shah — IIFL Securities Limited — Analyst

Thank you for taking the question. My question is largely around the margin, which has improved on a consolidated basis, but a large part of this has — when I look at it on a sequential basis for 4Q, a large part of this has come because of cost burn in the Product-Led businesses. So just specifically for Workforce Management and Operating Asset Management, what is the size of the cost cutting measures and efficiency improvements that we’re looking at? Because in Workforce Management, we’ve seen a large improvement in core-to-associate ratio and even then margins have remained flat. So, could you just like help understand is there any pressure on PAPMs or pricing as such?

Kamal Pal Hoda — Chief Financial Officer

So Vidit, thanks for the question. So Vidit, we have an organization-wide cost realignment exercise that we have done and even for Workforce Management and OAM, the IDC costs have been reduced. We had called out that we have reduced the IDC to 5.4%. The reason that you see that the margins have remained intact is because of the additional investments that has happened in North America business and also a bit of demand muted in the IT sector.

Vidit Shah — IIFL Securities Limited — Analyst

Okay. So the North America burn is at around INR11 crores, right, for 4Q?

Kamal Pal Hoda — Chief Financial Officer

It is. On a full year basis, it’s INR11 crores.

Vidit Shah — IIFL Securities Limited — Analyst

Okay. How much would it be in this quarter?

Kamal Pal Hoda — Chief Financial Officer

It will be close to INR3 crores this quarter.

Vidit Shah — IIFL Securities Limited — Analyst

Okay. Got it. Any sense that you could provide on any update on the North America venture, how are we doing? Last quarter we had started bringing in revenues from one customer so how has that picked up and where are we at currently?

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Sure, Vidit. Lohit, you would want to take this?

Lohit Bhatia — President, Workforce Management

Yes, absolutely. Good morning, everyone, and thank you for the question, Vidit. So as you know, we started this only in the summer of 2022 with US. Our long-term and medium-term strategy remains very robust. US has again shown deep growth — a solid growth in the overall staffing market and last year’s numbers that we have now from the world bodies is 187 billion. The good part in those INR11 crores numbers though not yet visible and impacting our revenues and EBITDA is that in the Q4 in the last month, we did start revenue generation. The revenue generation was sub USD50,000, but it was our very first start with our first customer.

Secondly, with our current quarter that we’ve started, which is Q1 of FY ’24, we’ve added another two large customers and these customers are part of the Fortune 500 pack. As I speak with you today in almost the mid of May, our team has already received close to 100 open mandates in USA itself. To give you a context, an average open mandate converts into selection and joining at the rate of about 7%. So hereafter, we would be clocking and wanting to see a strengthening of our portfolio on a month-to-month basis and a quarter-to-quarter basis. So as Guru said in his commentary, we want to achieve our breakeven goal in the first half of this financial year and thereafter, make a strong start and a strong moat for ourselves in the American market.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Hope you understood.

Kamal Pal Hoda — Chief Financial Officer

On the margin. Three clear contributors. One is of course North America investment. Second, IT and — IT staffing and selection business which declined. And the third one is largely to do with the entire — I mean IT and North America business. So, these two are impacting our margin for WFM.

Vidit Shah — IIFL Securities Limited — Analyst

Okay. Understood. And just one last clarification. On the intangible assets, these — they have reduced by around INR40 crores when seen against FY ’22 and consequently, we have also seen a sharp increase in depreciation. So, is there aggressive amortization happening across these assets and what is the view on depreciation and amortization going forward?

Kamal Pal Hoda — Chief Financial Officer

Sure. Vidit, Kamal this side. So, there are two things. On intangibles, we have not accelerated any depreciation and it is in line with what we’ve been doing so far. It’s a normal amortization of intangibles that we’ve been doing. The additional depreciation this year has come on account of and, as also mentioned during my commentary, is on account of the additional investments that we have done in the rental space in our CLM business. So, the total seats in the CLM business have gone up more by 15% this year and it’s almost touching 20,000 seats. We’ve hired close to 1,45,000 square feet of additional office space for the CLM business and that’s visible in the growth that you see in that business in terms of its revenue numbers. What comes from an Ind AS 116 accounting is the entire rental cost then gets aggregated and the lease accounting happens and a large chunk goes into the depreciation cost and the depreciation cost is higher in initial years and then the liability is then amortized and the interest costs have been charged off to the P&L over the period of the lease.

