TeamLease Services Ltd (TEAMLEASE) Q4 FY23 Earnings Concall Transcript

TeamLease Services Ltd (NSE:TEAMLEASE) Q4 FY23 Earnings Concall dated May. 17, 2023.

Corporate Participants:

Ashok Reddy — Managing Director and Chief Executive Officer

Sunil Chemmankotil — Chief Executive Officer, Specialized Staffing

Karthik — Head of Staffing

Ramani Dathi — Chief Financial Officer

Analysts:

Aditi Patil — ICICI Securities — Analyst

Deep Shah — B&K Securities — Analyst

Amit Khetan — Laburnum Capital — Analyst

Vidit Shah — IIFL Securities — Analyst

Mukul Garg — Motilal Oswal Financial Services — Analyst

Ruchi Mukhija — Elara Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the TeamLease Services Limited Q4 FY ’23 Earnings Conference Call, hosted by ICICI Securities. [Operator Instructions] I now hand the conference over to Ms. Aditi Patil from ICICI Securities. Thank you and over to you, Aditi.

Aditi Patil — ICICI Securities — Analyst

Thank you. Dorvin. Good evening, everyone, and welcome to the TeamLease Q4 FY ’23 Earnings Call. Thank you, TeamLease management for giving us the opportunity to host the Q4 earnings call. We have with us today, Mr. Ashok Reddy, Director and CEO; Mr. Sunil Chemmankotil, CEO Specialised Staffing; Mr. Kartik, Head of Staffing; Ms. Ramani Dathi, CFO, and Mr. Kunal, Head of Investor validations. We will start-off with the remarks from management, after which we will open the floor for Q&A. 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 good evening to everyone. I think we had a flattish quarter on quarter on revenues, headcount and EBITDA. For the year, we grew revenues by about 22% year-on year. But clearly, the margins have been under pressure. General staffing has been adding headcount and continuing to add headcount in Q4 also, but it has been negated by the losses in headcount in the higher-margin businesses of the DA and specialized staffing and that has really been continuing to put pressure on the bottom-lines.

Also, on the staffing side, the larger clients are growing larger across sectors and across, different companies. But the reality is that larger clients pay a lower PAPM has also been one of the drivers to the lower realizations and the PAPM in-quarter four has dropped about INR15 rupees on that count. We continue to work on productivity and FTE improvement across the businesses to drive more efficiency through technology and processes, and I think that is kind of again played out with about improvement on the FTE ratio by about 6 to 7 incrementally for the quarters. I think, we had on the DA front the element of the impact from the exit of the NIM scheme continues to play-out with more trainees dropping out from there. We do expect a complete exit of the NIM trainees by end-of-quarter two. The headcount in the quarter from the NIM perspective dropped by about 9,000 and cumulative impact of the drop of the headcount in Q3 and Q4 has an impact of about INR5 crores in the net revenue.

While the drop-in NIM headcounts are expected over the coming five to six months, we have started to sign-on new accounts for the apprenticeship what we call the DPA and NAPS option and traction on finding of the accounts and getting apprentices on Board has initiated in a small way, but we believe we will start seeing more traction in growth on those numbers sometime in Q2, and I think the team is focused on that front. While the element of details of the specialized Staffing and staffing will be given by Sunil and Karthik, I think at a broader level we continue to focus on cost-control in areas of business that are stagnant some market outlook perspective and continue to focus on growth in verticals that are seeing traction of open positions.

I think the call-out that we were going to realign the team sizes, in-line with the market demand has been executed in Q4. Obviously, we will continue to stay focused on that aspect as we go-forward in Q1, and Q2 and align resources, in-line with the market opening up and market opportunities. I will call, Sunil on to give a updates some the specialised staffing front, followed by Karthik, on the staffing front and Ramani from a finance perspective. And then we will take the questions.

Sunil Chemmankotil — Chief Executive Officer, Specialized Staffing

Thanks Ashok. Good evening, everyone. Specialized staffing business had a tough year, it started with an anticipation of huge tailwinds on the back of strong sentiment that was expected to drive a multi-year digitization cycle. However, as you all know, it turned out to be an unexpected and shocking headwind marked by uncertain economic conditions. Our IT clients were impacted by the prolonged uncertainty and started reducing the hiring numbers significantly. In fact, the dip was drastic to the tune of 60%, based on the original anticipation of growth, we made huge investments in people and facilities, which had to be cut-down.

