TeamLease Services Ltd (NSE:TEAMLEASE) Q3 FY23 Earnings Concall dated Jan. 25, 2023.
Corporate Participants:
Ashok Reddy — Managing Director and Chief Executive Officer
Rituparna Chakrabort — Co-Founder and Executive Director
Sunil Chemmankotil — Chief Executive Officer, Specialized Staffing
Ramani Dathi — Chief Financial Officer
Analysts:
Aditi Patil — ICICI Securities — Analyst
Vidit Shah — IIFL Securities — Analyst
Soumitra Chatterjee — Avendus Spark — Analyst
Krunal Shah — ENAM Investment — Analyst
Aasim Bharde — DAM Capital Advisors Limited — Analyst
Amit Chandra — HDFC Securities — Analyst
Nitin Padmanabhan — Investec India — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the TeamLease Services Limited Q3 FY ’23 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded.
I now hand the call over to Ms. Aditi Patil from ICICI Securities. Thank you. And over to you, Aditi.
Aditi Patil — ICICI Securities — Analyst
Thank you, Ricko. Good evening, everyone, and thank you for joining TeamLease earnings call. Thank you, TeamLease management for giving us the opportunity to host the Q3 FY ’23 earnings call. We have with us today, Mr. Ashok Reddy, Managing Director and CEO; Ms. Rituparna Chakraborty, Co-Founder and Executive Director TeamLease and CEO Degree Apprenticeship; Mr. Sunil, CEO Specialized Staffing; and Ms. Ramani Dathi, CFO.
We will start off with the remarks from management, after which, we will open the floor for Q&A session.
I now hand the conference over to Mr. Ashok Reddy. Thank you. And over to you, sir.
Ashok Reddy — Managing Director and Chief Executive Officer
Thank you, Aditi, and welcome all of you to the conference call. Just as early update, I think at the group level our revenue grew 26% on a year-on-year basis and 3% quarter-on-quarter basis. However, we have noticed much weaker festive demand in Q3 compared to prior years, I think, and that’s kind of accounting for the net growth in general staffing that we’ve had of only about 3,000 for the quarter. I think we did add headcounts in the early part of the quarter in October and November, but we’ve had a much higher attrition and end of festival onboarding in the December month. And I think if we extend into IT staffing, also, we’ve had growth in headcount of about 400 for the quarter, but relatively flat from a billing perspective given the furloughs and lower billing days in Q3.
I think for us the biggest hit has actually come from the degree apprentice side where — and Ritu will cover that in more detail, but the NEEM program, the Gazette program from AICTE Higher Education Department has been discontinued effective December. As a run-up to that and post the discontinuation, we’ve had to let go of nearly 20,000 trainees who were under the training program under NEEM. And even currently we have further exposure of about 26,000 under NEEM that we are in dialog with customers for continuation, moving them to other areas and so on.
So overall, I think that kind of puts a pressure on the element of the headcount and the bottom line contribution as we go forward for the coming quarters. And in HR services, there has been a delay in University billings from Q3 to Q4, which broadly from the commentary we do seem to believe should get done in Q4.
So I think, overall, a weaker festive demand in general staffing and headwinds in specialized staffing have impacted our growth. The NEEM is a surprise element with the notification being canceled. And we have started working on alternate placement of apprentices out the 26,000 across other alternate options. However, given all of that, there will be some pressure on margins for the coming quarters with a soft demand realization pressure NEEM impact.
We have taken the necessary actions on core headcount that we had called out in Q2 in rationalizing it in line with the softening of the market. And we do have a reduction of about 200 core headcount, which is about 9% of our headcount in Q3. We do have some further adjustments that will happen in Q4 also, in line with how the market is, and that’s something that we will continuously look at as we go forward.
From a staffing perspective, broadly, the other parameters of PAPM, productivity, core employee headcounts and all have been in line with the revenues. And the top line, even the CTCs, the hiring has improved overall in terms of what we deliver to customers. So no major call-outs of huge deviation happening in the staffing business as we look at it at this point, other than the softer festive quarter. And we will continue to look at seeing which verticals to focus on for driving growth as we go forward.
Ritu will cover on — a little more detail on DA, Sunil on Specialized Staffing and then Ramani overall before we get into the questions.