Vidit Shah — IIFL Securities Limited — Analyst

Okay. Got it. Thanks for answering these. I’ll get back in queue.

Operator

Thank you. [Operator Instructions] Our next question is from the line of Vikas Jain from Reliance Securities. Please go ahead.

Vikas Jain — Reliance Securities — Analyst

Good morning sir. My question is the promoters have increased some stake in the last quarter so any further plans to acquire something from the existing investors? And the second question is with respect to the PLS business, by what time the Product-Led Business would be profitable?

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

All right. So we’ll will take the second question first. Sekhar, do you want to?

Sekhar Garisa — Chief Executive Officer, Foundit

Yeah, hi. Thanks for the question. The Product-Led businesses, specifically in Foundit, as you know we raised some capital last year and whole of FY ’23 we were on an investment mode on product as well as marketing and the business has been growing aggressively in line with whatever expectations we had. We’ll continue that path in FY ’24 as well where our growth plans are aggressive and as committed earlier, we are looking at breaking even on the business by Q4 of FY ’24.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Allright. So I mean on the other question, Vikas, the first question. See promoter buying is kind of independent activity and we have — we’ll not have much of foresight on that. But yeah, I mean there is no any specific cause or reason for that.

Vikas Jain — Reliance Securities — Analyst

Okay. Thank you.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from the line of Chirag Shah from White Pine. Please go ahead.

Chirag Shah — White Pine Investment — Analyst

Hello.

Operator

Yes. Please go ahead.

Chirag Shah — White Pine Investment — Analyst

Sir, two questions. First on Workforce Management side. So in the last two quarters, we have been indicating that effort is to reduce the staffing business, which is the lowest margin business…

Operator

Mr. Chirag, sorry to interrupt. May I request you to use the handset, please.

Chirag Shah — White Pine Investment — Analyst

Hello. Is it better now?

Operator

Yes, it’s better. Please go ahead.

Chirag Shah — White Pine Investment — Analyst

Sir, first question is on Workforce Management. Over last few quarters or last two, three quarters, you have been indicating effort to reduce the staffing part of that business, which is the low margin business, and hence aggregate margins won’t see an uptick. If I presume staffing would be around 2% plus-minus kind of margin business for you, right. So, it doesn’t appear to be happening. So, any thoughts on that side from when we can see that effort start resulting in numbers?

Lohit Bhatia — President, Workforce Management

Can I take that, Guru? Good morning. Chirag. How are you doing. I think slight misconception. We’ve never said that we are reducing the staffing business. In fact on return ratios and matrices, it happens to be one of the finest businesses in the platform of Workforce Management. If you look at core to FTE ratio, which works at 1:500 plus this time, efficiencies are very high. If you look at your DSO days, one of the lowest DSO days are in this business because we have 75% to 76% collect and pay. It’s a negative working capital business and hence a very high ROE business in many ways. The third thing about this business is that if you look at India, India is going through a massive structural transformation today. From farm to non-farm, from rural to urban, from the informal to formal, and from the unorganized to organized. This kind of growth is a once in a lifetime opportunity and this growth should and will continue for the next couple of decades. I don’t want to say a couple of years because it’s clearly visible, it will at least continue till 2054 when India continues to have its demographic dividend. So coming back to your question and why I said that there could be a misunderstanding. What we said is the overall percentage of contribution within WFM shall be reducing from the General Staffing space though General Staffing continues to clip at 20% and more. So…

Chirag Shah — White Pine Investment — Analyst

I was referring to that — I was referring to the contribution coming not absolute reduction. Other parts of business growing faster. My actually question was that that it doesn’t seem to be happening, your staffing seems to be growing at similar pace as other parts. So, I was not coming from that side.

Lohit Bhatia — President, Workforce Management

So, fair enough. So I think at the same time last year if you look at it, the contribution of EBITDA coming from General Staffing was about 54%. Today, it stands at around 48% in the entire WFM so it has come down. It has come down because APAC and some of the other assets have done well. Why you’re not seeing it in the Q4 numbers is primarily for what Kamal briefly explained and Guru in his speech explained. The two investments which were not there same time last year or at the start of previous financial year was one, the North America business and we were not in North America and obviously that’s an investment of INR3.5 crores to INR4 crores every quarter. The second is if you look at the EBITDA, which we were getting from our IT business in India was extremely high at the same time last year.

