TeamLease Services Ltd (NSE: TEAMLEASE) Q2 2025 Earnings Call dated Nov. 06, 2024
Corporate Participants:
Amit Chandra — Moderator
Ashok Reddy — Co-Founder, MD & Executive Director
Kartik Narayan — CEO of Staffing
Ramesh Alluri Reddy — Chief Executive Officer
Neeti Sharma — Chief Executive Officer, Staffing
Ramani Dathi — Chief Financial Officer
Analysts:
Nitin Padmanabhan — Analyst
Deep Shah — Analyst
Amit Chandra — Analyst
Aniket Kulkarni — Analyst
Sumit — Analyst
Nikhil Choudhary — Analyst
Rohit Balakrishnan — Analyst
Vikas Ahuja — Analyst
Aasim Bharde — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the TeamLease’s Quarter Two Earnings Conference Call hosted by HDFC Securities. 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]
I now hand the conference over to Mr. Amit Chandra from HDFC Securities. Thank you, and over to you, sir.
Amit Chandra — Moderator
Yeah, thank you, and thank you, and good evening, everyone. On behalf of HDFC Securities, we welcome you all to the TeamLease’s Quarter Two FY ’25 Earnings Call. Today, we have with us the Management team of TeamLease, represented by Mr. Ashok Reddy, MD and CEO, Mr. Kartik Narayan, CEO of Staffing, and Mrs. Ramani Dathi, CFO.
I will now hand over the call to the management for the opening remarks, post which we can start the question and answer session. Thank you, and over to you, Ashok.
Ashok Reddy — Co-Founder, MD & Executive Director
Thank you, Amit. Good evening, and thank you all for joining the call. We also will be covering the specialized staffing and DA update as we go forward, but just as an introduction, I think we’ve maintained the growth trajectory over the quarter, taking us to a little over 3.5 lakh headcount in the employment cluster. At a group level, we added nearly 18,000 headcount, largely coming in from across sectors in the staffing and DA business. The specialized staffing did see a net degrowth, but we believe that it is stabilizing as we go forward with some of the open positions and decline that will offset in the coming quarters. EBITDA recovery is backed by the operating leverage in the staffing business with growth and also the growth in EdTech billings, which have a seasonality factor.
We’ve also been adding new logos and delivering more on hiring. Parallelly, we are investing in a higher-tech platform, which we believe will go live in FY ’26. The platform aims to bring down our hiring cost significantly in a phased manner because we do believe that a larger element and volume of hiring would get delivered by us as we go forward.
We continue to focus on growth, productivity, and profitability. And before we take questions, we will have an update on the businesses and finance front and then get into the questions. Karthik, do you want to share something? [Phonetic]
Kartik Narayan — CEO of Staffing
Good evening, everyone. I’m pleased to share a detailed update on our Q2 and H1 FY ’25 performance, where we continue to see a steady momentum and expansion across our key verticals. In the first half, we recorded growth in our general staffing business with a net addition of 31,000 associate counts, marking a new high for us in any given first half.
This growth represents 11.7% from our closing base in March FY ’24. In the second quarter specifically, we’ve noticed notable progress in general staffing with a net addition of nearly 16,000 associates, marking the highest number reported in any quarter for the last few years. This number represents a 6% quarter-on-quarter from a net addition perspective, and a 19% year-on-year Q2 last year versus Q2 this year, aligning with our focus on building long-term relationships with clients while capturing some of the new, evolving market demand coming through.
On the revenue front, we have seen an 8% increase quarter-on-quarter, sequential, and a 26% year-on-year increase, which is Q2 last year versus Q2 this year. In terms of different sectoral performance, in the banking finance sector, it’s been a mixed bag as far as business [Phonetic] side is concerned this entire year. And following a period of what I had called out last quarter as well, regulatory scrutiny and market recalibration, we are seeing a measured revival within microfinance, payment services, and affordable housing.
It’s too early to call it. We’ll have to wait and see how it plays out in Q3. In the consumer business, as described in the last few quarters, high input costs and inflation have led to the core consumer businesses being largely flattish. Some of you will be seeing the results for some of these companies which have come out at the end of Q2, except for the consumer durable business, which has benefited from the prolonged summer.
However, some of these companies have reached out to us to seek efficiencies by formalizing their workforce. We are also working with some customers on better retention strategies, and some are looking to enhance productivity through their extended workforce channels.