Rituparna Chakrabort — Co-Founder and Executive Director
Thank you, Ashok. Good evening, everyone. Like, as mentioned already shared by Ashok, I think the NEEM program has been discontinued with effect December 23rd, 2022, wherein we had to release 20,000 trainees who were under various short-term training programs. We have exposure of another 26,000 trainees under the NEEM program who shall be migrated and new onboardings to move in dialog with the customers to our own, which is a TeamLease apprenticeship quota, the client apprenticeship quota under the Apprenticeship Act and Degree Apprenticeship program.
PBT for the quarter has remained flat as exits remained effective end of December. The impact will show up in Q4 numbers.
Outside of this, we have maintained a steady momentum in new logo acquisitions having added 20 new logos, taking our YTD count to almost 70. Hiring contribution to gross remained constant. The non-recruiters channel contribution to overall hiring additions have been around 60%. And the overall conversion has definitely gone up to about 33% as against about 28% last quarter. However, we are not where we would like up to be given that the overall volume of open positions have been showing a declining trend on month-on-month basis and is much below our expectation.
Just to update you a little more on the recent price developments. NEEM, which is the National Employability Enhancement Mission, it’s a Gazette Notification scheme under the Ministry of Education run by AICTE. It has been — in spite of there being a renewal beginning of December, suddenly closed by way of a notification circulated on 3rd Jan, putting almost 2 lakh active apprentices’ future livelihood and learning in a precarious position. Representation has been made by us with the AICTE and Ministry of Education to offer clarity on the future of the existing apprentices already enrolled, which from the notification is completely unclear causing a lot of anxiety to both organizations as well as apprentices.
We have, in addition, initiated legal deliberations by way of filing a stay order to ensure the existing lot of apprentices can be retained. We are assessing the impact of this new development closely and shall duly keep you informed.
Thank you so very much. Sunil, over to you.
Sunil Chemmankotil — Chief Executive Officer, Specialized Staffing
Thanks, Ritu. Good evening, everyone. Q3 is normally a seasonally weak quarter for specialized staffing. Hiring in IT sector has still not recovered, while we were able to benefit from the hiring of tech and non-tech. However, the volumes are not comparable at this point of time. Most of our IT customers have either stopped or slowed down on hiring with focus shifting towards improving the utilization factor. Unfortunately, the cautious approach of our customers also circulated to staff augmentation which ideally should not have been the case, as in these markets staff argumentation is the best option. Our headcount grew 2 percentage quarter-on-quarter basis and is broadly flattish when compared to the same period of the last fiscal year.
The revenue grew 4 percentage year-on-year basis and quarter-on-quarter basis it’s broadly flat. Although we have seen marginal headcount growth, the revenue stay flat on account of leaves and for furloughs in Q3 impacting the profits for this quarter. We continue to focus on client acquisition and were able to bag 43 new logos YTD, including 18 strategic client wins.
The client wins are mix of tech and non-tech, keeping in view our long-term strategy to build a balanced portfolio. With uncertain macroeconomic trend, geopolitical turmoil, inflation and rising interest rate, we are uncertain on the compounding effect it will have on our clients’ hiring strategy. We shall continue to focus on client acquisition, better fulfillment ratio and improve operational efficiency. We are confident of bettering our Q4 numbers compared to Q3, however, for the full year it will still remain flattish. Thank you.
Ramani Dathi — Chief Financial Officer
Thank you, Sunil. Good evening, all. We had about 3,000 headcount growth in staffing business in Q3 excluding the NEEM closure exits of 20,000 as of 31st December. EBITDA and operating margins have been flat on a quarter-on-quarter basis. However, there is a dip year-on-year because of reduced contribution from IT staffing and delay in EdTech business compared to Q3 of last year. The quarter-on-quarter drop in PBT is on account of a few write-backs — non-recurring write-backs and onetime hiring revenues. Unallocated EBITDA is now brought back to the regular quarterly run rate levels.
So, given the lower-than-expected closure of Q3 run rate in staffing, NEEM closure in DA business and overall external demand environment, we are projecting Q4 profitability to be flat or lower than Q3. Accordingly, we are bringing down our internal costs and core headcounts for the next few quarters.
In terms of income tax refunds, we have completed assessment up to financial year 2021, and the refunds can be credited over the next few months. So there are no new queries that are received on 80JJAA front. Only the previous year FY 2022 assessment is pending as of now with no other backlogs.