The rightsizing, in-line with the market conditions, took some time and impacted our overall profitability for the year. As informed in our previous calls, we had embarked on building a client base in non-tech space to improve our product portfolio mix since second quarter of last fiscal year actually, wherein we provide tech what non-tech companies. We were able to capture a decent market-share of the tech in the non-tech market and substitute some portion of the current IT dip. Overall, a better product portfolio mix and substantial improvement in our fulfillment ratio of the available market opportunities helped us to grow the revenue over last fiscal by 7% percentage and retain broadly the revenue run-rate on a sequential basis.

The dip in headcount by nine percentage is due to our earlier decision to opt-out of a large client with over 900 headcount in telecom tech space due to payment issues. The combination of dip in high-value IT business, exit of large telecom mandate, investments made in the early part of the year, not paying-off and subsequent time it took to right size led to a dip of 7% percentage in-full year EBITDA and a subsequent dip of 120 basis-points on the EBITDA margins. On the sales front, we have some good news, we bagged 57 clients in FY ’23, out of which, 23, are large strategic mandate which shall feed into multi-year growth of our business.

Now coming back to Q4 FY ’23 performance, our revenue decreased by 1% percentage on a sequential basis, whereas it decreased by 5% percentage on a year-on year basis. Our headcount, decreased by 5% sequentially and 9% is on a year-on year basis for the reasons, I have already covered earlier. The EBITDA percentage is flat on a sequential basis and dropped by 230 basis-points on a year-on year basis. The macroeconomic situation still seems to be not conducive enough for our clients to open up, hiring in the IT segment, while we see some uptick in tech and non-tech sector hiring. Despite these challenges, we remain focused on our long-term vision and are taking steps to — and are taking steps to position the company for success in the years ahead. Based on the ongoing dialog with our customers, we understand that the uncertain outlook on hiring still continues and it will impact our business in the near-term.

We pin our — We pin our hopes on the IT sector reviving and looking-forward to a better business outlook in the near-term. We have reduced 19% headcount and brought in an overall cost-saving of 16%. We will continue to focus on adding new strategic clients across the industry, fast-track our digitization efforts, continue to run the operations frugally and putting our best efforts to maintain healthy margins. Thank you.

Ashok Reddy — Managing Director and Chief Executive Officer

Karthik, on the staffing front?

Karthik — Head of Staffing

Yes, thank you and good evening, all. General staffing registered a mere 29,000 net additions to our associate base, which is the second-highest number we have reported in any given year next only to last year’s performance. Given the year before was a bounce-back from pandemic for all practical purposes, this is one of our better years a long-time in terms of headcount additions. Our larger challenges that Ashok pointed out, we are barely had been in terms of PAPM some of our large customers, getting larger and expecting, I think efficiency for volumes. For the quarter alone, we added about 8,000 associates [Technical Issues], on our Q4 performance. Typically, Q4 is not expected to be better quarter that largely on the backdrop of businesses looking at pruning that OpEx spend and our experience over the last decade shows related slowdown. For this Q4 has been different and relative to this has developed better Q4 in the past several years.

The reason for that has been robust growth in our banking finance vertical and the group sales and hiring rigor across industry verticals. Our revenues went up by about 22.7% for the year and there been a 2% sequential quarter on quarter basis. In terms of absolute growth in associate base, our two top two segments would be financial services and consumer goods followed closely by telecom. Consumables and banking and finance has registered a growth of over 20% and 18% tactically over the last year. Our sales [Technical Issues] continued with us [Technical Issues] this year with 459 new logos sign ups, 31 of that being in Q4 alone. For the whole year, we have delivered about 63,000 new joinees were hired by us, which is a 23% increase over last year, 52% of them, of course, non-recruiter channels.

