TeamLease Services Ltd (NSE: TEAMLEASE) Q4 2025 Earnings Call dated May. 21, 2025
Corporate Participants:
Unidentified Speaker
Ashok Nedurumalli — Co-Founder, Managing Director & Executive Director
Kartik Narayan — Chief Executive Officer
Neeti Sharma — Chief Executive Officer of Specialised Staffing
Ramani Dathi — Chief Financial Officer & Financial Controller
Analysts:
Unidentified Participant
Vinesh Vala — Analyst
Dipesh Mehta — Analyst
Mithun Aswath — Analyst
Harsh Chaurasia — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Teamlease Q4FY25 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. Should you need assistance during the conference call, please signal an operator by pressing 0 on a Touchstone 4. I now hand the conference over to Mr. Vineshwara from HDFC securities. Thank you. And over to you, Mr. Vala.
Vinesh Vala — Analyst
Yeah, thank you. Good evening everyone. On behalf of SDFC securities, we welcome you all to the team leads Q4FY2 25 earnings call. Today we will have with us the management of team list represented by Mr. Rasop Reddy, MD, CEO Mr. Karthik Narayan, CEO Staffing and Mrs. Ramni Dutti, CFO. I will now hand over the call to Mr. Ashok for opening remarks and post which we can open the floor for Q and A sessions. Thank you. And over to you Ashok.
Ashok Nedurumalli — Co-Founder, Managing Director & Executive Director
Thank you. Vinesh. Good evening and welcome to the call. We also have Niti from our specialized staffing business on the call. She would also be giving an update specific to the business. I think we had a mixed bag performance overall for the year in staffing we overall added about 25,000 headcount despite the headwinds in specific sectors in H2. In DA also we’ve added about 2.5 thousand headcount for the year. Factoring now for all of the NIEM headcount reduction from the start of the year in specialized staffing we had a net headcount reduction for the year.
But the composition mix of the revenue streams has ensured the EBITDA stability in that business. We covered the seasonality shortfall in HR services that carried over from Q3 to Q4 and we continue our investments on the HR tech side. The two acquisition investments that we have made are also working with the business from a perspective of integration of product portfolio and go to market. Overall, the revenues over the year grew 20% year on year, EBITDA grew 6% and PBT has been flat. Some of it is a play out as we’ve been calling out over the years of a transition from the higher margin businesses or the higher margin revenue streams that we have in DA from NIEM to alternate revenue streams through NAPS and NAPS specialized staffing being flat while the general staffing business has been contributing to the top line growth, we believe we have positioned ourselves to growth, cost optimization and profit growth as we go into the new financial year.
But before we dive into specific questions and details. I think my colleagues will give a little more detail on the specifics on the staffing, specialized staffing and the finance front and then we’ll take the question over to you. Karthik.
Kartik Narayan — Chief Executive Officer
Thank you Ashok. FY25 has truly been a story of two distinct halves. In the first half we saw strong broad based growth taking place which by the second half was more tempered due to sectoral headwinds and persistent macro uncertainties which impacted incremental headcount expansion. That said, general staffing business still delivered strong growth numbers, closing the year with a net headcount addition of 25,000 as called out by Ashok. So a little over 9% growth over last year. Notably though 37% of these net additions came from new client acquisitions, top line momentum continued with revenue growing 21% on a full year on year basis supported by strong execution and operational management.
Ebitda growth stood at 4% year on year. As called out in our Q3 results for the quarter, we lost about 7,000 associates due to regulatory changes in the BFSI sector. However, on a year on year basis There is a 17% revenue increase over Q4 last year, a bit on different verticals and how it has panned out. As some of you might know, GDP contribution by sectors is around 55% is for services, about 17 to 18% is manufacturing and the balance is agriculture. Services as a sector therefore yields much more easily to contract staffing and herein our ability to kind of decipher what happened last year.