Our current cash position is INR270 crores, and by end of the year including tax refunds we expect the number to go up to INR350 crores. We currently do not have any active M&A discussions on the pipeline. Thank you.
Ashok Reddy — Managing Director and Chief Executive Officer
Aditi, you can take the questions.
Questions and Answers:
Operator
[Operator Instructions] Our first question is from the line of Vidit Shah with IIFL Securities. Please go ahead.
Vidit Shah — IIFL Securities — Analyst
Hello. Thanks for taking my question. Just my first question is on this NEEM program where 20k — 20,000 associates have been let gone off and 26,000 have further exposure. Could you just — I mean it’s quite basic but just how this works in a sense why not 46,000 have been let gone off? I mean if the program has been discontinued shouldn’t all associates be let go off immediately?
Rituparna Chakrabort — Co-Founder and Executive Director
So the thing is that the ones that have been let go off have been on account of clients — certain clients choosing to kind of offload them. And they have been because of the unrest caused some attrition from the trainee side as well, but largely on account of certain organization taking that call. However, the balance, essentially, the organizations have — are at the moment choosing to retain until and unless there is ample clarity provided from the AICTE and Ministry of Education on — because the notification as such, it can be — it need not necessarily be interpreted as the ones who are existing, however it’s a gray area.
However, we are actively talking to these organizations, because they have a clear intent to continue with these apprentices to move them or shift them to alternate, around the Apprenticeship Act, which is using their own quota of apprenticeship using our quota of apprenticeship and also to degree apprenticeship wherever we can. So I think — and of course, this is something which will start becoming clearer over the next month, the next two, three months. Meanwhile, from our side, we have put all our weight behind getting legal stay order in place file for one — and filing for one. And we’ve also made very active aggressive presentations with the AICTE is that at least — because this is — this means the future of livelihood of not just our largest trainees, overall 200,000 apprentices across India and their stipend and as well as their learning, to be honest.
Ashok Reddy — Managing Director and Chief Executive Officer
So I think, Vidit, extension of that is that ideally a scheme that’s in place could have a glide path to an exit, which is to say that people who have already been onboarded as trainees should effectively finish that training period or kind of exit as they do as a part of natural attrition. And the notification could be to the effect that you don’t onboard anybody new and kind of keep feeding that fund. So I think, while some organizations have taken it as a closure and wanted to kind of exit, some do want to give the benefit of continuance to the trainees. And that’s really where representations have been made to AICTE about an acknowledgment that no new onboardings of trainees will happen under the scheme, but to give continuity for those who have already been onboarded till the training period complete.
Similarly as Ritu was mentioning, we are also exploring legal options for a stay to create continuity for these people. So I think the continuance of the 26,000 is more customer choice at this point in time where there is dialog to see whether they will continue, whether we can migrate them to alternate options and so on.
Vidit Shah — IIFL Securities — Analyst
So just to clarify, we are still being paid INR400 to INR600 per trainee per month by the existing customers for the ones that are not let go off?
Ashok Reddy — Managing Director and Chief Executive Officer
Yes.
Rituparna Chakrabort — Co-Founder and Executive Director
Yes, yes. Yes.
Vidit Shah — IIFL Securities — Analyst
Okay. And what’s the average training period in the sense, let’s say, if this program were to be discontinued and the existing ones were allowed to be complete their training? After what period would all these associates be let gone off?
Ashok Reddy — Managing Director and Chief Executive Officer
So it’s normally a three year training program that is there for the NEEM aspect. By natural element of completion, about 9,000 of the 26,000 will complete in the next year. So in the next financial year, about 9,000 will complete. Over and above that we also have to factor some natural attrition that does happen on this front.
Vidit Shah — IIFL Securities — Analyst
Okay, understood. Also, could you just shed some light on the other HR services? I mean a few quarters back we had guided to around 8% to 9% of EBITDA margin. Now I understand some of the billing has been delayed. So would we catch up to the extent then achieve our margin target? Or is this expected to be impacted by delayed billing?
Ashok Reddy — Managing Director and Chief Executive Officer
So I don’t think the full year should get impacted at this point in time with it, because the indication from the counterparty entities of universities and institutions is that the billing would happen in Q4, because services have been delivered. And from that perspective, I think the belief that the Q4 billing should happen with no further delay at this point in time and should come back to the yearly 8% that we had indicated.