In Q4 our FTE improved 11% on the strength of a 4% increase in associate headcount. Our investments in digitization initiatives has been paying-off in terms of efficiency gains resulting in RMB to service a larger client base with the existing core employee base. We see this trend continuing to play-out in FY ’24, resulting in both faster client servicing as well as higher operating leverage. Coupled with anticipated growth, we shall be on-track towards a further improvement in the FTE during Q1 of this financial year. I’m sure some of you probably already aware about the different insights that keep coming out. So just to share with you some of the impact from the employment market. I think based on our recent employment outlook, telecom and financial services in the services sector, health-care, pharma and FMCG — FMCG manufacturing sector are showing positive signs on hiring. Metro and Tier-one city is going to be having a much higher intent to hire, Bangalore, Chennai, Mumbai are probably going to be the top cities with maximum demand coming in.

Entry level jobs in the services sector and junior level jobs in the manufacturing sector, are exhibiting the higher intend to hire for different experience it. Looking ahead, our business is well-poised for growth in H1 and there a clear visibility of a healthy pipeline and emerging demand across most of our customers. A few forward-looking [Technical Issues] changes, which will continue to drive the future of business includes [Technical Issues] formalization of workforce in FMCG — in FMCG sector, capacity increase expected in manufacturing, especially in electronics, which has created a large number of employment opportunities including [Technical Issues].

There is a growing shift towards higher diversity hiring within manufacturing or services. The innovation therefore in a non-recruiter and equipment hiring shall help us on top of emerging demand from organizations. Of course, we all know, there is a funding fees, which means a bit of challenge as part of the space is concerned, including the E-commerce space. However, we expect the investment made in our ability to move labor from smaller towers to where the demand is shall continue to yield good results. Consumer and Financial Services vertical specifically are expected to go positive expansion. Overall, our continued focus on contextual definitely business around sales and hiring and the emerging benefits of digitalization and property improvement is well-poised to impactful year. Thank you.

Ashok Reddy — Managing Director and Chief Executive Officer

Ramani?

Ramani Dathi — Chief Financial Officer

Thank you, Kartik. Good evening all. We had an annual revenue growth of 22% led by strong performance in general staffing business. However, headwinds in higher-margin verticals of specialised staffing and DA had impacted the profits and margins of H2 and overall. On a sequential basis, gross revenue growth is 1% due to drop-in DA headcount and also the impact of Q3 H3 one-time billing in staffing business. PBT remained flat on both Y-o-Y and Q-o-Q basis. In case of EdTech business, which is reported under which HR Services segment, we have estimated a higher bidding in Q4. However, the university sales cycle, is taking longer-than-expected.

During Q4, we have two exceptional items. So, one write-off of INR9.8 crores outstanding loan TeamLease Skills University referred in as TLSU. TLSU is the registered NIM agent, contributing to 40% billing of DA business. For all mean trainees build under the about TLSU INR100 rupees is retained by TLSU to manage their operations and the balance is transfered to TeamLease. Given the uncertainty around mean team and lack of future cash-flow viability at TLSU, we have taken a call to write-off the entire outstanding loan to TLSU.

The second exceptional item is regarding ILSS settlement, we received INR9.2 crore parts settlement on ILSS investments under the [Technical Issues]. A proportionate provision has been written back as an exceptional item. During the year, we received total income tax refunds of INR72 crore and the outstanding TDS receivable as of March is INR230 crores. Our current free-cash balance is INR370 crore, out of which INR100 crore is earmarked for buyback.

In terms of core costs between Q2 and Q4 of this year, we have reduced the core employee headcount by 200, translating to about 8% reduction, again largely in specialized staffing and DA businesses. We continue to hold a tight control on costs and maintain the current run-rate to next year as well, except for the employee appraisal impact which is about INR4 crores per quarter. Thank you.

Ashok Reddy — Managing Director and Chief Executive Officer

Thank you Ramani. Aditi, we are good for the questions now.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Deep Shah from B&K Securities, please go ahead.

Deep Shah — B&K Securities — Analyst

Thanks for the opportunity. Sir first on specialized staffing. You did mention that you added 22 new large clients. So in this segment, do we have pricing pressure compared to what we have in general staffing with large clients? An additional question, there would be, given that we’ve made these changes now and the costs have come down, would it be fair to say that margins have now bottomed-out and this should only improve from here?