We have also benefited from the boom in quick commerce and organized retail. This structural shift towards compliance and productivity in workforce management in some of these sectors has helped us grow our headcount, even as the consumer goods sector remains pressured by input costs and inflation. If the telecom vertical continues to benefit from the nationwide expansion which is taking place in network upgrades, with additional investments in infrastructure and network growth, this sector remains promising for sustained associated additions in the months ahead.
On the client acquisition part, client acquisition strategy, you get about 37 new logos. That makes it, in H1, about 80 odd logos, driven largely by consumer financial services manufacturing sectors. Of these, as I’ve highlighted before, 70% have signed on to variable models.
On the recruitment front, we successfully hired roughly about 46,000-odd associates through both our internal and external channels. We hired nearly 26,000 associates during Q2 through our sources, which is a 29% increase quarter-on-quarter and a 16% increase from the same period last year. This is H1 to H1.
Our focus on hiring for the rest of the year would be the need to scale while optimizing resources. Hiring has been crucial in sustaining growth across our client base and maintaining our competitive edge in delivering value-added services. From an operational efficiency and digital transformation project that we’ve undertaken, our commitment to operational excellence continues to yield positive results.
During H1, our FTE, full-time equivalent productivity, improved by 1.7%. FTE has improved by 2% to 387 headcount, owing to a 6% increase in associated headcount in Q2, enabling us to manage a larger workforce effectively and support more clients without additional overhead. Our digital transformation efforts are gaining traction, delivering substantial improvements in speed, customer responsiveness, and process efficiency. Some of the digital initiatives introduced are expected to further enhance our operational ability, allowing us to meet rising client demands with greater accuracy and resourcefulness.
As we move into the second half of FY ’25, our core focus areas include continued expansion in consumer and telecom. These sectors will remain pivotal, driven by demand and evolving client needs. We are watching the recovery in PFSI with caution. These opportunities, like I called out earlier, in microfinance, payment, and the housing finance sector, of course, will continue to work towards enhancing our operational agility.
In summary, our core growth drivers in H1 were consumer with telecom and early-stage recovery within PFSI, each contributing significantly to our performance. Q3 can be muted on the backdrop of caution in the PFSI sector, and the drawdown which typically happens due to temporary festive hiring which takes place towards the end of Q2.
Our emphasis on doing more with less has brought efficiency gains across our processes. These efforts allow us to deploy more associates, as I called out earlier. We expect this to continue to play out in H2.
Thank you. And with this, I hand it over to Ramesh to take you through the DAP.
Ramesh Alluri Reddy — Chief Executive Officer
Thank you. Thank you, Kartik. So, good evening, everyone. I will give a brief about degree apprenticeship and the changes that are happening in the marketplace, and then I’ll dive into Q2 performance. So, as a background, India’s workforce is at a very critical juncture, with only 51.25% of the youth meeting industry employability standards, as per the India Skills Report 2024. This gap underscores the need for extensive skilling initiatives as demand for industry-ready talent surges.
In Q2 FY ’24, both the central and state governments have intensified their efforts through multiple schemes and are aiming to bridge this gap, which is aligning with our vision to enhance employability via degree apprenticeships and other apprenticeship programs. From a central government initiative perspective, the employment link incentive, and as a constituent of that, the Prime Minister’s Internship Scheme, the PMIS, were the key initiatives that were launched in Q2. So this scheme, aimed at reaching 10 million youth in five years, offers a very promising path for industry-aligned skills and draws more youth and corporates into apprenticeship opportunities.
So, in addition, the UGC also launched the draft guidelines for the Apprenticeship Embedded Degree Program, AEDP, which allows students to gain work-relevant training through both the NATS program, which is a National Apprenticeship Training Scheme, or directly through industry ties as well. Now, apart from this, from a state-level skilling perspective, states are complementing these national efforts with specialized initiatives. Karnataka’s Nipuna Karnataka Skilling Scheme, which is backed by INR300 crores, is focused on skilling for IT and Technology sectors with major industry partners.
In addition to this, the Karnataka government is also set to roll out the AEDP at 45 government first-grade colleges across the state from this academic year to enhance the employability quotient of its youth. Similarly, Uttar Pradesh, Maharashtra, Haryana, etc., are launching tailored schemes to align education with industry demands and focusing on employability in IT manufacturing and other government roles. So, the background is that there is a good amount of tailwind which is coming from the government, and we’ll also talk about how our Q2 performance was.