Banking finance is a key part of the services sector which has been a mixed bag for us this year. At the beginning of the financial year we experienced some hiding our post caution expressed by RBI around November, especially around KYC and the earlier caution on NBFC Spintex giving out small ticket unsecured loans. We have seen hiring slow down for example, if you take the credit card business, and I’m taking this example specifically because we have a lot of salespeople doing those roles, grew by 11.2% in FY25 against 31% in FY24 and roughly about 29.2% in FY23.
Some of the largest credit card issuers actually saw a degrowth, which means fundamentally downstream we had an impact on it. Of course part of it has been the imposition of risk weights on credit card receivables from 100% to 125% on NBFCs which of course got them to be slightly more circumspect than what they were the year before. Large and mid sized banks, the other category within the banking finance space have also registered a steep fall in the pace of retail loan growth in quarter 4 FY25 financial quarter for business growth. This again is owing to what we understand lower demand and pricing issues for home and vehicle loans.
That said, I think the worst is hopefully behind us. RBI has restored risk weights on bank loans to nbsp as of February 2025. It’s too early to say how this will pan out, but we are positive about this. Combined with the fact that the income tax release will kick in start has kicked in starting April 2025. The other part of the services vertical is the consumer business which is one of the larger verticals. It comprises fmcd, FMCG and retail part of the business. Now some of you might be aware a lot of headwinds like high input costs, subdued urban demand.
We are now of course noticing companies reporting sequential improvement in volume in Q4FY25, which is a good sign for companies like ours. Of course urban demand has been slower to recover, which is a much bigger force multiplier for contract staffing. But signs of improvement appeared in the last quarter of FY25, so that has been good. E Commerce as a vertical and especially quick commerce has been positive with the growth of dark stores and expansion in tier 2 and tier 3 cities. So that’s been positive. Finally, telecom is a vertical which comprises equipment makers, ISPs, telecom operators have seen growth largely around service providers expanding networks and the volume growth this last year has been around 10%.
In summary, if I were to look at it FY25 I think consumer business, which is largely consumer durables, consumer goods and retail has registered a year on year revenue growth of over 37%. And if you heard my call out before, it’s not been that that particular industry has really been growing. This is largely flesh formalization that has taken place and scale up rather than being a reflection of the underlying industry itself doing well, which has had its own challenges but of course changing. Followed by E Commerce, Quick Commerce 29% followed by Telecom 33 and BFSI which has been a more muted 8%.
On the safe side, our sales aggression continued with us closing this year with over 140 new logo signups. The number for Q4 was 24. For Q4 the percentage on variable markup is up to 75%. 75% of our clients we acquired was on variable markup and the full year that percentage is 71%, reinforcing the shift towards acquiring new customers in variable markup that we set upon ourselves nearly two years ago. On the hiring side, for the whole year we have delivered about 80,000 new joinees who were hired by us. 20% of them were hired through non recruiteral channels and up to 30% of the gross joinees are first time employees with us.
Another key pillar of our strategy is driving optimization and leverage, essentially doing more with less using technology as a key leverage. RFP at the end of the year is at 378. That’s a marginal reduction largely due to the associate headcount tapering off in Q4. On an ongoing basis, we see this as a structural shift, not just a short term gain. As we move into FY26 we expect this moment to accelerate, translating to sharper client responsiveness, improved customer satisfaction and of course improving upon our cost efficiency and putting up a stronger foundation for growth. We’re pleased with the performance in our general staffing business this year.
I think despite broader sectoral challenges, we delivered growth we have as we enter the new year close to about 30,000 open positions. Continued focus will be on driving productivity, especially in sales and hiring, combined with the momentum we are seeing from our digital transformation giving us strong leverage for the year ahead. Thank you and with that I would like to hand it over to Deepi for update on specialized staffing.
Neeti Sharma — Chief Executive Officer of Specialised Staffing
Thank you Karthik the IT hiring landscape continues to face macro level challenges with the overall IT services market momentum slower than anticipated in Q4. While we did see pockets of growth, particularly in high demand tech role, the broader market remains cautious and cost focused. However, through the year we have stayed committed to expanding our focus on specialized skill hiring, newer delivery models and global expansion. While top line revenue remained flat, we delivered operational excellence across a core metric. Recruitment productivity has improved by 11% year on year. At the same time, PAPM realization grew by 16% year on year reflecting an increasing focus on high value skills and premium client segments.