Vidit Shah — IIFL Securities — Analyst
Okay. Got it. And just lastly, if I could bother you for the data point. Could you disclose the cash flows for 3Q and for the year-to-date for the company or the operating cash flows?
Ramani Dathi — Chief Financial Officer
So currently, we are at 70% conversion of EBITDA on operating cash flow, so that stands for full year, nine months as well as for the quarter.
Ashok Reddy — Managing Director and Chief Executive Officer
And above that, given two years assessment is done, we are expecting that money to come in over the next three to four months.
Ramani Dathi — Chief Financial Officer
So we already received assessment orders for FY ’20 and FY ’19. So between the two years, we are expecting refunds of about INR80 crore. So in the next few months, so that will be added to our cash balance.
Vidit Shah — IIFL Securities — Analyst
Okay. Thanks. That’s very helpful. I’ll get back in queue. Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Soumitra Chatterjee with Avendus Spark. Please go ahead.
Soumitra Chatterjee — Avendus Spark — Analyst
Yes. Hi, good evening, and thanks for the opportunity. Ashok, just wanted to check on this decision of this February 3rd Board Meeting to proceed with the buyback. Why are we not contemplating increasing the dividend payout? That is one. And second question to Ramani is on the FX side. What is the impact of in third quarter the revenue that you have — revenue and EBITDA that you have lost because of you were unable to bill?
Ashok Reddy — Managing Director and Chief Executive Officer
Yes. So just on the February 3rd meeting, I think the Board wanted to deliberate, no decision taken yet around the fact of our current cash reserves and the refund that is happening are expected to happen for the two assessment years. And our M&A pipeline has depleted a little bit. We don’t have as many active dialogs as we were in the past having, given early due diligence findings and also the element of counterparty issues and so on.
So while we do have some dialog going on, the pipeline for inorganic is not very large. So I think from that perspective, the Board wanted to deliberate on the capital allocation with the fact that we would have in excess of about INR300 odd crores by the end of the year as to what to do as a next step. So I think, we — I mean we just couldn’t complete that dialog, have initiated it. And we’ll be taking it up at the Fed 3rd meeting.
Ramani Dathi — Chief Financial Officer
So Soumitra, on the EdTech billings, so about INR3 crore in revenue is what got delayed to Q4. So the same INR3 crore will be the impact on EBITDA level as well, because all the related costs have already been taken into consideration.
Soumitra Chatterjee — Avendus Spark — Analyst
And in fourth quarter you would be billing including this INR3 crores which has been lost in this quarter? So regular billing plus third quarter?
Ashok Reddy — Managing Director and Chief Executive Officer
Over and above the regular Q4 billings, this would be additional.
Ramani Dathi — Chief Financial Officer
So that’s what we are saying that on a full year basis we’ll get to 7%, 8% EBITDA margin of HR services.
Soumitra Chatterjee — Avendus Spark — Analyst
Okay. And one more question to Ritu. What would be the annual impact of, assuming that the NETAP business is discontinued and from FY ’24 there will be no more NETAP trainees? What would be the annual impact on the EBITDA?
Ashok Reddy — Managing Director and Chief Executive Officer
It would be about INR10 crores. So we — from a top line perspective — I mean from a net revenue perspective, it would be about INR22 crores. And from an EBITDA perspective, it would be around INR10 crores to INR11 crores.
Soumitra Chatterjee — Avendus Spark — Analyst
Okay. And lastly on this unallocable expenses, historically, it used to be about INR6 crores to INR7 crores. Do we see the INR10 crore number on a quarterly basis reaching there? Or it will remain at the current levels?
Ramani Dathi — Chief Financial Officer
So it can remain at the current INR10 crores per quarter run rate, Soumitra. And with no other costs increasing for next year actually we believe plus-minus we can maintain this run rate.
Soumitra Chatterjee — Avendus Spark — Analyst
Okay. Thanks. That’s all from my side. Thank you.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Krunal Shah with ENAM Investment. Please go ahead.
Krunal Shah — ENAM Investment — Analyst
Yes. Hi, thanks for the opportunity. My first question is on general staffing. In terms of sectors, can you spell out as into which you’re seeing some traction for general staffing in terms of new client and where are you seeing a slowdown?