So, reflecting on our Q2 performance, our strategic focus has already yielded promising results. We had more than 3,000 new additions across all the apprenticeship schemes, be it NAPS, NATS, or the Work Integrated Learning Program. And we saw a INR27 increase in our PAPMs, with learning additions increasing by 23%. We added 23 new client logos, with 13 of these including learning solutions in their apprenticeship agreements.
Additionally, our farming efforts have resulted in 27% of our customers incorporating learning solutions, highlighting their value in improving productivity and reducing attrition. Now, our ongoing efforts to evangelize degree apprenticeships are really building momentum across industries, including manufacturing, capital goods, retail, quick commerce, engineering electronics, and automotive components.
By capitalizing on the heightened interest in learning-embedded degree apprenticeships, we aim to create a sustainable talent supply chain that meets the industry needs, enhances productivity, and builds a future-ready workforce.
Thank you so much. With that, I hand over to Neeti for the specialized staffing.
Neeti Sharma — Chief Executive Officer, Staffing
Thank you, Ramesh. Good evening, everyone. From a specialized staffing standpoint, we see that the tech talent demand is showing gradual signs of improvement. However, with the current focus in the industry on resource optimization and upskilling, we don’t expect a big surge in open positions right away. On a positive note, we are seeing growth with many of the GCCs we partner with, and several non-tech industries are ramping up their digital transformation, which is creating new growth opportunities for us. About 60% of our revenues come from GCCs, and we see that this will continue to grow over the next few quarters as well for us.
Looking ahead to Q3 of FY ’25, we expect steady growth in the IT staffing industry, especially in critical areas like cloud computing, cybersecurity, data analytics. Thanks to our specialized expertise and strong client relationships, we are well-positioned to capture these positions with a focus on high-margin sectors for sustainable and profitable growth. We signed 15 new clients in Q2, including nine large strategic accounts.
Our sales pipeline is strong. We are optimistic that this momentum will continue through the fiscal year as well. We are committed to focusing on high-margin customers by fine-tuning our approach with low-margin engagements to boost both profitability and efficiency.
On the financial side, we are strategically focused on high-value projects. Even though our revenue dipped slightly, our profitability has improved over the last few quarters. EBITDA is up by 18% year-on-year and 26% sequentially, largely due to cost-saving efforts and some one-time sourcing and absorption benefits.
Going forward, we are optimistic about IT hiring as digital transformation continues to drive demand for tech talent. While we anticipate moderate growth for Q3, we are proactively reinforcing our strategic priorities. Our initiatives spanning new client acquisitions, cost efficiency, stronger accounts management, streamlined hiring, and technology enablement, we believe that they are all set to keep us resilient and profitable while we see the demand gradually surging and improving.
We are committed to keeping our competitive edge, accelerating these strategies to take on any emerging opportunity, and delivering consistent value to all our stakeholders.
Thank you. And with this, I hand this over to Ramani.
Ramani Dathi — Chief Financial Officer
Thank you, Neeti. Good evening, everyone. At group level, we had 18,000 headcount addition in Q2 FY ’25 versus 13,000 in the corresponding quarter of last year.
In H1 FY ’25, we have added 31,000 headcount versus 19,000 for the corresponding half-year period last year. While the PAPM pressure continues in staffing, we are focusing on improving absolute profits through operational efficiencies in general staffing and upselling of learning programs in DA systems. Specialized staffing is flattish on quarterly revenue, but improved profitability through cost optimization and higher number of associate adoptions in the quarter.
In edtech business, as we explained in the previous quarter, there is a delay in student admissions owing to UGC guidelines this year. Substantial chunk of edtech profits get booked in the second half of this year. In HR tech vertical, we are evaluating M&A options to expand our product portfolio and client base.
Overall, we had 30% growth in sequential PBT this quarter, and we are confident of maintaining strong double-digit growth in sequential profits for the rest of the quarter. Balance sheet metrics like receivables ratio, DSO, working capital ratio, ROCE are all steadily maintained. There is an increase in working capital borrowing at edtech business level, which is in line with their business growth.
Free cash stands at INR340 crores as of 30th September 2024. These are the high-level comments on quarterly results. We can now move to specific questions from the participants. Thank you.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator Instructions]
The first question is from the line of Nitin Padmanabhan from Investec. Please go-ahead.