Most notably, our year on year PVT margin has improved from 6.2% in FY24 to 6.7% in FY25, driven largely by disciplined cost management, increased PAPM and optimized resource allocation. We’ve seen a continued formalization of workforce strategies amongst our enterprise clients, especially in the bfsi, telecom, health, Pharma and consumer tech segments where demand for tech professionals remains strong and selective. While traditional IT services hiring continues to be sluggish, hiring by GCCs and product companies has shown positive traction. Today we’ve partnered with over 75 GCCs and our GCC business remains the cornerstone of stability and resilience in the last year as it will continue in the next few years as well as in quarter three.
GCCS contributed approximately to 40% of our associate headcount and continue to account for 60% of her net revenue. This segment continues to show structural strength, particularly in verticals such as bfsi, health care and high tech engineering services. Despite the broader market softness, our GCC share held steady underlining the strategic importance of this client base in driving predictable and recurring revenue. Our major strategic move this year to partner with gccs has been our focus to scale the BOT or the build, operate transfer model. This has allowed us to move up the value chain offering integrated workforce solutions.
We currently have active BOT engagements in areas like bfsi, itits, Pharma and product engineering, helping clients accelerate time to productivity. We’ve also partnered with various ecosystem players including technology, legal, real estate and intra partners to deliver turnkey solutions for new GCCs that are setting up their base in India. During FY25 we successfully onboarded 35 new clients contributing nearly 19 crores in annualized revenue. Simultaneously, remaining revenue momentum was safeguarded by deeper penetration with our existing client base. Recruiter productivity continued to improve reflecting the positive impact of our investments in training process refinement and technology enablement. Our average hires per recruiter has shown incremental gains supporting a goal of achieving scalable operational efficiency.
We did see a slight reduction in overall headcount this quarter and this year driven primarily by the conclusion of few large scale projects in the IT services space and few bots transition While this was anticipated, it also reflects our ongoing efforts to realign resources in response to changing client demand and to maintain a leaner and a more agile delivery model. In summary, Q4 has been a period of consolidation rather than acceleration. While the macro environment has tempered growth expectations in IT services, our strong GCC foundation, improving internal productivity and strategic focus position position positions us well for long term resilience.
We’ve successfully completed the integration of Ikigai, a global acquisition in the last quarter. By leveraging our India delivery capabilities to serve clients in these new geographies, we’re well positioned to drive growth with improved margins. As we enter FY26, we remain cautiously optimistic. While broad based IT hiring may continue to remain slow in H1, we see signals of demand increase in tier 2 IT services companies, VCCs and the non tech enterprises undergoing digital transformation. Our focus on specialized skills and VCC hiring will continue and our Investments in AI power, candidate matching tools and automation first hiring systems will play a very crucial role in enhancing both speed and quality of delivery for our customers.
Thank you. And with that I would like to hand it over to Ramri.
Ramani Dathi — Chief Financial Officer & Financial Controller
Thank you Niti. Good evening everyone. At group level we have added 27,000 billable headcount in FY25 net of 8,000 dip in Q4. The corresponding edition for FY24 is 37,000. Staffing has maintained flattish EBITDA on a sequential basis post absorbing about 1.5 crore of impact from BFSI attrition in Q4. In specialized staffing, improved GCC mix and operational efficiency have contributed to margin expansion on year. On year basis. We fell short on our profit estimates in the edtech business due to delays in billing and collections which had been called out earlier. HRTech is negative on EBITDA mainly on account of investments made in sales and product enhancements during H2.