Ashok Reddy — Managing Director and Chief Executive Officer
Yes. So I think, like I said, the festive element of a volume we did not see kind of across the board. It was quite muted. But overall, if we look at it for the quarter and for the nine months, BFSI and consumer have kind of been growing. Where we have seen an element of actually negative is in what we call emerging, which is the element of FinTech, EdTech and other new sectors that play out on volumes for us. And some of the e-commerce has also been relatively soft.
I think industrial has kind of been flattish, hasn’t been growing at the rate that we would have expected. And telecom has kind of been flattish. So I would say two verticals have been positive, two have been flattish, and two have been on the negative overall. But typically, consumer and BFSI are where we normally get element of festive volume kicker, which has been more muted this year.
Krunal Shah — ENAM Investment — Analyst
Got it. So in terms of the headcount growth, the guidance that you used to maintain of 20%, do we still seem to be possible in FY ’24?
Ashok Reddy — Managing Director and Chief Executive Officer
So we used to normally have a 14%, 15% associate growth. I think, overall, this time we would have slightly lower than that. And also, I mean IT has been impacted and the DA impact has been quite substantial on account of the notification. So while purely in staffing, I think, we will have — we have had and will have the associates growth. We are impacted from the other two verticals. So overall, I don’t think we will be at that. So at a revenue level, we will still end up with about a 20% plus growth. The associate growth will be a little more muted.
Krunal Shah — ENAM Investment — Analyst
No, sir. I was talking more of FY ’24 the year afterwards not…
Ashok Reddy — Managing Director and Chief Executive Officer
So I mean, early to call that out at this point, Krunal, primarily from the perspective that in specialized staffing, IT is still quite uncertain about how the future is holding out. So like Sunil had called out earlier, we have managed to keep it flat for the year. But normally, December is when most of the companies do their internal planning and kind of come back with their outlook for the coming year. We still haven’t heard from the companies around their outlook for the coming year. So I think to that extent in specialized staffing we aren’t very sure how things are going to play out, though in some companies we are getting feedback about some vendor consolidations to happen and so on.
From a DA perspective, clearly, the 26,000 could be a potential risk which we will try and mitigate by conversion into other avenues of onboarding that we could do, and also have to drive the natural growth that comes about. I think in staffing, some of the sectors we are getting positive feedback around demand that they are having and potential open position pipeline that they are giving to us. But I wouldn’t yet to say that it is back to across sectors and across companies a very aggressive open position situation at this point in time. So I think it’s a wait and watch. We will have to see how the macros play out for us to be more clear about the associate growth for next year. But clearly, what we are doing as against for the current year where as a run-up from last year, we expected the demand to be very high and had made large investments in our core teams for delivery. For customers, this year we’re taking the reverse approach of saying, let us to rationalize our headcounts, let’s reduce the cost. And only on the back of clear demand coming in, we will start adding back the headcounts.
Ramani Dathi — Chief Financial Officer
So just to add on the associate headcount growth, Krunal, last year FY ’22 we had 22% growth. And so Q1, we had 12,000. So we thought we can sustain the 20% growth in headcount this year as well. But Q3 is a big surprise because we usually have the highest addition in Q3 in a year because of the festive season which should reflect here. So that would bring down the associate headcount growth on a three year [Phonetic] basis to maybe 14%, 15% kind of level.
Krunal Shah — ENAM Investment — Analyst
So — and also this INR10 crore, INR11 crore hit that you said on NETAP if this program is withdrawn, that will only be for the NEEM program, right? Because we of course have certain additional headcount in NETAP.
Ashok Reddy — Managing Director and Chief Executive Officer
Yes.
Ramani Dathi — Chief Financial Officer
Yes.
Ashok Reddy — Managing Director and Chief Executive Officer
So we have a total headcount as of now of about 59,000 of which 26,000 are in NEEM and other headcount would continue.
Krunal Shah — ENAM Investment — Analyst
Okay, got it. Got it. And so the — okay. And so just help me explain, I’m actually not aware, how is the Degree Apprenticeship program different from NEEM? And how can you transfer from one to the other?
Rituparna Chakrabort — Co-Founder and Executive Director
So the thing is the Degree Apprenticeship program essentially the one big advantages will be under the Apprenticeship Act. But most importantly, I think this allows for there being a degree linkage essentially would be apprenticeship program, which means the attractiveness of this particular option from a candidate perspective, the long-term gains for the organization from this program definitely is there. That’s essentially is the outside view or the customer benefit view of it.