Nitin Padmanabhan
Hi. Good evening, thank you for the opportunity. Now, the first one is on the general staffing business. If I got it right, I think you mentioned that the next quarter will be muted. Did I get that right? That was the first one. And wouldn’t the consumer and telecom basically take care of the growth in the third quarter? So that was the first question.
The second question was around the subcontracting cost. It seems to be up meaningfully year on year from some INR43 crores to INR121 crores. I think this is the first time we have introduced this data. So what is the context of this cost and which businesses does this attribute to and what’s driving this increase?
Ashok Reddy
Thanks, Nitin. I think while Karthik will give a little more flavor, I think broadly we are expecting growth. But the BFSI will mute the quantum of that growth is the call out. I think other sectoral demands continue to be there. Even BFSI demand continues to be there. But certain RBI regulations we do believe will kind of suppress that outlook for Q3.
But overall I think we are positive to element of outlook on growth as we look at Q3. Karthik.
Kartik Narayan
Yeah, thanks, Ashok. So Nitin, largely if you’ve been following news, I think there is some strictures which are coming across specific to KYC that RBI is calling out. So we are anticipating, is it possible that there might be some sort of a muted response coming in from largely BFSI sector. So that’s one aspect of it.
But some of the other verticals that we are seeing, aspects around formalization both for consumers, the quick commerce aspect of it which is going to grow, and then of course manufacturing. So all of those are going to grow nonetheless. The reason why the tonality muted is a relative thing that we are calling out is because BFSI is a large part not just for the industry but also the economy. So that’s why we call out.
Neeti Sharma
On the subcontract expenses its specific to the specialized staffing business. Over the last two, three quarters we have seen aggregation of vendors at IT companies and we are winning some of those aggregation mandates. So that’s the reason for the increase in subcontract expenses in the P&P. [Phonetic]
Ashok Reddy
It’s in line with the business.
Nitin Padmanabhan
So it’s not something that’s driving margins either way. It’s overall from a business perspective, the margin profile is what it is. It’s not decorative or anything in any way.
Ramani Dathi
The gross margins on subcontracting is minimal. But at the same time considering the volume on the total size of specialized staffing which may not deviate the overall margins to that extent.
Nitin Padmanabhan
Got it, got it. Got it. That’s helpful. Thank you and all the very best.
Operator
Thank you. The next question is from the line of Deep Shah from B&K Securities. Please go-ahead.
Deep Shah
Hi, good evening. Thank you for the opportunity. The first question is on this investment in higher-tech that you highlighted. If you could help us understand a bit more what is this product and what is the extent of investments? Has those investments started now or you are just calling it out now? And in your assessment, what is the implied benefit of this? Maybe if we cannot, I mean, it would be great if we can share some ballpark numbers. But just so that we understand that what is this actually? Because I understand this is for your general staffing business and not other HR that we call out. So that’s the first question.
The second question is on the other’s business. So as you rightly pointed out that second half sees disproportionate profit, but this time there was some timing issue, especially in the first quarter. So last year, I see we did EBITDA of INR12 crores in this business. Can we comfortably assume that you at least cross this number from a four-year perspective given that first half has been really subdued? So would that conclusion be correct that second half this year would be disproportionately higher so that our four-year numbers are still better?
That’s all from my side. Thank you.
Ramani Dathi
Deep on high-tech investment, we are planning for a total spending of roughly about INR20-odd crore of capex starting Q1 of this year. And this would be spend over a period of 18 months. And this is not just for our general staffing business.
This particular investment will benefit GS, Specialized Staffing, and DA, the entire employment cluster. Because if we look at our overall expenses, especially the variable expense, the linear costs in all our employment businesses are mainly on the hiring front, on the sourcing front. And with this investment, we believe that the recruiter productivity and our hiring costs can be optimized substantially.
And that can directly contribute, one, to higher volume growth and two, to improve margins in these businesses. On the second part of your question, ed-tech business, yes, we are expecting double-digit year-on-year growth on profits, on annual profits for this year as well, considering the muted profitability in H1.
Deep Shah
Yeah, so just a follow-up. So, on this higher-tech piece, when you say that, so this is essentially, this will help you hire people yourself, so what exactly does this product do or this investment help us do?
Our reliance on third-party comes down? How does it work?
Ashok Reddy
So, we get open positions from customers. In specialized staffing, we deliver to 100% of the open positions for growth. In general staffing, we deliver to about 30% to 35% of the positions to growth.