In terms of inorganic contribution, owing to our acquisition of 90% stake in TSR Darasha HR, 80% stake in Ikigai and 30% stake in Crystal HR, EBITDA contribution by acquisitions is about 1 crore. In Q4 legal entity Ikigai is renamed as Team Lease Digital Singapore Pte. We have invested close to 40 crore for these acquisitions including working capital requirements post which the free cash Balance stands at 310 crore as of 31st March 2025. Income tax assessments have been completed till assessment year 2024 including refunds on 80 JJW claims. All balance sheet metrics are stable and steady.
With this we can now move to specific questions from the participants. Thank you.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rupesh Kumar, an individual investor. Please go ahead.
Unidentified Participant
Good evening and congratulations on the stable set of numbers. My question is on the dental shopping business. What is the kind of attrition we see in this quick commerce sector and what is the kind of exposure we have on the headcount? I can throw some pictures on this.
Ashok Nedurumalli
Yes. So Quick commerce as you know has two parts. You know, one is where our workforce is involved in the, you know, dark stores. And the other aspect is on, you know, the gig workforce which is really, you know, your driver’s delivery boys, et cetera and all that. So that’s the space we don’t occupy because that’s not really formal workforce. The space we occupy is the dark stores aspect of it. But I’ll throw light on both of them. The gig workforce largely the attrition is about 30, 40% a month. On the dark stores part of it it’s anywhere between 7 to 10% a month.
Unidentified Participant
What is the kind of exposure on. The overall headcount we have
Ashok Nedurumalli
overall for the E commerce sector? It’s about 10% in terms of headcount.
Unidentified Participant
Thank you. I’ll come back.
Ashok Nedurumalli
Thank you.
operator
Thank you. The next question is from the line of Dipesh from MK Global. Please go ahead.
Dipesh Mehta
Yeah, thanks for the opportunity. Just first question about the margin in general shopping we are closer to a percentage for I think sometime now and in differing of compared to our earlier margin number. How one should look this margin numbers considering two three things. First, about earlier you said large account is where growth is coming. This quarter we have seen sizable decline in one of the large 7,000 or decline. That’s what you highlighted. Despite that our margin performance is not seeing any kind of uptick. Second thing is variable component even though very small but directionally are we seeing let’s say signs of this margin can have upside from one percentage where we are today.
That is question one. Second question is about can you give some sense about the associate mix or headcount mix across vertical because there are some plus and some minuses happening FY25. So if you can give some sense about how this is playing out and where we are seeing that say pocket of strength entering into FY23. Thank you.
Ramani Dathi
Sure. Firstly on the margins since we don’t control the associate salaries, giving any kind of indication margins as a percentage on gross revenue is kind of difficult at rn. So we are focusing more on expanding the absolute profit. So specific to this year like last year we have added about 37,000 headcount in staffing. This year we have managed to add only 27,000 because almost 25% of our contribution comes from BFSI. And with the headwinds and insourcing in BFSI that has impacted both papns as well as profit contribution especially in H2 of this year. Also in DA business because of NEEM withdrawal we have fully absorbed close to about 6 crore of impact this year.
So that also has contributed to margin dilution in staffing segment. Overall we are targeting a decent 20 to 25% annual growth in absolute profits of staffing segment going forward again contributed with volume as well as operational efficiency and other PAPM expansion value added services. On the second question, staff Karthik and.
Kartik Narayan
Distribution associates yeah associate distribution is roughly if you take financial services Ramani mentioned roughly about 25 odd percentage consumer which is largely the FMCG SND business roughly about 35 odd percent. E commerce I mentioned the previous question is roughly about 10 odd percent. The balance about 20% is manufacturing. So that’s the distribution.
Dipesh Mehta
Understand just on the question about the papm, can you give what was the PAPM in quarter four and how one should expect it going forward?
Ramani Dathi
For this quarter we are at 665 PAPM in staffing business which has dropped by about 5 rupees compared to Q3 and on a year on year basis there is almost a 14 rupee dilution in PAPM going forward Outlook. Karthik can add his comment.
Kartik Narayan
We are looking to sustain the papms. Obviously as we had called out earlier, a combination of trying to get clients on the variable front and renegotiation and the element of creating alternate revenue streams with the customers. But clearly the variable client signups while larger in percentage terms today contribute very small associate numbers so they don’t move the needle on the realization front. But we believe that taking those steps in a cumulative manner over a period of time starts to add up. So maintaining PAPM or marginally driving it up is what would be the focus.