The more important thing is that this allows organizations to have apprenticeship for a longer duration, which is three years as against the NAPS or the Apprenticeship Act program which kind of mandates or restricts it to one year, right? So in case of NEEM, of course, there was a flexibility of having people for three years. However, given the absence of NEEM today the Degree Apprenticeship definitely stands out as very attractive proposition for customers.
Ashok Reddy — Managing Director and Chief Executive Officer
So I think just to add on to that, Krunal, it’s a layer on top where there is historically most of the apprenticeship training program was certificate-driven for a shorter-term period. But our belief is that at the profile of candidates that are coming in for learning on the job, creating a corridor effect for a degree help from a retention perspective and also from a learning outcome perspective. So I think it’s longer engagement coupled with the aspect that the signaling value of a degree is always better than that of a certificate program.
Rituparna Chakrabort — Co-Founder and Executive Director
And just one more thing I’d like to add, this degree essentially is UGC and NCVT approved curricular and hence the apprentices — and its credit-based, which means that this is something which holds good for them to have mobility in their learning process. So essentially it starts with the certificate program, diploma program and associate degree and can be scaled up to a degree program. So it’s a lot more fungible, flexible even from the candidate perspective.
Krunal Shah — ENAM Investment — Analyst
Got it. Got it. And also on the financial benefit to the client. So one was the tax advantage. That remains the same in both cases?
Ashok Reddy — Managing Director and Chief Executive Officer
The set off against CSR expense will not be there.
Krunal Shah — ENAM Investment — Analyst
Okay. In the apprenticeship —
Rituparna Chakrabort — Co-Founder and Executive Director
So the thing is that the financial benefits is twofold from the apprenticeship program. One was that, does it qualify for set off against the CSR criteria. So this does in many ways actually qualifies under the skill development category for organization, so some organizations do take a benefit out of it. But more importantly, there is a subsidy which comes to — from the governance side for every trainee up to one year. Earlier, it used to be directly coming into organizations as a reimbursement. But now that has moved to the trainee directly getting up to INR1,500 per month. However, as you can see with schemes and benefits, and it’s there today, but we don’t know really the continuity of it in future.
Krunal Shah — ENAM Investment — Analyst
Okay. Okay. Got it. Thanks. And one last question, in terms of the core headcount for us. Where would we stand right now?
Ashok Reddy — Managing Director and Chief Executive Officer
The current number is about 2,200.
Krunal Shah — ENAM Investment — Analyst
Okay. Got it. And the markup for Q3 in general staffing.
Ashok Reddy — Managing Director and Chief Executive Officer
It’s kind of flattish at around 695.
Operator
Thank you, Mr. Krunal. May we request you that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Thank you.
Our next question is from the line of Aasim Bharde with DAM Capital Advisors Limited. Please go ahead.
Aasim Bharde — DAM Capital Advisors Limited — Analyst
Yes. Hi, thanks. So just one question was on the specialized staffing margins. You are at sub 7% in Q3. Adjusting for the lower billable hours, etc., is it still a 9% odd EBITDA margin in Q3?
Sunil Chemmankotil — Chief Executive Officer, Specialized Staffing
So we always maintained around between 8 to 9 percentage, so we should be able to maintain a similar margin.
Ashok Reddy — Managing Director and Chief Executive Officer
And at this point in time, given as Q4 outlook, you should get back to that 8% to 9%.
Aasim Bharde — DAM Capital Advisors Limited — Analyst
Okay. So Q4, we should be back to 8% to 9%. Got it.
Ashok Reddy — Managing Director and Chief Executive Officer
Yes.
Aasim Bharde — DAM Capital Advisors Limited — Analyst
Secondly, on the general staffing bit. I think you answered it partly in the previous participant’s question, but just wanted to get a sense. And for the year on general staffing headcount growth that should still be around 13% to 14%, right, for FY ’23?
Ramani Dathi — Chief Financial Officer
That’s right, Aasim. It should be around 14% on a full year basis. And in terms of revenue growth we would be at 20%, 21% growth.
Ashok Reddy — Managing Director and Chief Executive Officer
Because inflation also factored and prior period.