In DA, we deliver to about 40% to growth. So, these are open positions from various companies and clients that come to us and we have to work the delivery in terms of functional skill, location, and numbers. What higher-tech would do is automate the end-to-end of the process and would also create a central repository of a database of candidates with a better matching mechanism that would effectively enable the recruiters to have a more active database that is being fed on a continuous basis through various channels and also control the whole delivery process end-to-end.
Deep Shah
Okay, understood. Okay, this is helpful. Thank you so much.
If I could squeeze in one more, we’ve seen significant announcement…
Ashok Reddy
Your voice is breaking, sorry.
Deep Shah
Okay, okay. Is this better?
Ashok Reddy
Yeah.
Deep Shah
Yeah. So, we had a significant announcement in the budget, but if I understand correctly, the final scheme is not yet released. So, any progress you could share on that? Because I’m sure you are closer than we are.
So, any progress there? Any reason why it’s delayed or anything there would be helpful?
Ashok Reddy
I mean, schemes get announced, the devil is in the detail, and a lot of sorting out the element of how to implement and the conditions on which to implement are kind of being worked out. So, while the whole internship element has technically gone live with a few customers and we are also working with customers, I think there is a lot that is still to be sorted out from the MCA end. So, I think it will take time for it to get a full form and complete clarity, but I think that clarity and detailing will also work out as people go live to the whole internship model.
So, there is a huge element of unknowns in the whole scheme. I think only time will kind of sort it out.
Deep Shah
Understood. This is very helpful. Thank you so much and all the best.
Ashok Reddy
Thank you, Deep.
Operator
Thank you. The next question is from the line of Amit Chandra from HDFC Securities. Please go-ahead.
Amit Chandra
Yeah, thanks for the opportunity. So, my first question is on the general staffing. Obviously, we have seen some margin expansion there. So, you mentioned about the PAPM increase there. Why is the PAPM increase? Because we are seeing the PAPM increase after so many quarters.
Ashok Reddy
Sorry, Amit. Sorry to interrupt. The PAPM increase was in the DA business. There was a marginal decline of PAPM in the staffing business. But EBITDA improved because of efficiency.
Amit Chandra
Okay. So, as you mentioned earlier that we are taking some steps to increase the PAPM in the general staffing business. So, where we are on those initiatives, and how we see the margins of the general staffing segment panning out over the course of the year?
And after this, I have questions on IT and HR. So, after this, I will take this.
Ashok Reddy
So, on the PAPM front, largely the decline in the PAPM is because of the portfolio play. So, if you look at it on incremental clients, as Kartik called out, being signed, about 70% of new clients being signed are on the percentage model. But they’re still relatively small and will take time to start growing.
I think the element of, you know, we haven’t had too many new contracts that have come on board at very low price points and stuff. But the growing clients in volume are the ones with the lower PAPM. So, by virtue of that, the weighted PAPM kind of is reducing.
We are selling more of the HCM solutions for a little extra markup to customers. We are doing various other initiative dialogues with customers. But it’s just because of the portfolio play that the PAPM reduction is there.
Amit Chandra
And also, in the general staffing, the margin decline over the last one year has also been because of the decline in the DA business. So, now that the DA has stabilized and started to increase, which is typically higher gross margin. So, from here on, can we expect some margin increase to come in from the contribution from DA also in the general staffing?
Ramani Dathi
That’s right, Amit. But we cannot translate that into an exact number because of the reasons which we discussed earlier. Absolute profits, definitely, yes. We’ll be posting a double-digit growth sequentially. And in terms of margin, there’ll be an improvement. But the number of basis points is subject to the gross salaries and the top-line flow. And on the IT staffing obviously, we have seen some signs of improvement and the margins have also improved and we have shared that 61% is from the GCCs which has been this segment which has been increasing like within the specialized staffing. So what was this number for GCC last year if you can share? And also what was the decline in the IT staffing that we are seeing and from here if like we are seeing a stable GCC and like increase in IT staffing so what can be the projected growth or if you can give some directional growth for the specialized staffing for the next year? So GCC contribution about 18 months back was at 40% on revenue and about a year back it’s at 50%. So we are consistently adding numbers and clients on GCC front and that’s also helping us to improve margins overall. In terms of growth outlook, I would request Neeti to give.