You would remember that the IT industry was seeing and IT services industry were seeing tailwinds about 12 months ago. These tailwinds in the last six to nine months converted from tailwinds to headwinds. So, that shrinkage has caused what you see as the Q4 number that okay GS is contributing again almost at the 50% mark. But over a period of time, Chirag, I’ll be honest with you, we want to bring this to 40% from General Staffing and 60% from the rest, but that’s a long exercise and that’s a continued exercise. At no time in our company will we slow General Staffing to achieve that. So, I hope that answers the question.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Just to add, having said that, it doesn’t mean that General Staffing will slow down its growth. They will continue to grow that upward of 20%.

Operator

Thank you. Sorry to interrupt. Mr. Chirag Shah, may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. [Operator Instructions] Our next question is from the line of Vikrant Gupta from ICICI Prudential. Please go ahead.

Vikrant Gupta — ICICI Prudential — Analyst

Hi, good morning. Thanks for the opportunity. I have two questions. Firstly on the Workforce Management side given that margins have remained broadly flat on a sequential basis, could you give a sense of what sort of savings is seen by improving our core-to-associate ratio. So if you can give a sense of maybe what are the salaries that you pay to the core employees and what sort of savings have accrued on that side. And the second question is on the CLM business. So I’m just looking at the numbers, the Q4 growth in the CLM business is around 7% or 8% year-on-year. So, I’m just wondering why did we need to increase our seat capacity so dramatically in Manila? So, is this because the seat capacity was less in the previous years and this is more a catch-up? And then the third question is on the product side. So, if you could talk about what has led to a lower burn in Q4 versus Q3 and do you think as we have guided that the burn could come down by INR50 crores in FY ’24 versus ’23? Thank you.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Sure, Vikrant. Sekhar, you want to start from the product.

Sekhar Garisa — Chief Executive Officer, Foundit

Yeah, sure. Thanks, Vikrant, for the question. Like you rightly pointed out, the first half of FY ’23 was a period of high investment across hiring, product, and marketing and the business grew quite a lot from Q1 to Q4 in terms of sales. And as some of these investments taper off, we also had a rebranding event in Q3 which consumed some of our incremental marketing expenditure. In Q4, some of this did not come in. So the business grew, some of the expenses followed. And on the glide path of business growing and expenses remaining constant, which would be the nature of this business, we will continue to see tapering down of losses.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Well, the second question that you had, Vikrant, was on the Workforce Management specific to the Workforce Management margin. Lohit, you want to comment on that. Lohit?

Lohit Bhatia — President, Workforce Management

Sorry, I believe the second question was for Pinaki, Guru.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

So you go ahead with the Workforce, we’ll get Pinaki next.

Lohit Bhatia — President, Workforce Management

Okay. Fair enough. Vikrant, good morning again. And so, let me give a bit of a context here, Vikrant. There are a couple of moving parts when you look at a core to an FTE ratio. Yes, you’re absolutely right when the core-to-FTE ratio goes up, it’s simply means that for every one core employee dedicated within the organization, primarily here we’re talking about the General Staffing India business, looks after N number of associate employees and today that’s greater than 500 as is available from the Investor deck. That automatically brings costs down. To your question on what an average core employee cost. Today, an average of the core employee including the management layer for the business is close to about INR40,000 plus per month, that’s about sub-INR5 lakh per annum. That’s an average employee cost. Having said that, see, you must also see that the last year we’ve added about 71,000 associate headcount including YoY growth over last year and like Guru in his speech also mentioned, if you do not add the exit employees or the F&F employees, we actually grew 58,000 net additions in our GS India business.