Aasim Bharde — DAM Capital Advisors Limited — Analyst
Got it. Got it. And can you just — just one clarification. I think in Q2 we had the skills business bloating other income and unallocated expenses. Is that not there in Q3?
Ramani Dathi — Chief Financial Officer
No, skills business is still there in Q3 as well. However, we don’t have any new provision hitting on account of skills business.
Aasim Bharde — DAM Capital Advisors Limited — Analyst
But you had shifted the reporting from revenue to other income, right, because it was in sunset mode or something. That’s what I was expecting.
Ramani Dathi — Chief Financial Officer
Correct, correct. So the income levels have remained flattish, Aasim. Only difference between Q2 to Q3 is, in Q2, there is a provision that we made on skills business on account of delayed collections. So we don’t have any incremental provision made under unallocated.
Aasim Bharde — DAM Capital Advisors Limited — Analyst
Okay, okay. Okay. Thanks. I’ll get back in the queue.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Amit Chandra with HDFC Securities. Please go ahead.
Amit Chandra — HDFC Securities — Analyst
Yes. Hi, sir. Thanks for the opportunity. Sir, my question is related to the closure of the NEEM program. So what was the rationale behind closing program? And was that expected or we were expecting some kind of closures to happen or it was on a surprise for us also? And also in terms of the revenue impact, as the closure happened at the end of December, so the impact on the headcount we have seen. But have we seen the impact — the full impact will come in the next quarter?
Ramani Dathi — Chief Financial Officer
Yes.
Ashok Reddy — Managing Director and Chief Executive Officer
Yes. The full impact will come in the next quarter, Amit, from that perspective. But I think, just to add, I mean, all the headcount didn’t — so one answer the prior question. While the notification to end was kind of in the coming though it was, when it did come, it was a surprise. And to the nature of how it was awarded, it was a surprise.
I think the rationale or the approach that the government was taking is that there had certain — it was kind of throw the baby out with the bathwater or kind of a situation where some of the authorized vendors were misusing the provisions of the NEEM Gazette scheme and they wanted to correct that. But instead of so-called correcting it, they have ended it. So there have been — the government has been in talks with the vendor partners who are authorized to roll the scheme to create corrective action and so on. We believe that it would be better enforcement that would get driven not an ending of the scheme firstly.
Amit Chandra — HDFC Securities — Analyst
Okay. And in terms of the margins, we have been saying that the general staffing margins are at bottom for the last few quarters, but we are still seeing some of the other headwind that is coming up every quarter. So how we see the margins from here on? And the HR staffing margins also now is yet to recover and the margins for the specialized staffing is also coming down. So how do you see the margin for FY ’24? Is it going to be under pressure or can we see some recovery there?
Ashok Reddy — Managing Director and Chief Executive Officer
So I think there will be at least two, three quarters of softening on the margin front as a translation of the volumes going down and the aspect of seasonality that does exist in the HR services front, where typically, Q3, Q4 is large for them. While this Q3 has been not so high like, Ramani had called out, it has been moved to Q4. So there’ll be a strong Q4, but they open with a very weak Q1 as always.
Specialized staffing also has kind of been flat, which is the other driver to margin improvement. So kind of outlook on growth coming back in there is going to be a key.
I think general staffing, the aspect of margin pressure given that 75% of our billing is on a fixed markup model has been under pressure at a percentage level given the wage escalations that kind of happened last year, and probably to some extent will happen next year. But the variables of productivity and all of that have been playing out at that end.
In — like I called out a little earlier on that front, Amit, I think in this financial year we made a conscious call on the head — on the tailwinds of last year’s growth and client outlooks to add a lot of headcount and cost structure. Going into the coming year, we will hold all of that constant to the — as other than revisions — annual revision that would happen in Q1 to effectively back ending cost and hirings to actual demand growth that comes in from customers.
So I think, I take your point, some surprise or the other. So the next two, three quarters, we do expect it to be softer. But thereon, I think if business sustains at the rate that even current year has been, we should be able to recover on the margins front.
Amit Chandra — HDFC Securities — Analyst
Okay, sir. Thanks, and all the best.
Operator
Thank you. Our next question is from the line of Nitin Padmanabhan, Investor. Please go ahead.