Dipesh Mehta
Okay, and last question from my side. Let’s say this year We Our revenue grew 20 percentage because of certain headwind. Our EBITDA growth was relatively lower considering all the factors which we know today whether you expect revenue growth to now getting translated into EBITDA growth entering starting FY26 and maybe have some upside compared to revenue growth.
Ashok Nedurumalli
So that is the clear objective with which we would be working because I think the headwinds that we I mean headwinds in a sense of the NIM hit and the headcount decline hit impact and all of that is kind of factored for in this year. The productivity play continues to be there and combination of growth with productivity should sustain the element of profit growth in line with revenue growth.
Dipesh Mehta
Thank you.
operator
Thank you. The next question is from the line of Mithun Ashwath from Kiva Advisors. Please go ahead.
Mithun Aswath
I just wanted to understand that EdTech revenue that you have booked this year, this quarter, the catch up billing, how much was that and how did that impact the margins for this quarter and on an annual basis just wanted to get a sense on how margins are expected to fare in the next year.
Ramani Dathi
Yeah. So in EdTech vertical this year we have about 115 crore of revenue. We have expected about 6% of EBITDA margin on this number. However, because of some collection delays we have to make provisions on account of ECL policy that has impacted our margins in EdTech vertical. And for next year we are projecting close to 20 to 25% growth on top line with about 6 to 7% of EBITDA margin.
Mithun Aswath
Okay, thank you.
operator
Thank you. Ladies and gentlemen. To ask a question you may press star and one. Now the next question is from the line of Dhananja Jain from HDFC Securities. Please go ahead.
Unidentified Participant
Hi. Congratulations on the good set of numbers. The question I wanted to ask is I want to understand that for the specialized staffing segment the realization have increased but margin has dipped marginally. And also there is a slight decline in the headcount. So can I get a more color on that and what is outlook for the next year and how should I see the GCG revenue now? And a bit more explanation on the the bot side of the business. Thank you.
Ramani Dathi
On specialized staffing full year basis FY24 we are at an EBITDA margin of 6.8%. So that has improved to 7.3% in FY25 on a full year basis between Q3 to Q4 there is a marginal difference of about 30 basis points. That’s mainly because of some one time adjustments. So otherwise 7.3, 7.4% EBITDA is something that is sustainable margin in specialized study.
Unidentified Participant
Okay, and how should I see the headcount additions going onwards? That is one. And you have acquired the Ikigai entity. So how should I look at the overseas the outlook for the overseas staffing? You acquired IT for the Middle east and Middle east is performing quite well. Right. And do you have any plans for Singapore as well? Because other competitors have said that Singapore is not performing very well due to visa restrictions. And apart from this I just wanted to understand what is the impact of this NBFC in sourcing? How much is the decline in headcount due to it? Gross headcount decline due to IT and what was the revenue and EBITDA contribution impact? Thank you.
Ashok Nedurumalli
So we had about 7,500 in sourcing on the BFSI front in general staffing and roughly about 1.5 to 2 crore EBITDA impact from that on the specialized staffing front. On the IT services front, the demand is still quite heavy. It has not picked up aggressively. Aggressively. There is some demand in but delayed cycles to closure on the open positions and so on. The continued element of demand and closure is happening in the GCC segment and that will continue to play out as of now. I think also the element of presence through Ikigai in Singapore and in the Middle east is driven on a very low volume at this point in time.
So I think our key focus is to leverage the clients that they had in these markets to kind of get the demand and deliver to that and also leverage our customers from India to kind of get their demands in these locations and deliver to that. So while the integration of the business and the team has been done, I think we are given that it’s a very small base to start with. We should have exponential growth as we go forward. But I think specifics on numbers we’d be able to call out after about a quarter or two once deeper understanding with the customers and everything else kicks in.