So when we do core to FTE ratios, there are two things that we have to do. One, we have to take care of these additional 58,000 people that have got added or 71,000 if you include F&F also that we’ve managed. The second, we have to invest for the future. Vikrant, it’s very, very important to understand on the aspect of the structural shift of the economy in India and the macroeconomy. At 3,87,000, we are still starting as far as India and General Staffing and capturing the market is concerned. This is not the endpoint. This is not where we can stop all investments in technology or in people or in processes and then say that we will continue to grow for decades to come. So, I hope you keep both this in mind when you look at why an immediate incidental in core-to-FTE ratio does not give a direct bottom line increase. To the last point, yes, you’ve been right we have been now at sub-3% of EBITDA, but flattened out as far as WFM is concerned. We would like to get back to the 3% mark first and then look at contribution from the rest of the world to take us beyond that. I hope that answers. Thank you.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Thanks, Lohit. Vikrant, the third question that you had was largely on the CLM business and specific to Allsec. So let me call out, Allsec actually grew 28% year on year, specifically the international CLM business and 6.3% quarter-on-quarter. This largely — what we do there is we support all the US customers and it is delivered from Manila. And I mean of course we have signed good set of new accounts based out of — in US which will be delivered from Manila. So, there is an expansion of roughly about 200 seaters that we have implemented in between Q3 and Q4. I would call Pinaki to add more light to this.

Pinaki Kar — President, Global Technology Solutions

Thanks, Guru. Am I audible?

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Yes, Pinaki, go ahead.

Pinaki Kar — President, Global Technology Solutions

So Vikrant, as Guru told, the CLM here in Quess for Allsec which has got delivery center in Manila, which was at a certain seat capacity for a long time. But over the last one year specifically, and those are reported numbers, last year CLM number for Allsec was INR53.7 crores in the same quarter, this year it is INR69 crores, which is actually 30% around growth. If you take specifically North America, as Guru was alluding to for which the delivery happens out of Manila, the growth has been 30% plus and more importantly, the quarter three and quarter four the order booking was actually the highest ever in quarter four for the US business. And there is a huge pent-up demand based on the scalability which we are expecting at least in the next few quarters based on the committed headcount growth that is coming from the existing portfolio of clients. So that’s why, actually we just made that investment on time not even ahead of the curve because even currently the investment that we have made, that capacity will be fulfilled over the next six months itself. So we are trying to keep it flexible on a completely variable costing model as we grow and the capacity increases, we keep it [Indecipherable]. Hope it clarifies the data points and it gets to what you are looking for.

Vikrant Gupta — ICICI Prudential — Analyst

Understood. So the incremental depreciation number is largely on account of buildings for the seating capacity, number which has moved up from INR70 crores to INR76 crores.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

That’s right.

Vikrant Gupta — ICICI Prudential — Analyst

Okay. Thank you.

Operator

Thank you. Our next question is from the line of Raj Bhanushali from Motilal Oswal Financial Services. Please go ahead.

Raj Bhanushali — Motilal Oswal Financial Services — Analyst

Yeah. Thank you for taking my questions. First, on Product-Led Business, what impacted this quarter and just wanted to understand if there is any seasonality there? Secondly on OAM, it was weak sequentially so what is causing weakness there?

Sekhar Garisa — Chief Executive Officer, Foundit

Sure. So on the Product-Led Business, we do grow quarter-on-quarter as the year progresses. The same trend has been also in FY ’22, FY ’23. So, we have significant growth of about 40%, 45% from Q1 to Q4 consistently. So there’s a bit of seasonality in Q4 as corporates tend to close their next year contracts, we do tend to get some of our larger orders there. If your question was around EBITDA, I answered slightly earlier in terms of the cost going down slightly because of some one-time rebranding costs in Q3. Hope that answers the question.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

On the other specific to OAM, this business went through a good headwind between ’21 and ’22 because our exposure to IT, ITES was almost about 35% and most of these offices are not completely resumed even today, right? So we had to navigate in terms of restructuring our sales team, our focus shift I mean moved away from IT, ITES in the sense the dependency and we wanted to move towards manufacturing and retail and other segments. So, we did invest in terms of sales and strengthening our sales around this and that has resulted in revenue growth of about 24% in FY ’23. The other clear call out here is our food business has almost contributed to 71% growth in FY ’23.

So this is kind of in a way helping us to recoup the entire platform to at its best plus we have invested substantial time in terms of cost optimization and productivity. Our core-to-associate, which used to be as low as 86 in previous year, that is now about 110 in terms of the optimization of cost. The other part under OAM is the security business. Even security business has started moving up and we see a 12% revenue increase year-on-year. So — and the other piece here is telecom on back of 5G rollout, this business is phenomenally doing well. We have done about 46% – 47% growth year-on-year. So on an aggregate, it’s contributing to overall upliftment of this particular platform OAM. Does it answer, Raj?