Nitin Padmanabhan — Investec India — Analyst
Yes. Hi, good evening. Thanks for the opportunity. I just wanted your thoughts on the how the open positions look both in specialized staffing and general staffing? I think in the last quarter on specialized staffing, you mentioned that the open positions are down 70%. So how should we sort of think about this? How is it at the current point in time? And how should we think about this on a going forward basis?
The second question was on the margins. Well, you mentioned that margins will remain soft. Are you — next quarter we should see a bounce back in other HR services margins and specialized staffing as well. So are you suggesting that margins will remain soft despite that? Or are you speaking about next year? Those were the two questions. Thank you.
Ashok Reddy — Managing Director and Chief Executive Officer
So — sorry, I’ll just answer the second question before Sunil gets into the first one. I think, while the seasonality element, I mean, not the furlough and lower billable days of Q3 will go away. There’ll be a marginal bounce back of that 1% in specialized staffing margins. Aspect of the HR services will bounce back with the backlog of the revenues that didn’t happen in Q3 happening in Q4.
The NEEM impact is really what will be large from a perspective for the full quarter. And I think that is really where we are expecting a softness rather than anything else. I think, broadly, in general staffing also at this point in time, in addressing the first part of the question, there is demand of open positions that is with us across some of the sectors. I wouldn’t say it’s across all sectors, but at least three, four sectors do have active open positions with us with an outlook of that they will be looking at growth in Q4. So I think we’re still looking at a positive number coming into play for staffing in Q4 and continuance on that.
From a specialized staffing perspective, Sunil will…
Sunil Chemmankotil — Chief Executive Officer, Specialized Staffing
Yes. So Q3 is normally seasonally weak quarter for hiring so the demands were pretty low. However, if you look at Q2, Q3, both the quarters the demand — the fulfillments from our point of view has been around 60, 65 percentage of the demands what we used to get earlier. So normally, by this period we get to know how the Q4 is going to be. But unfortunately, as of now, we don’t have clarity. So we are hoping that some hirings might pick up in the next quarter and that will help us to get a glide path towards next year.
Ashok Reddy — Managing Director and Chief Executive Officer
But I think underlying of that, Nitin, effectively, is that at this point in time open positions are still 70%, 75% down from what they used to be. December, which is where typically IT company planning happens and they come back with outlook and larger open positions hasn’t yet happened. We are hopeful. Having said that, we have also at the back-end adjusted headcounts in the specialized staffing business in a large way and would kind of rebuild basis the aspect of demand coming back.
Nitin Padmanabhan — Investec India — Analyst
Sure. Fair enough. And lastly, how much would be the overall headwind on revenue and margin from the NEEM impact for the next — for what we already know for next quarter?
Ashok Reddy — Managing Director and Chief Executive Officer
We’d have to work that in completely, Nitin, not yet factored in. Because we’ve been actually working on the overall base and how to protect it and how to reassign it and so on. So wouldn’t have the number immediately, but could come back.
Nitin Padmanabhan — Investec India — Analyst
Sure. Fair enough. Thank you so much and all the very best.
Operator
Thank you. [Operator Instructions] As there are no further questions —
Ashok Reddy — Managing Director and Chief Executive Officer
Actually, if there are no further questions, I mean maybe there was a little time between announcing of the results and people absorbing of the numbers, I could just conclude to say that we did have a surprise from the NEEM perspective. We are trying to mitigate as much as possible from the other 26,000 trainees that are still there. There has been an element of a seasonality push from the HR services and there is still uncertainty from the specialized staffing demand perspective. I think we do have some softness across the businesses that is playing out into the margins and the growth per say. But I think our preparation this year will be very different from how we entered last financial year. And from that perspective, like I called out, we would have two to three quarters of softness in margins. With the glide path of the business trajectory, we should be able to start getting back to improvement on the margins front as we go forward.
I think we are still — there is demand coming in from some of the verticals for staffing and we continue to deliver on that front. As of now, there are no headwind — broader headwind views for the general staffing business other than the fact that the festive season was clearly lower than anything that we have seen in the past.
So we will continue to stay prudent around the cost structure. We will rebuild teams and costs in line with the demand and the macro situation coming to play out on that front. And, I think, we will effectively look at the element of capital allocation in line with the market and the utilization that we have into the future.
With that, thank you very much.
Rituparna Chakrabort — Co-Founder and Executive Director
Thank you.
Operator
[Operator Closing Remarks]