But we are optimistic that there will be growth in these two areas given the low base that we are coming in at.
Unidentified Participant
Okay, I’ll join with the queue. Thanks for the detail.
operator
Thank you. Participants who wishes to ask a question may press star and 1. The next question is from the line of Harsha Rasiya from Balam Capital. Please go ahead.
Harsh Chaurasia
Good evening sir. I have just one more question. Am I audible?
Ashok Nedurumalli
Your voice is a little.
operator
No, we are unable to hear you properly, sir.
Harsh Chaurasia
Okay,
Ashok Nedurumalli
now you are better.
Harsh Chaurasia
Am I audible now?
Ashok Nedurumalli
Yes, yes.
Harsh Chaurasia
I had this one question. When you say that we are going to maintain the PACM at the similar level at this year. But when you understand the BFSI is going through a trend where there is some level of insourcing because of the sector slowdown in some pockets and at the same time when you say your head count majority conclusion is coming from BFSI and you also mentioned that there would be for to maintain the PAP and the similar level, there would be a negotiation that would you guys would do to maintain it. So I wanted to understand how all of these things will work together hand in hand.
And if there is a, if there is still a pressure from the BFSI side, are there any other operating leverage which you guys are generating internally which can help you offset that pressure on the bapm?
Ashok Nedurumalli
So I think on the BFSI front basis the RBI guidelines so far the exposure that we had that had to be insourced has been completed. So we don’t have anything further in the existing headcount that should move out because of the specific guidelines that had come out. Having said that, I think net of the headwind challenges that BFSI had in the latter part of Q3 and in Q4 we are seeing demand slowly coming back and I think from that perspective we are optimistic about driving growth in BSSI sector as things stand as we go forward into the year coupled with other sectoral plays.
I think on the pricing front on the papm it’s an element of a portfolio play. So I think larger element of logo signups and like Karthik had called out 60, 70% of them coming on a variable composition and the element that if the large aren’t going to grow larger, the mid and the long tail will give us the growth should enable us to sustain the PAPMs as we go forward. If the demand comes in in a large way from the large accounts, we would actually be pressurized on the weighted average for the papm. But our belief is that some modest element of growth there coupled with the portfolio of the other clients and the variable mix should enable us to sustain.
Karthik anything
Kartik Narayan
I think Ashok, you’ve covered pretty much. But harsh just to just to add, I think the absorption which has taken place is a one off event which took place between Q3 and Q4. If you heard my opening remarks. I think part of what has also happened is a degree of slowdown on credit card retail loan sales loans etc. And all that. Some of them again give the shifting stance of what RBI has spoken in terms of reducing risk credits for bank loaning to NBSCS etc and all that. We we are expecting you know, growth to return back on on BFSI per se.
Harsh Chaurasia
So so my question is mainly because let’s say the sector is coming from a slowdown. We’ve already done some level of sourcing. So are clients ready for negotiation where you would be lifting up the papm and if let’s say not BFSI is not agreeing with the PAPM price hike. So are there any different other verticals which are which you are expecting that can give you the PAPM uptick on and second.
Ashok Nedurumalli
Sorry, no, finish your question and we’ll answer.
Harsh Chaurasia
And second question is on the the technology spend which were you which we were doing to increase the operating leverage and help us on the margins when are we going to see the a positive impact coming from the from that investment and will it be going to be linear or we going to be seeing in the back end of the year like in the H2 so specific.
Ashok Nedurumalli
To the staffing side, I don’t think the PAPM sustainability will largely come from renegotiation of existing rate cuts. There will be some renegotiations, there will be a flip of customers also renegotiating downwards and so on. But like I called out, I think it will be because of a portfolio mix between sectors, between customers, between old customers, new customers, large, medium and small customers. So I think it’s primarily driven from multiple fronts rather than one element of being able to renegotiate with customers upwards. The second element is also leveraging the HR tech for our existing customers, both as an upsell to generating revenue to offset any PAPM drop from the core staffing side, coupled with the technology playing to productivity and economies for us for sustaining the profit margins.