Raj Bhanushali — Motilal Oswal Financial Services — Analyst

Yes. Thank you so much.

Operator

Thank you. Our next question is from the line of Alok Deshpande from Nuvama Institutional Equities. Please go ahead.

Alok Deshpande — Nuvama Institutional Equities — Analyst

Yeah. Good afternoon to the entire Quess team. My first question is on the Product-Led businesses. Now Q3 and Q4, we are looking at about INR25 crores, INR30 crores of net loss coming from that part of the business. I was just wondering if you could share some roadmap as we go into FY ’24, how are we looking in terms of profitability there? That’s my first question. And my second question is on the General Staffing. Given that this year has started slowly, are we targeting a similar quantum of headcount addition or is that even possible this year given the general softness everywhere? How are — what are the initial indications that we’re getting in April and May on that front?

Sekhar Garisa — Chief Executive Officer, Foundit

So. I’ll take the question on the Product-Led businesses. As you’ve seen in the last two years, we went through a period of high growth because we’ve invested in product and marketing as well as the team. We’ve had more than 50% growth if you see on a CAGR basis over the last two quarters and we’ll continue the growth trend going into FY ’24. The nature of this businesses is that the cost structure after a point becomes more or less constant except for a marginal cost of sales growth. So from that perspective, as the business grows significantly, the margin profile changes. So as we get into FY ’24 and grow as per our committed growth rates, we expect the EBITDA loss to go down taper down all the way to Q4 when we’re expecting the business to breakeven. So, it’s a bit of the business growing fast and the cost structure remaining more or less constant that will take us to breakeven as we enter Q4.

Lohit Bhatia — President, Workforce Management

Good morning, Alok. I’ll take the question on General Staffing that you asked. So, I think it’s a very valid question and it’s a good question. This was our best year ever. We said that in the year prior to that as well and we continue to always enter the year with a lot of synergy, lot of strategy, people, processes, and technology. We want to obviously repeat the kind of performances that we’ve done in the past or better. Having said that, you asked a specific question as to how is the color of the year looking and I just wanted to give that context to everybody. Same time last year we had over 33,000 open mandates. This open mandates in the — after ending the first half of the financial year gone by ’23 actually dropped almost 33% and came down to as low as 21,000 open mandates as we were exiting out of Diwali and we were talking about this in our Q3 and subsequent to that period as well. It has since then again risen by another 35% to 40%, but continues to trail almost 20% over the best last year. So, that’s the first part.

The second part is each segment is behaving very, very differently, Alok. Like I mentioned, there is a structural shift in the economy. Infrastructure, manufacturing, BFSI, healthcare are definitely doing better than some of the other elements of the economy. You know the government’s push on infrastructure over INR10 lakh crores, you know the PLI scheme which keeps getting expanded and new FDI which is coming there. That clearly also synergized with our own investments in the M&I portfolio. You also know that Quess today has general staffing people deployed in over 6,400 towns and cities. So, customers in BFSI and customers in NBFCs are expanding to the new space. Having said that, I think we must be appreciative of the fact that we are constantly dealing with tailwinds and headwinds in different parts of the economy and we will continue to watch this space very, very closely and each of our team has their action and their task cut out.

Alok Deshpande — Nuvama Institutional Equities — Analyst

Sure. Thanks, Lohit, for that detailed answer. Just one clarification, this Product-Led Business’ breakeven is this EBITDA breakeven or PAT breakeven by Q4?

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

EBITDA breakeven.

Alok Deshpande — Nuvama Institutional Equities — Analyst

And Lohit, just an extension on this. Any color now you can give, you put in about INR11 crores of investment in North America, we are going by similar run rate I am guessing for this year also. So two, three years out, what is the sort of potential revenue we are looking at? Any color you have in mind and how should we look at it?

Lohit Bhatia — President, Workforce Management

Alok, we’ll be happy to take this offline because a three-year plan is definitely there in our mind. When we walked into it, we have an immediate goal, we have a medium-term, and then a long-term goal. Having said that, I’ll just leave some thoughts with you. For every one resource gross margin added in the American business because we are doing professional staffing and IT staffing there, it compares to about 20 people’s gross margin added in the India IT staffing business and close to 350 people’s gross margin added in general staffing in India. So, that’s the size and scale and complexity and differentiation of margins between the American IT market versus the Indian IT market and the Indian general staffing market. Like I said, we have an immediate-term goal, which Guru also called it out, which is to get the breakeven this year. Our medium-term goal is to steadily go beyond a few hundred deployed resources and then there is a long-term goal as well. But happy to take you through more details away from the call.