Ashok Reddy — Managing Director and Chief Executive Officer

Yeah, just on the specialized staffing, Sandeep [Phonetic] we work on what we call the rate card model and the margins are between the 15% to 22% broadly and there — I mean, there’s really not too much of a margin pressure per se in specialized staffing at a gross realization level. Clearly once we sign new customers scaling them up takes time, because it’s 100% hiring activity. Clients normally tend to give smaller number of open positions to start with and we build-on base in a trajectory. So, I think signing on more customers, is good for the long-haul, because you start building the element of open positions and delivery across a larger base. But no new sign-up, really starts off as a big customer, to start with.

I think as we enter coming year we are optimized on the cost front, so. I would be able to say that I think we have bottomed-out on the margin depletion possibility in the specialized staffing, subject to the numbers holding at this point. The view from most customers that we are getting is hiring is kind of still on the. They’re not talking about reduction, but should reductions happened, then again there will be a lag between revenue dropped to costs and that could put some pressure, but other than that I think we are optimized.

Deep Shah — B&K Securities — Analyst

Right sir, thanks a lot. Sir second question on this [Indecipherable] needs to be the write-off. The revised order, I think Government of India did come up with some other alternatives to NIM. So, first is that assessment correct? Second, does that benefit us and if it does then is this TSLU write-off judged as a measure of abundant caution or is that — that money is very unlikely to come back and — and the team leads to this University will not be helpful into whatever revised or the new government program for trainees.

Ashok Reddy — Managing Director and Chief Executive Officer

So, there is really no new alternative program that has been introduced in-place of NIM as of now. I think the government has made optionality under the Apprenticeship Act where we can work for corporates administering and managing their quota which is what is the GPA model and there is an option for us to take our quarter of apprentices to corporates, which is the NAPS model. And both of those are what we are taking market and what I called out earlier, we have started to sign-up customers on that front, we should start seeing traction of apprentices coming on-board, from Q2 onwards.

And I think however, the apprenticeship model, translating to what we are looking at the DA which has degree apprenticeship model is really where the opportunity for the TLSU to contribute will really play-out, which is why I think the optionality of TeamLease Skills University for the future, if the degree apprenticeship system get embedded is clearly there, but that’s an optionality that we are keeping to evaluate and play-out into the future, but the loss of NIM and all NIM trainees kind of being students of TeamLease Skills University and that drop which we have seen in the past two quarters, and will see in the coming two quarters is really where the impact for the INR10 crore write-off is there, but that, I think the right thing to do given the drop, we have had their but the call option around degree apprenticeship and the alignment of TeamLease Skills University into that over the next one to two years is what we will keep the call option for.

Deep Shah — B&K Securities — Analyst

Understood, sir, this is [Indecipherable]. Thank you so much and all the best.

Ashok Reddy — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Amit Khetan from Laburnum Capital. Please go ahead.

Amit Khetan — Laburnum Capital — Analyst

Hi, good evening. Sir you mentioned that the PAPM has been impacted our customers expect pricing efficiency in exchange for volume. In that context, would it be possible to share some color on the granularity of the 220-K headcount that we have in general staffing. So, say what percentage of our clients would be with more than 500 employees.

Ashok Reddy — Managing Director and Chief Executive Officer

We could circle back to the specifics on that, Amit. So the way today we have is about 80% of our customers are on a fixed PAPM and 20% are on a percentage markup. We’ve broadly look at customers as large, medium, and small and realization between the three buckets as we’ve called out in the past does vary to extent of it being X for large, about 1.5 X for medium and 2 X for the small clients. In the current environment over the last two quarters, we have seen the large clients growing larger, the demands are really coming in from them. And the fact of the lower realization there has put the pressure on the overall PAPM number. But basically, of how many clients get distributed between the lot we can circle back on that.

Amit Khetan — Laburnum Capital — Analyst

Got it, how do you classify someone as largely like — is it like 100 employees, 500 employees?

Ashok Reddy — Managing Director and Chief Executive Officer

The large for us is about 1,000 employees, 100 to 1,000 is considered medium and less than 100 is small.

Amit Khetan — Laburnum Capital — Analyst

Okay, but you wouldn’t have a sense right now what this 1,000 plus or this market between small, medium and large consists of right now.

Ashok Reddy — Managing Director and Chief Executive Officer

So up to 25 odd all will be in the large. There would be about 200 to 300, in the medium and the balance would be in the [Technical Issues].

Amit Khetan — Laburnum Capital — Analyst

I mean, the percentage of the 220-K.