Neeti Sharma
Thanks Ramani. Hi Amit. So in terms of the growth that we are seeing from GCCs like Ramani called out over the last 18 months every quarter we are increasingly signing up more and more GCCs. Our focus has been largely on few sectors of GCCs like the BFSI, there’s auto, there is life science, health care, there’s retail. So we are continuously signing a lot of GCCs in these four or five sectors. As and when newer sectors come in with higher volumes and requirements we are actually ready to service them because GCC hiring requirement is very different from services hiring requirement.
Margins are much higher but the skill set and the profile of candidates they require is also very different. So since we have been servicing a lot of these GCCs, today we have about 65 GCCs that we partner with. We believe that this number is going to grow. In fact over the last two-quarters H1 we signed about 10 new GCCs that are getting onboarded right now as we see. So we know that this growth will continue for us.
Amit Chandra
And on the HR services obviously, we said that second half we have higher profits but for the full year, like last year we had around INR12 crores of profit, 8.5% kind of margin. So is it fair to assume that for the FY ’25 also we can see like similar profitability or is it going to be lower than that?
Ramani Dathi
We will be able to maintain similar profitability in FY ’25 as well.
Amit Chandra
Okay. Thank you.
Operator
Thank you. The next question is from the line of Aniket Kulkarni from BMSPL Capital. Please go-ahead.
Aniket Kulkarni
Good evening and thank you for the opportunity. So could you speak about the benefit that the employment link incentive scheme will have on companies like TeamLease? So what is the incremental growth opportunity here that we can see over the next three years owing to this incentive? If you can just give them.
Kartik Narayan
Yeah so Aniket, lastly you know from the government policy and the elements of the scheme that are announced, we think the impact will be as called out earlier to the DA business and to the staffing business. What I think is that primarily the element of focus from the government side on employment and employability coupled with an element of formalization. Of course, as Ashok mentioned, you know, the details are yet to come out.
So we are going to wait as to how they translate to the element of the budget statement which has been put into specifics.
Ashok Reddy
Yeah, sorry. So the details on the specifics to the apprenticeship and the internship, we await the details as it evolves. On the employment link per se, I think, you know, the China plus one kind of an outlook to saying, you know, we improve the manufacturing outlook in the country and stuff will play out over a period of time but then these are capital first kind of initiatives which will then lead to employment.
So we are in dialogue with a number of players coming into India from a manufacturing perspective that over a period of time will give us demand and growth opportunities. But difficult to call out a specific number on that front because we do believe overall manufacturing will grow and since we do have a presence in manufacturing, we will kind of back that up.
Aniket Kulkarni
All right. Thank you so much and best of luck.
Operator
Thank you. The next question is from the line of Sumit, who is an Individual Investor. Please go-ahead.
Sumit
Good evening. I had a question on the claims under the 80 JJAA. I know this has been going on for the last few years. My question was actually just twofold. There is a note in the consolidated statement mentioning that the IT department has given a notice for the 2016 and ’17 names. I know there’s a reputation in front of the High Court and you have the nameless IT task force which you had already filed it over the last two years.
Now last quarter’s call you had mentioned that you’ve got full allowance for the 80 JJAA claims. So what am I missing? Is this laid to rest and everything is okay?
And why are they specifically talking about 2016-17? Why not 20-21, 21-22, 20-23? Is there something different about those? And finally, is there any provisions we need to make for the same? Thank you.
Ramani Dathi
So regarding 80 JJAA, so far there are no outstanding demands and we have received full refunds up to FY ’23. So the only pending refund is for last year. In fact, even for current year on low deduction certificate, when we applied for the LDC certificate, we received full allowance for the 80 JJAA claim as well.
So to that extent, we are not seeing any kind of risk with the continuity of this particular section. However, reopening the assessments of 2016 and ’17 is more likely going with the time-varying of income tax assessments because 80 years is the statute limit. So that’s the reason we believe those were reopened and kept. But whatever queries that have been given to us, we have been providing the documentation and literacy there. So we are not seeing any kind of challenge with respect to the computation or the amount of claims that we made under this section.
Sumit
Okay. Thank you.
Operator
Thank you. The next question is from the line of Nikhil Choudhary from Nuvama Wealth and Investment Limited. Please go-ahead.
Nikhil Choudhary
Yeah, thanks for the opportunity. My first question is regarding the INR200 crore capex announcement on the hiring platform. So just want to understand what kind of margin benefit we are expecting from that platform.