The HR tech platform is in the process. One is ours getting built plus the two investments that we have made start going out to market through the sales team and the sales collaterals and everything else. We do think that the impact of that from a revenue element will start to kick in from the late Q2 to Q3 onwards.
Harsh Chaurasia
Got it. Just last question I can squeeze in. So looking at all this commentary which you guys mentioned, will it be right to assume that we would be adding close to 37,000 headcount from a general staffing perspective which we did in FY24 where everything was positive.
Ashok Nedurumalli
So I mean as of now, like Karthik called out, we have about 30,000 plus open positions with us and we are working on those sustained element of a demand and market condition should enable us to to add headcounts to that number subject to no surprises coming as we go forward from the macro factors. Got it.
Harsh Chaurasia
Thank you very much sir. All the best. Thank you.
operator
Thank you. Ladies and gentlemen, to ask a question, you may press star and 1. The next question is from the line of Vaneshwala from HDSA securities. Please go ahead.
Vinesh Vala
Yeah, thanks for giving me the opportunity. Sir, my question was related. Could you provide me the overall guidance on the growth trajectory you anticipate on the IT staffing going forward? And was there any specific project related or client contraction that led to a decline in IT services headcount in this area? And second question was related to the GCC part. What specific growth outlook would be for GCC in FY26 and what would be the contribution that you see from GCC versus the traditional IT services sector? Thank you.
Ashok Nedurumalli
So difficult to give an element of growth number at this point as we’ve called out. I think IT Services is still not in the market with open positions and growth. There is still an element of absorption or decrease in headcount that’s happening from the IT services side. I think what we had called out was GCC substituting for that to some extent. And this year we would also have the global play kind of complementing the element of numbers. So overall difficult to give a specific call out on headcount growth. But we believe that some element of growth should happen and with the continued element of rationalization of cost productivity and technology involvement we should improve the profits per se.
I think the other variable is the element of trying to also look at skill sets within the specialized staffing business. If not in the IT skill sets. There’s what we call specialized skill sets where there still could be demand with the customer base and we would work to deliver to that. So not calling out a specific number for growth. But I think what we would work for is enhanced profitability and profit, absolute profits as we go forward.
operator
Thank you. The next question is from the line of Shankar Narayanan. S from I thought pms please.
Unidentified Participant
Thanks for the opportunity sir. So my question is regarding the GCC vertical. So if you see the staffing.
operator
Can you speak a bit louder? We are unable to hear you.
Unidentified Participant
I’m good. Able to hear me now?
Ashok Nedurumalli
Yes, we can.
operator
Yes, please go ahead.
Unidentified Participant
Yes sir. So my question is regarding the GCC vertical. So if you see the overall staffing industry. So this industry is dominated by both organized players and unorganized players. And within organized we have these foreign. MNCs as well as. So these foreign staffing companies, they have a better edge or better relationship with foreign companies. So how do we differentiate ourselves with regards to getting contract from the GCC companies?
Ashok Nedurumalli
I think primarily for us, differentiation and play to the Indian market comes from our understanding of the Indian market. The talent acquisition, access in the Indian markets and delivery to the customer requirements and obviously thereafter the ability to administer the operational aspects through technology and compliance. I think a few of the contracts that come globally do come with element of international partnership to continue in the Indian context. But otherwise a larger number of GCCs or MNCs in the Indian context do work with multiple vendors, do work with vendors who believe would be able to deliver to their requirements in context on the skill sets.
Also some of the MNCs are entering with a BOT model which is the operate transfer model model which is that we are small, we are new, we don’t understand the element of the landscape in India. Can a partner who is local bring us that element of expertise and drive the initiation and inception of the play in the Indian context. So we have been working a few mandates on that front and we believe that being an Indian player, being in India, understanding the element of the landscape gives us strength over the MNCs.
Unidentified Participant
Got it sir. Thank you.
operator
Thank you. Participants who wishes to ask a question may press star and one the next question is from the line of Dhananja Jain from HDFC securities please.