Alok Deshpande — Nuvama Institutional Equities — Analyst

Sure, Lohit. That would be helpful. I’ll reach out to you separately. Thank you.

Operator

Thank you. Our next question is from the line of Amit Khetan from Laburnum Capital. Please go ahead.

Amit Khetan — Laburnum Capital — Analyst

Hi, good morning and thanks for taking my question. If I look at your annual report, we had about lease expenses of INR130 crores last year in FY ’22, which was split between depreciation and interest. Could you share that number for FY ’23 and how that broadly splits between the three or four segments?

Kamal Pal Hoda — Chief Financial Officer

Sure. So the ROE depreciation number was INR105 crores last year, it is INR148 crores this year. So, there is a INR40 crores to INR43 crores increase as far as ROE depreciation is concerned. Similarly, the interest component in the — also the lease component in the finance cost was close to INR24 crores last year. This is INR44 crores this year so this is a INR20 crores increase in the interest cost as well. So cumulatively both put together, it is close to around INR62 crores of further increase the P&L cost. In terms of segment segregation question, majority of this in the GTS platform.

Amit Khetan — Laburnum Capital — Analyst

Got it. By majority, you mean what like 80% plus?

Kamal Pal Hoda — Chief Financial Officer

Almost 90%.

Amit Khetan — Laburnum Capital — Analyst

All right, thank you very much.

Operator

Thank you. Our last question for today’s question-and-answer session is from the line of Mohit Mehra from Guardian Capital. Please go ahead.

Mohit Mehra — Guardian Capital — Analyst

Thank you for taking my question. Are there any updates on that tax disputes so have we appealed to the ITAT? What is going on there?

Kamal Pal Hoda — Chief Financial Officer

Mohit, thanks for this question. This is Kamal. So we had called out in the last quarter so there are two separate years ’17-’18 for which we had a DRP ruling in the last quarter, for which we are going into ITAT. Our first hearing is scheduled by end of this month. And for ’18-’19, we are yet to — the DRP proceedings are yet to commence. So, we understand that the first hearing would be in the first week of June. So, that is the status on the income tax matter. In terms of the overall exposure towards contingent liability, no change from the previous quarter, INR74 crores is what we had reported in the previous quarter so we remain on the same amount because there have been no hearings that has happened in the last quarter.

Mohit Mehra — Guardian Capital — Analyst

Got it. And how should I look at margins going ahead? So, I know that cash burn in Monster is at INR20 odd crores in this quarter that will go up as well as the cash burn in US, which was around INR3 crores, INR4 crores that will also go. But is there any other further levers in the core business? So, can that margin improve or will it stay the same?

Kamal Pal Hoda — Chief Financial Officer

So this has been a year of investments, Mohit, you have pointed it out; Product-Led Business investments, the rental space investments that I just explained, and also the North America investment. And we have also explained during this call that we are expecting to breakeven next year in Monster, we are expecting to breakeven in North America. And in terms of overall margin increase, we are also very in a methodological and detailed manner working with each platform President to look at the IDC and the salary structure and the associate-to-core ratio, which also we brought it out in our presentation is at all-time best levels. So, these steps we believe should give us a margin uptick as we move into the next financial year.

Operator

Thank you. That was the last question for a question-and-answer session for today. I now hand the conference over to the management for closing comments.

Guruprasad Srinivasan — Executive Director & Group Chief Executive Officer

Sure. Thank you. And I take this opportunity to thank each one of you for your continued support. I would like to reiterate again the investments that we’ve made during FY ’23, whether it is North America or Product-Led, as a management we are quite confident the way it is going to result out for us in FY ’24. So for FY ’24, our focus will remain on growth without taking our eyes off, driving cost optimization across all platforms, and ensure that how do we bring down our debt and debt reduction around it. So, our focus is going to be around — these are the key areas that we will focus. And I again take this opportunity to thank each one of you for all your continued support. Thank you.

Operator

Thank you. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us and you may now disconnect your lines.