So just want to understand the ROI calculation which you must have done for that INR200 crore capex. So that’s the first one from my side.
Ashok Reddy
INR3 [Phonetic] crore, Nikhil, not INR200 crores.
Nikhil Choudhary
Okay, my bad. Okay, then second one is on IT hiring. We have seen a sequential decline in specialized staffing revenue for us. That is despite the fact that the IT services company for the first time did net hiring. And also subcontracting spends for IT companies were almost flattish on sequential basis. So first is around what caused the decline from IT services.
And second, any early color based on the mandate you must have received for coming quarter lay outlook forest. [Phonetic]
Neeti Sharma
So Nikhil, hi, Neeti here. On the IT services hiring bit, while there are a lot of open positions that are coming in, closures are actually taking slightly longer than what it used to happen earlier. I’m talking of 18 to 24-month time frame. So we don’t, so we have not done an addition on the IT services hiring. Most of our hiring has come from GCCs and the non-tech sector, at least in Q2.
Your next question on, you know, Q3 outlook. We have mandates, but again they are, they are not very high in number. We don’t see a dramatic surge in the demand right away. I think that’s going to come in gradually. A lot of hiring that has happened, you know, and I know that a lot of new, fresher hiring that has also been opening up. But the closures, like I mentioned, are taking time. It is going to, in a way, the way we look at it, Q3 is going to be a little slow from services side, continue to, we are just looking at, sorry, so we are just looking at growth from GCCs and non-tech sectors. Our net growth will be positive, something that we have not actually been able to do in H1.
But Q3 onwards, we believe that there will be net additions and we will see growth from the IT hiring sector.
Nikhil Choudhary
Got it. Very helpful. Thanks a lot and good luck for a coming period of time.
Operator
Thank you. The next question is from the line of Rohit from ithought PMS. Please go-ahead.
Rohit Balakrishnan
Yeah, good evening. Just two questions. So one, on this APJJ, till when do we continue to get this benefit? Till what, what is the threshold? That was my first question.
Ramani Dathi
Yes, on APJJ, as of now, there is no sunset. So we continue to claim this benefit under our staffing business. So in standalone, team-based financials, our effective tax rate can be zero, going to APJJ benefits for, at least for the next three to five-year time frame.
However, we are making profits at our subsidiary levels, both in specialized staffing and HR tech services. And we believe effective tax rate would go anywhere between 8% to 10% starting next year.
Rohit Balakrishnan
That is for the Company you’re saying 8% to 10%?
Ramani Dathi
That’s right. That’s right.
Rohit Balakrishnan
Got it. Okay. That’s helpful. And the second question was on the general staffing business. We’ve seen, I mean margins, while you’ve been growing top-line and you’ve been articulating the kind of pressure that the bigger clients have been posing for you. So two questions here. So one, have the margins bottomed out for you, in your sense?
And two, I mean on a longer-term basis, let’s say not in the next two quarters, but let’s say three, four years out, is this, the margins, what we used to earn here probably closer to 2% here, that is not possible going given the kind of consolidation that you’ve, I mean the bigger, the play of the bigger customers, is that, I mean just wanted to get your sense from a longer-term perspective.
Ashok Reddy
So I think taking the element to a 2%, the wage increases are higher than our realization increases. And that’s really where we called out that the staffing business will be the growth engine and absolute profits will improve on that front. The portfolio of the other businesses, which are higher margin starting to contribute, will overall improve the team leads margin story.
Rohit Balakrishnan
And you think the margins are bottomed out in general staffing?
Ashok Reddy
I mean as of now, yes. Like we called out, the growth is starting to reflect back in the EBITDA improvement and we believe that that will sustain.
Rohit Balakrishnan
Got it. And just one more question, if I can. On your HR services, I know there is a lot of seasonality, and Q3, H2 is usually better and Q1 is usually very subdued.
But on a full-year basis, what kind of margins, because I think we have restated a few things in terms of the division. So just wanted to understand what kind of margins on a full-year basis, do you think are sustainable in your HR services business as a combined, I mean there are multiple heads there. So just wanted to get your sense as a combined segment that you report, what kind of margins can you sort of sustain on a normalized basis for a full year?
Ramani Dathi
So at the annual level, we should be able to make 6% to 8% EBITDA margin in other HR services this year and that can improve to 8% to 10% sustainable margin in the coming years.