Ashok Reddy — Managing Director and Chief Executive Officer

On that, so it is split let’s circle back. I do want to take an estimate on that. I will — we will circle back on.

Amit Khetan — Laburnum Capital — Analyst

Okay, okay. Thank you. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aditi Patil from ICICI Securities. Please go ahead.

Aditi Patil — ICICI Securities — Analyst

Thank you for the opportunity. I just have one question. Sir, can you provide outlook on general staffing in terms of like vertical wise demand in general staffing?

Ashok Reddy — Managing Director and Chief Executive Officer

Yeah, so I think on a broader spectrum Aditi as was called out by Karthik, we have seen continued quarter-on-quarter growth in associate count and largely, it has been driven by BASF by telecom and consumer. I think as we enter the year we do continue — we do have continued demand in those three factors that we are delivering to and working with customers on. As Karthik had called out, I think emerging is still quite muted, just given the funding fees, E-commerce is also a little muted on the demand front, manufacturing, we believe could see some element of opening up as more investment happened but it is a lag between the investment to the demand on the employment front in manufacturing.

Aditi Patil — ICICI Securities — Analyst

Okay and sir, how should we look at the like number of headcount addition, should it be, like this year it was 28,000, so like, should it be north of 25 like better than this year-on or lower than this year?

Ashok Reddy — Managing Director and Chief Executive Officer

Aditi I would love to, I’d love to have is higher than this year clearly, but. I think it’s early to make that call. It will depend on sustained demand from this sector playing out over the coming quarters. Like — like it was called out, I think for last year three verticals did drive the growth and we continue to see positive demand from those three sectors playing out into this year also. So ideally, yes, I would like to have a higher growth than last year.

Aditi Patil — ICICI Securities — Analyst

Okay, thank you all the best.

Ashok Reddy — Managing Director and Chief Executive Officer

And just if I might add, in Amit in response to your earlier question while I don’t have the exact associate split and we will circle back with the details our top 10 clients gave us about 38% of our associated volume last quarter that has gone up to 42% this quarter, so there have been like a near 4% increase with the top 10 customers. Part answer but we’ll get back with it.

Operator

We have the next question from the line of Vidit Shah from IIFL Securities, please go ahead.

Vidit Shah — IIFL Securities — Analyst

Hi, thanks for taking my question. My first question on the specialized staffing margins. These margins you alluded to earlier or even in maybe last call was because of dropping off a big customer and 900 associates. So are we to assume that these margins will not recover until that is there any sort of recovery in the IT staffing or are there plans for the margins will recover and how much of cost — how much of cost can be cut to add to EBITDA of specialized staffing?

Ashok Reddy — Managing Director and Chief Executive Officer

So, I don’t think — on this front, the margin drop was not on account of the drop a telecom customer, the headcount drop was on account of the telecom customer that we let go off. The drop-in margins, if I look at it at an EBIT margin between FY ’22 to ’23 has been about a 1% drop from 8.8 to about 7.8 is largely driven on the aspect of the headcount being flattish to actually negative coupled with the element of what I — what Sunil had called out. Earlier we had created a larger cost structure for the element of the tailwinds we were seeing in the industry. In between Q1 and Q2 those tailwinds actually turned out to be headwinds with hiring freeze across IT company and that kind of led to re-aligning the structure of the team and costs. So, I think today, the costs have gotten realigned and between Q3 and Q4 they have had flattish margin play-out. Subject to no further drop-in headcounts, on the specialized staffing I think we can say that we have hit the bottom on the margin front. And should support that going-forward.

Vidit Shah — IIFL Securities — Analyst

Okay, so when I look at revenue from let’s say 2Q FY ’23 to today, it’s been around flat for the last two quarters, but EBITDA has fallen from INR13 crores to INR9 crores and despite a flat revenues, and the alignment of cost was already done by 2Q, margins have fallen even since then despite revenue not collapsing. So I was just trying to wonder whether it’s a change in mix, so are we seeing pricing pressure out there?

Ashok Reddy — Managing Director and Chief Executive Officer

No, so, the headcount adjustment it’s initiated in Q2 completed to-end of Q3 and Q4. So, it didn’t get all done in Q2, like we had called out. We held the element of team between Q1 and Q2. And as it being called out there has been reduction in headcount, which is also impacting the realizations and I think a combination of that is really where the drop-in EBIT comes in from.

Vidit Shah — IIFL Securities — Analyst

Okay, fine. And in terms of, you know, the working capital front, we’ve seen a like a decent improvement in debtor days [Phonetic], annual revenue versus FY ’22. Is this just a function of general staffing, which is a lower working capital business growing faster than specialized staffing or are we doing — or we consciously taking calls into our cash generation.

Ashok Reddy — Managing Director and Chief Executive Officer

It’s both, obviously general staffing, which has had better or lower DSOs is the business that has been growing and 22% of the revenue growth largely comes from the staffing business much lower DSOs. The specialized staffing business has been maintaining its discipline around invoicing and collections with I would say flattish DSOs over the year, so. I think the mix of businesses is overall adding to that.

Vidit Shah — IIFL Securities — Analyst

Okay…

Ramani Dathi — Chief Financial Officer

I want to add something to that. I was saying, Ashok. Because it’s a combination of both, even in specialized staffing business earlier, used to be close to 90 days, around FY ’22 times so that we have managed to bring down to about 75 days now, also the unbilled, any outstanding balance, we have substantially brought down. So, it’s not just because of increase in general staffing contribution. So, it’s also with other initiatives that we have taken around control of credit period.

Vidit Shah — IIFL Securities — Analyst

Okay, thanks, so if I just squeeze in one-one more. You know if you could just provide an outlook on the PAPM like when you said it has dropped by INR15 rupees, which makes it INR650, what’s the outlook here? Is this likely to be the new normal. Are we likely to see it go back to INR700 post COVID or can even see INR750 where we will peak [Phonetic].

Ashok Reddy — Managing Director and Chief Executive Officer

So, I think clients are obviously very margin conscious and negotiating hard on the price front, but Karthik, is looking at multiple options on how we could try and hold and grow the PAPM. We don’t have a comprehensive solution on the table at this point in time, but multiple variables that are being explored with upselling, cross-selling and other avenues, which over the next one-two quarters we will go-to-market with and see how that kind of response, but ideally, we’d like to hold and grow the PAPM.

Vidit Shah — IIFL Securities — Analyst

Okay, fine, thanks for that. I’ll get back-in queue.

Operator

Thank you. The next question is from the line of Mukul Garg from Motilal Oswal Financial Services, please go ahead. Ladies and gentlemen, the line for the current participant — participant, seems to have disconnected. [Operator Instructions] As there are no further questions. I would now like to hand the conference over to the management for closing comments. Over to you sir.

Ashok Reddy — Managing Director and Chief Executive Officer

Thank you. I think that has been called out, we are conscious about the fact of driving growth, while some of our — two of our businesses are clearly had head wind one from a perspective of the market in specialized staffing and one from the aspect of the gazette notification being cancelled in the DA, NIM business. I think the consumed element of growth with cost administration at the back end is going to be key. However, the reality that general staffing is our low-margin business and a key focus for Karthik is going to be on driving associate growth, revenue growth working on the PAPM sustain and growth and clearly the FTE productivity angle playing out as we go forward.

On the specialized staffing front, like has been called out the demand at this point is flat. It is about sustaining current numbers by replacing the attrition and absorption that we are seeing and I think from a cost perspective optimization has happened. In fact, we look to sustaining those numbers and hopefully on the back of turnaround of demand growing in that segment, while IT has been very flattish to negative, IT and non-IT is something that has contributed to complementing the decline there and I think that’s an area that, Sunil and team will continue to focus on.

On the degree apprenticeship front, like I called out, we do see sunset of all the NIM numbers by end of Q2. The green shoots are signing-up customers in other service areas will start to kick-in numbers from Q2 onwards. And I think it’s important for us to stay on course in a controlled manner for both and driving the aspect of profitability. I think all other aspects of financial discipline and everything else will be key for us and we continue to stay focused on those fronts and I think the current aspect of the share buyback that was in process, we look to completing that next month and taking it on from there.

Thank you all for being on the call and we will connect and provide more information as.

Operator

Excuse me, sir. The participant who has dropped from the line has rejoined the queue. Would you like to take the questions, sir for just [Speech Overlap].

Ashok Reddy — Managing Director and Chief Executive Officer

Yes, I can take the question.

Operator

All right sure. I will hand over to Mr. Mukul Garg from Motilal Oswal Financial Services to proceed with his question. Please go ahead.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Thank you so much for [Indecipherable] this question. Sorry for getting dropped off. A couple of questions from my end, first one on this impact of NIM on margins, how should — what was the impact this quarter, on the overall profitability from NIM in the kind of decline? How should we see the impact over the next few quarters while [Indecipherable] Q2? How should we see impact on the overall profitability?

Ashok Reddy — Managing Director and Chief Executive Officer

Yeah, so like. I think we’ve had about 9,000 drop in NIM headcount in Q4. And on account of the Q4 and Q3 headcount drop-in NIM, the impact that the net revenue level was about INR5 crores. So, I think that will clearly continue to play-out. We do expect another 8,000 to 9,000 probably dropping out across the quarter on the NIM front.

Obviously, we’re trying to offset this to some extent with getting training/apprentices in the other schemes and also some element of the contribution to growth that staffing would have given that they are still seeing healthy demand in some of their verticals is really what we believe could offset the downsides.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Yeah, so I was looking more for the impact on margins. And because NIM does not historically from staffing side has been more of positive tailwind. So can you just break-out what would have been the impact on EBITDA margin for this [Technical Issues]?

Ashok Reddy — Managing Director and Chief Executive Officer

Ramani you want to?

Ramani Dathi — Chief Financial Officer

So Mukul for the current quarter, as Ashok mentioned given the headcount drop of Q3 and Q4. The impact on profit is almost INR2.5 crores, close to INR2.5 crores and with additional estimated loss of 8,000 to 9,000 in the next one-two quarters so that can go up to almost INR3 crores or something. So that’s the estimated quarterly loss on the NIM headcount loss.

Ashok Reddy — Managing Director and Chief Executive Officer

And it’s about, I would say around 20 basis-points broadly, would be the drop in margin on account of NIM trainee drop, but exact number Ramani and Kunal, will come back up, but at a ballpark I would say it’s about 20 basis-points.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Right and just coming back to the PAPM session. How should one think about, I understand you guys are trying to [Technical Issues] out but in terms of our exports on [Speech Overlap]

Ashok Reddy — Managing Director and Chief Executive Officer

Mukul your voice is kind of echoing a little bit, can’t hear. If you can just pick-up the phone or [Speech Overlap]

Operator

Mr. Garg the line for you is sounding muffled. If you could use your handset please, it would be great.

Mukul Garg — Motilal Oswal Financial Services — Analyst

Is this better?

Ashok Reddy — Managing Director and Chief Executive Officer

I mean, not really, but carry on Mukul. Carry on Mukul.

Operator

Sir the participant has dropped from the queue.

Ashok Reddy — Managing Director and Chief Executive Officer

So, what we can do is Kunal will get in touch with him post the call and address the queries.

Operator

Sure, all right. And we do have two more participants who have joined the queue sir, would you like to take the question, sir.

Ashok Reddy — Managing Director and Chief Executive Officer

Yeah, I will take it.

Operator

We have the question from the line of Ruchi Mukhija from Elara Capital. Please go ahead.

Ruchi Mukhija — Elara Capital — Analyst

Thank you. Could you [Technical Issues] are breaking out your capex [Phonetic] or outlook on IT sector between the test products [Technical Issues] and IT services? Do you see same trend across these subset or there are some variations that you [Technical Issues].

Ashok Reddy — Managing Director and Chief Executive Officer

I’ll take that question. So, we see across IT sector there is a higher fees and uncertainty. And when I say hiring fees, it’s not completely frozen we — we tend to get some requirements, which are — which we are able to fulfill our attrition and we see some intake coming in from GCC’s that captives. But however, the volumes are not in to the tune of what it can compensate for the dip in the IT services. So, I would summarize saying that there is a drastic drop-in IT services but the captive still has some requirements flowing in and tech and non-tech also there are some requirements flowing in, but the volumes are not comparable.

Ruchi Mukhija — Elara Capital — Analyst

Thank you. Thank you. That’s really helpful. All the best.

Ashok Reddy — Managing Director and Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]