QUESS - Quess Corp Limited Share Price

In the Q4 FY26 earnings call, Quess Corp management provided a positive outlook characterized by steady execution, strong margin expansion, and improved quality of earnings. For Q4 FY26, revenue reached INR 3,892 crores, reflecting a 6% year-on-year growth. EBITDA stood at INR 86 crores, a 28% year-on-year increase, leading to margins of 2.2%. Profit After Tax (PAT) was reported at INR 64 crores with an Earnings Per Share (EPS) of INR 4.3.

For the full fiscal year, Quess Corp reported revenues of INR 15,305 crores, with EBITDA of INR 312 crores, representing a 19% year-on-year increase. Excluding one-time exceptional items, PAT rose to INR 230 crores, a 10% year-on-year growth, achieving a Return on Equity (ROE) of 20%. Notably, operating cash flow conversion remained strong at 80%, emphasizing disciplined working capital management.

Management highlighted a significant pivot towards higher-margin business segments. Approximately 50% of total profitability now arises from high-margin businesses, enhancing margins sustainably. The Professional Staffing segment enjoyed year-on-year revenue growth of 13%, with EBITDA increasing 43%, leading to margins of 12%.

Looking forward to FY27, management expressed confidence in scaling Professional Staffing and the overseas business while driving further margin expansion across segments. They emphasized technology and AI integration into operations and committed to an effective capital allocation strategy. The company is also targeting double-digit growth in both revenue and headcount as they adapt to the evolving landscape shaped by labor legislation and global demand shifts.

Question 1: "On Overseas business, we saw a sharp uptick in Q4. Could you help us understand what were the drivers behind this growth and to what extent is this sustainable?"

Answer 1: We experienced growth driven by three factors: core organic revenue growth, the addition of new customers, and favorable currency devaluation. If we adjust for a one-time revenue jump of INR 10 crores, the remaining INR 32 crores stemmed from organic growth. We believe this growth is sustainable, particularly given the ongoing demand in essential services across various sectors, despite being cautious about geopolitical impacts, especially in the Middle East.

Question 2: "On General Staffing margins, margins expanded by 20 basis points year-on-year. What are the key drivers behind this improvement, and should we view this level of margins as sustainable moving forward?"

Answer 2: Our margins improved to 1.5% due to strategic choices in our business mix and execution discipline. By focusing on higher-margin segments like construction and value-added services, we have been able to enhance profitability. We aim to sustain and gradually improve these margins through continued operational efficiency and pursuing high-value contracts, positioning us well for the future.

Question 3: "Professional Staffing margins are now at 12.7%. Do we think there is more room to improve these margins further?"

Answer 3: Our margins in Professional Staffing we anticipate will stabilize around the 11-12% range moving forward. We've shifted focus from low-margin roles to higher-value positions, primarily through GCC engagements. This structural transition, coupled with adhering to our strategic goals, should enable us to maintain these margins sustainably for the medium term, balancing growth and profitability.

Question 4: "Can you provide more details on the revenue and margin impact of the 7,000 headcount loss due to discontinued projects?"

Answer 4: The project closure impacted our revenues by approximately INR 200 crores, which is around 1.3% of our total revenue. While the loss was significant, it was a strategic decision to exit low-performing segments. We do not foresee further such losses affecting our business as we have identified and exited projects that do not meet our financial metrics or cash realization criteria.

Question 5: "For the next three years, what effective tax rate should we model?"

Answer 5: For modeling our effective tax rate (ETR) over the next three years, you should anticipate a range of 7% to 10%. This will align with our evolving business mix and expansion into new sectors, ensuring we remain competitive while also adhering to compliance standards.