Ashok Reddy
So we have three businesses that are kind of included in there. There is the EdTech, there is the RegTech and there is the HCM. The EdTech business has been profitable, has the highest seasonality element from a Q1 being really bad to there on improving because of the admission cycle in line with the UGC guidelines.
The RegTech business is consistent, has become profitable, and will stay on that trajectory and has been also growing. HCM is the only one where we continue to make investments. We are looking at complementing the HCM business with some element of inorganic additions also so that it gets heft and product portfolio.
So with that, I think the element of the margin improvement should come through as we look forward.
Rohit Balakrishnan
Okay, understood. Thank you very much and all the best for the remaining year.
Operator
Thank you. The next question is from the line of Vikas from Antique Stockbroking. Please go-ahead.
Vikas Ahuja
Yeah, hi. Thank you for taking my question. Just one question, the impact led by BFSI which we have called for Q3. Is it just a one-quarter phenomenon or do you think something may go into Q4 as well and any margin implication in Q3 because of this impact?
Ashok Reddy
We think it should be just a Q3 impact because of a specific guideline issued and hence an action to be taken by the NBFCs on that front, subject to no new guidelines coming from RBI to the institutions. So we believe it should be just a Q3 impact on that front. While outside of that, we do have demand from other clients and we do see growth happening in the sector.
Net of this too, we do not think it will have an impact to the margin element.
Vikas Ahuja
Okay. Thank you.
Operator
Thank you. The next question is from the line of Aasim from DAM Capital. Please go-ahead.
Aasim Bharde
Hi, good evening. So two numeric questions. I think you mentioned in your opening remarks, you know, you called out some one-time benefit in specialized staffing EBITDA besides the cost optimization.
Can you tell me the nature of that and if you can quantify it? And second, the PAPM on general staffing, you said it’s down QoQ. Again, if you could quantify the Q2 PAPM number?
Ramani Dathi
So in specialized staffing, this quarter we had close to about INR80 lakh of absorption fees. So which is a one-time sourcing fee that we get from clients. Every quarter we have about INR20 lakhs, INR30 lakhs.
So it’s not something that is unusually high. So this number can continue into coming quarters as well. On the second item, the PAPM in staffing is down by about INR9 in this quarter.
Ashok Reddy
INR679 to INR670.
Aasim Bharde
Okay. And second question. So maybe you can give some outlook on how to see GS margins going forward. So I think 2% we saw long back. I think that’s perhaps now history. We are at 1% now in Q2. X of DA, would margins at best be in this 1% to 1.1% range? And maybe perhaps if DA ramps up as the way you expected, maybe overall GS margins go to say 1.2%, 1.3%. Even 1.5% looks like a very difficult road ahead.
Ramani Dathi
Sorry to repeat myself again and again. We cannot give any outlook on margins because of the same reason that we have no visibility on the average salaries, which industries grow, which profiles grow. However, on absolute profits, we are confident of maintaining double-digit growth sequentially.
And even on standalone basis, staffing has the potential to expand margins up to 1.5%. But again, that’s subject to whether it is going to happen in 18 months or 24 months is subject to external variables as well.
Aasim Bharde
I understand the difficulty on that bit. But still, since 90% of our business is general staffing, I’m assuming that you might be trying to budget something when you guys brought long-term plans. So that’s where I was just trying to get in.
Right now, so we are possibly at the bottom and just trying to get a sense where the top might ideally be.
Ashok Reddy
We don’t have a view on that top right now, Aasim.
Aasim Bharde
Okay. Thank you. That’s it from my side.
Operator
Thank you. [Operator Instructions] As there are no further questions, I would now like to hand the conference over to Mr. Ashok Reddy for the closing comments.
Ashok Reddy
Thank you very much. So I think just in closing, we continue to be optimistic on the outlook across the businesses for the coming quarters. Also, our planned investments in high-tech and HR tech solutions, both organic and the inorganic element, will give us enhanced capabilities in the coming quarters.
I think as we grow, it will play into the aspect of productivity and profitability for the Company and lead to the margin improvements going forward. We are quite optimistic on growth as a function of the demand and the outlook that we are seeing from the corporates that we deal with and are also working aggressively to add more new client logos on board across businesses. Look forward to your support and we’ll continue to deliver as we go forward.
Thank you very much.
Operator
Thank you. On behalf of HDFC Securities. [Operator Closing Remarks]