Unidentified Participant
Hi sir, thanks for giving me one more opportunity to ask the question. I just wanted to understand the one thing that this quarter witnessed, the slowdown in DE additions. So what led to that and along with it. So there were announcements made by government in the past two budgets related to the staffing industry. So how do we see it now? Do we have more clarity around it? That is the question one, we were waiting for the finishment. Right. And the second question is for, for the services industry, how is AI affecting the staffing needs? Basically because there is a threat to the entry level jobs and we generally hire for those jobs. So that is one more thing I wanted to understand. Thank you.
Kartik Narayan
So Dahinde a couple of things. The first part of your question, you know with respect to Q3 and Q4 slowdown so you know as we called out earlier, there has been a degree of slowdown on the BFSI side coupled with the fact of the absorption that took place obviously had a negative impact as far as Q4 is concerned. And along with that on the consumer side while we have seen growth having taken place because of the underlying business which is largely FMCG business having muted volume growth also affected largely in terms of the degree of headcount additions that that particular industry had.
So we had growth, we had growth largely in the E commerce part of the vertical, some portion of quick commerce. But overall I would say you know we are downstream from what India corporate experiences and Therefore from a Q3 Q4 perspective given the degree of slowdown which took place, I think it reflected on our headcount addition as well. So that’s one part of the question.
Unidentified Participant
No, no. So what I. Sorry to interrupt. What I specifically wanted to understand was apparent in CP ship additions were slow this quarter. The trainees degree apprenticeship program
Ashok Nedurumalli
actually last. Quarter saying that there has been element of a slowdown slash backlog in the direct benefit transfer from the government to corporates on the apprentice front and that has put many clients to go slow on the element of the rollout. That issue got resolved towards February where the government started releasing the DBT benefits to corporates. Thereon we started seeing the demand coming back and being able to have net adds. But we had called this out in Q3 that there has been a specific issue of DBT transfers from the government end and that is putting an element of a dampener on the customers, replacing attrition and adding additional headcount.
But with the February addressal of DBT we are seeing the demand coming back.
Kartik Narayan
Yes. So Dhanjay, on your other question on the ELI scheme, I think there are three aspects to it as you know. One is that first time employment scheme which is direct benefit transfer of 15,000 for first time, then the job creation and the manufacturing scheme and the third one, what we understand now is that there was an EPFO deadline given to Everybody extended to the 15th of March. So I think that’s done through. There is some IT implementation which is taking place on the government side. We are aware that the budget allocation which was first spoken about in July 2024 roughly about a lakh.
What we are awaiting is cabinet approval which is understood to be imminent post that the ELI scheme will hopefully get launched.
Ramani Dathi
Dhananjay, on your question on the impact of AI on the specialized staffing business, while we are not seeing a direct impact right now, we believe that in the next few quarters there would be obviously a reduction of overall headcount by about 20 odd percentage in the IT services companies. Having said that, certain skill sets especially in the space of AI ML prompt engineering, data engineering, AI governance, human AI collaboration, there’s also product engineering. I think those are roles that are only increasing. So while in the short term there might be some impact specifically because of implementation of agentic AI L1 support testing roles, I think we will start slowing down.
Demand for AI skilled professionals is increasing and will continue to grow. The skill sets will only keep evolving as we speak and the combination of domain and technical expertise candidates will be very high in demand. So from our end we are actually we’ve kept a pool of about 200 odd AI skilled candidates when a customer are asking for so we believe that AI skills will replace some of the traditional skill sets. In the short run there might be some impact but in the long run this demand will only go up.
operator
Thank you ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Ashok Reddy for closing comments.
Ashok Nedurumalli
Thank you very much and I think just in follow up, in closing we are positioned to leverage on the market macro opportunities to drive growth through service delivery, the regional capabilities, productivity and profit growth. We do look forward to deliver to expectations and appreciate your support through this cycle. Thank you once again. And we look forward to year of growth and profit improvement this year as we look forward. Thank you very much.
operator
Thank you. Ladies and gentlemen, on behalf of HDFC securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines.