Industry Overview
India continues to be the worlds fastest growing major economy
and is now the most populous nation with more than 1.4 billion people.
Economic growth: After two years of disruption due to COVID-19,
Indias GDP grew 7.2% in FY23, following 9.1% growth in FY22 on a low base. India is
projected to grow at 6-6.8% in FY24 on the back of rebound in private consumption, higher
capital expenditure and strengthening of corporate balance sheets.
Shift towards formalisation:
In India, formal employment is estimated at 15% and the rest is
informal. The transition underway from informal to formal will create huge opportunity for
staffing firms along with the yearly addition to the labour force.
Capex push:
The Indian government has raised its capital expenditure by 33% to 10
trillion for FY24. Capital spending has increased on infrastructure and new investment is
being sought through production-linked incentives.
Manufacturing push:
Driven by China+1 imperative many MNCs are diversifying their
manufacturing base and India is a prime contender for such investment. Since these will be
large investments focused on economies of scale, they will generate corresponding
employment. The governments infrastructure push should feed into creating last mile
connectivity for these proposed global units.
Emergence of Tier II & Tier III:
Work from Home has enabled the rise of Tier II & Tier III cities
and catalysed the geographical expansion for many companies especially in the IT sector.
Global capability centres will follow their footsteps due to lower operating cost and
lower attrition.
Workforce Management
General Staffing
The general staffing industry provides manpower services by helping to
match qualified candidates with companies that have job openings across sectors like
e-commerce, retail, telecom, manufacturing etc. They provide services across blue collar,
grey collar and entry-level white-collar jobs. India has emerged as one of the largest
countries for flexi staffing in the world with a market size of $12 billion. As per
Goldman Sachs, temporary staffing could account for 10% of Indias formal employment
by 2025. The industry is expected to grow 2x by FY26 and 5X in the coming decade to $60
billion. According to the Indian Staffing Federation 2023 annual report1, about
100 members of the ISF employ 1.44 million flexi workforce. The staffing industry saw 14%
year-on-year growth in FY23 compared to 21.9% in FY22. The industry (ISF members) added
approximately 0.18 million flexi-jobs to Indias formal employment sector in FY23. As
the economy evolves, the organised staffing market in India is expected to grow at a
higher speed and benefit larger compliance adherent players. Furthermore, the combination
of China +1, PLI scheme, larger manufacturing presence in India, lowest tax rate for the
manufacturing sector will lead to India becoming a large manufacturing hub and this
transition will continue for decades.
IT Staffing
Globally, the economic slowdown has affected the technology industry.
The total global technology spend for CY22 stood at $4.39 trillion, a decline of -0.2%
compared to the previous year. The tech industry is likely to continue to grapple with
issues around supply chains, workforce, and innovation, along with macroeconomic and
global uncertainties, as per Deloittes Technology Industry Outlook report.2
Despite the global headwind, Indias technology industry revenue
is estimated to have crossed $245 billion (8.4% y-o-y growth) in FY233, largely
due to the growth in IT services, BPM, software products, ER&D and the domestic
market. The IT apex body Nasscom has estimated that the industry will hit $500 billion by
2030 fuelled by enterprises, including traditional enterprises, leaning on technology for
scaling automation while humanising User Experience (UX), streamlining supply chain,
enhancing cyber resilience, and delivering their sustainability goals towards becoming
purpose-driven businesses. Staffing firms are expecting a resurgence in IT staffing, as
the hiring in technology sector reported a positive trend in the first few months of 2023.
A higher rate of digitisation will increase the need for talent with digital niche and
super niche skills including Cloud Infrastructure, Full Stack, React JS, Android and
Angular JS, among other skills. According to IDCs India Digital Transformation (DX)
2022 Survey4, as compared with 2021 and 2022, more than 95% of Indian
organisations are planning to increase their DX spending or keep it at the same level in
2023. DX adoption across industries and businesses will augment the demand for talent with
digital niche and super niche skills. This spending on digital transformation is across
sectors and that is why demand for IT hiring from non-IT sectors is on the rise in India.
This rise in demand has resulted in a cost uptick for companies and even global capability
centres who are dealing with it by expanding to Tier II cities. An EY report states that
earlier GCCs favoured Bengaluru, Hyderabad, Chennai, Mumbai, Pune and Delhi NCR but now
Tier II cities such as Coimbatore, Visakhapatnam, Jaipur, Vadodara, Kochi and Chandigarh
are becoming popular due to improving infrastructure, favorable state policies, lower real
estate and talent costs.
Global Technology Solutions
Business Process Management (BPM)
The Information Technology – Business Process Management (IT-BPM)
sector is the largest private sector employer in India employing 5.4 million employees and
accounting for 7.5% of Indias GDP in FY235. The BPM industry witnessed a
growth of 8% in FY23, accounting for 53% share of global sourcing6. IT-BPM is a
high growth industry and with a rise in the number of companies embracing digital
technology, it is likely to increase the demand for tech talent. The BPM industry is
diversified across verticals such BFSI, telecom, retail and healthcare. According to a
Nasscom report7, around 33% of the total jobs in the BPM sector are related to
customer interaction services such as call centre work (email, chat etc). A large portion
of the customer work is done in India through omnichannel model and involves higher end
expertise with technology and automation already built into the processes, says the
Nasscom report. The creation of BPM sector jobs in India in the past three-four years is
attributable to automation and robotic process automation (RPA). The industry is using RPA
for repetitive and low-end tasks that require less human judgement. These include document
processing, organising data, and responding to customer queries.
According to a joint report by Nasscom and McKinsey8,
Indias BPM industry has an addressable opportunity of $180 billion-220 billion that
will enhance growth and jobs. Indias BPO industry has been constantly evolving to
capture global and domestic customers through enhanced customer experience and by
leveraging analytics.
With Covid-19 accelerating the pace of digitalisation, and
organisations looking at data gathering to make wise business decisions, the demand for
BPM services is expected to grow. Going forward, the industrys hybrid approach of
customer connection – a mix of humans and machines – will help the BPM industry
to sustain its growth.
Payroll Outsourcing
The global payroll outsourcing market was valued at $9.9 billion in
2021, and is projected to reach $19.5 billion by 2031, growing at a CAGR of 7.2% from 2022
to 20319. As per an estimate, of the 86 million salaried employees in the
formal sector in India, just about 15% are payrolled on an outsourced platform. The
payroll outsourcing market will continue to grow in the near future as employment
increases in the formal sector & a growing number of organisations continue to
outsource their payroll enabling them to focus on their core business, achieve cost
savings & enhance compliance / employee experience. As the formalisation of jobs
increases and organisations enhance hiring, the outsourcing of payroll services is likely
to become the norm. However, in the absence of comprehensive research on Indias
payroll services, it is difficult to quantify the market size.
IT Services
In 2022, the Indian domestic IT & Business Services market was
valued at $13.87 billion and recorded a 7.4% year-over-year (YoY) growth as compared to
7.2% in 2021, according to International Data Corporation10. The growth is
attributed to the rise in digital transformation investments among Indian enterprises. The
overall Indian public cloud services market is expected to reach $13.5 billion by 2026,
growing at a CAGR of 24% during 2021-2611. Indian IT services industry is
quickly adopting to the cloud and artificial intelligence markets including
infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS) solutions and
software-as-a-service (SaaS) markets across private cloud, public cloud and
hybrid/multi-cloud. With the current emphasis around AI, technology players will upgrade
their tech stacks, leverage cloud and automate software delivery to provide better
services. IT companies are growing their team of experts to handle cloud platforms, to
keep up with the demand.
Operating Asset Management
Integrated Facilities Management:
The Facility Management Services Market in India is estimated to grow
at a CAGR of 15.23% between 2022 and 2027 and increase by $16.32 billion, according to a
report by Technavio12. In 2021, the industry was estimated to be worth
$21 billion. Facilities management consists of soft services such as housekeeping,
catering and security services and hard services such as heating, ventilation and
air-conditioning, plumbing and fire protection. According to the market research firm,
growth will be driven by rising level of outsourcing in building management, the
development of SEZs and mega food parks, and the focus on smart cities. By outsourcing
various facility-related services such as HVAC, catering, security, and other support
services, end users can focus their attention on core business activities, it adds. For
sectors such as retail, education, hospitality and healthcare, outsourcing facility
management makes eminent economic sense given the scale at which they operate. With the
exception of healthcare, most sectors were hard hit by Covid and over the past year have
made a gradual comeback. This is helping facility management providers get back on their
feet. The catering business continues to show traction on the back of opening up of
offices and educational establishments. With the hybrid work model still being active, the
facility management business has more headroom.
Companies are also increasingly opting for integrated services and
going forward this will lead to a gradual consolidation in the industry. Regional and
unorganized players could find the going tough as customers become more compliant and
expect the same of their vendors. Smaller players could also find it hard to grapple with
high employee attrition, which plagues this highly fragmented sector.
Security Services
The workforce size of the industry is more than the combined strength
of the Army, Navy, Air Force and Police put together. With 8.9 million security guards and
1.9 million police officers, India has 5x as many private security guards as police
officers.13 These numbers notwithstanding, the industry is characterised by low
entry barriers and this has led to mushrooming of unorganised players with little scale or
expertise. However, their presence actively deters organised players from flexing their
pricing muscle. While Private Security Agencies Regulation Act, or "PSARA" is
meant to regulate private security companies, given the vagueness in defining optimum
security or lack of standardisation, most firms engage in providing manned guarding
services. To differentiate themselves against unorganised players, organised players are
now increasingly using technology. The use of technology not only improves the scope of
services provided but also acts as a value add to justify higher pricing. It also helps
with employee retention via training and upskilling needed to use the technology.
As with the facilities management industry, the security services space
will undergo consolidation driven by higher operating costs and adoption of technology.
With rising industrialisation and commercialisation, the demand for security services is
only expected to rise. The Indian private security market is estimated at 150,000 crore
and has historically grown at 20% annually.14 According to Technavio, bulk of
the future growth could come from South India due to the existence of significant
metropolises like Hyderabad, Bangalore, Chennai, and Kochi. These metropolitan cities are
attracting high investments from the financial, industrial, and IT sectors, which are
resulting in rapid urbanization of the region.15
Product Led Business
Online Recruitment
The global online recruitment market is projected to grow from $31
billion in 2022 to $58 billion by 2030, at a CAGR of 7.1% as per Skyquestt.16
This growth will be powered by high bandwidth internet infrastructure, expanded use of
cloud technology, and social networking. After North America, Asia Pacific is predicted to
hold the second-largest share due to rapid adoption of AI in the regions key
countries such as China, Japan and India.
Job boards are working on innovative ways to address the traditional
challenge faced by recruiters of finding the right candidate and that of the candidate
optimising his skills and experience. As for the job portals themselves, engagement and
assisted services have much bigger revenue potential than just plain vanilla candidate
discovery. While the discovery market is estimated at $1.3 billion, the market for
assisted services is estimated at 8X the former. This will eventually work out very well
for the job portals who have historically had 90% of their revenue flowing from
recruiters.
This internal transformation in no way harbours the job portals from
external business realities. According to the World Economic Forum, about 22% of the
Indian job market will witness structural change over the next five years, with top
emerging roles coming from AI, machine learning and data segments. Of the companies
surveyed by WEF, 61% think broader applications of ESG (environment, social and
governance) standards will drive job growth, followed by increased adoption of new
technologies (59%) and broadening digital access (55%). To be adequately prepared, India
needs policies that can create jobs and prepare the workforce for the future. The
government will have to focus on building both physical as well as digital infrastructure
to create opportunities for fresh graduates.
Financial Performance
( in millions except per share data)
| Particulars |
Consolidated |
Standalone |
|
FY 2023 |
FY 2022 |
FY 2023 |
FY 2022 |
| Revenue |
171,583.87 |
136,917.78 |
121,963.45 |
97,584.98 |
| Less: Cost of Materials and Stores and Spare Parts Consumed |
4,794.39 |
2,787.25 |
1,773.52 |
1,110.39 |
| Less: Employee Expenses |
146,595.61 |
116,869.92 |
109,156.31 |
87,045.27 |
| Less: Other Expenses |
14,337.25 |
11,025.76 |
9,094.63 |
7,558.23 |
| EBITDA |
5,856.62 |
6,234.85 |
1,938.99 |
1,871.09 |
| EBITDA Margin |
3.41% |
4.55% |
1.59% |
1.92% |
| Add: Other Income |
263.35 |
198.01 |
707.62 |
1315.70 |
| Less: Finance Costs |
1,066.08 |
792.15 |
574.89 |
476.99 |
| Less: Depreciation & Amortisation Expense |
2,746.12 |
2,120.47 |
651.10 |
481.04 |
| Add: Share of Loss in Associates |
0.84 |
(16.87) |
- |
- |
| Less: Exceptional Item |
(535.03) |
(72.24) |
83.04 |
422.52 |
| Profit Before Tax |
2,843.64 |
3,575.61 |
1,337.58 |
1,806.24 |
| Profit Before Tax Margin |
1.66% |
2.61% |
1.10% |
1.85% |
| Less: Tax Expense |
614.55 |
1,065.84 |
35.92 |
357.96 |
| Profit After Tax |
2,229.09 |
2,509.77 |
1,301.66 |
1,448.28 |
| Profit After Tax Margin |
1.30% |
1.83% |
1.07% |
1.48% |
| Add: Other Comprehensive Income/ (Losses) |
554.54 |
16.26 |
50.54 |
(78.42) |
| Total Comprehensive income for the year |
2,783.63 |
2,526.03 |
1,352.20 |
1,369.86 |
| Diluted EPS (in ) |
15.04 |
16.18 |
8.72 |
9.71 |
Key Highlights for FY23
Revenue from operations
The companys consolidated revenue registered a growth of 25%
during the year to reach 171.58 billion as compared to 136.92 billion in FY22. All
Platforms registered a steady 20%+ revenue growth with our headcount net-addition of 74k
(17% YoY growth) in FY23; Second consecutive year of 70k+ HC addition signifying our
strong sourcing engine and a relentless focus on sales.
EBITDA
Consolidated EBITDA for the year dropped by 6% to 5.86 billion from
6.23 billion in FY22, the drop is majorly because of our investments in Product led
platform of 0.95 billion, excluding that EBITDA grew by 7% YOY at 6.81 billion. EBITDA
margin dropped from 4.55% in FY22 to 3.41% in FY23. Excluding Product led
platform- EBITDA margin stood at 4.1%, drop YOY majorly attributable to slowdown in IT
sector hiring in H2 and also contract renegotiation in OAM platform.
Cost of Materials and Stores and Spare Parts Consumed
Cost of Materials, Stores and Spare Parts Consumed increased 72% YOY to
4.79 billion from 2.79 billion in FY22 as we saw exceptional growth in break-fix
and food businesses.
Other Expenses
Other expenses increased during the year with volume growth in business
activity. FY23 saw an increase in Travel and Conveyance, Consulting, Recruitment and
Business promotion expenses. Other expenses was also higher during the year due to rise in
subcontractor costs in telecom business, Stellarslog becoming a subsidiary and growth in
professional IT staffing and facility management business.
Our SG&A cost has increased to 5.7% of revenue in comparison to
5.4% in FY22, increase is driven by product led spend on business promotion and
marketing expenses; excluding PLB, SG&A spend is down to 4.5% of revenue from 4.9% in
FY22. The decrease is because of continued focus on cost reduction, productivity and
automation.
Finance Cost
Finance cost for the year was 1.07 billion against 0.79 billion for
the previous year, an increase of 35%. Increase in Finance cost is mainly due to interest
rates going up during the year and also because of IND AS 116 interest component for new
leases signed during the year.
Finance Cost - The gross debt reduced to 5.31 billion in FY23
from 5.88 billion in FY22. This in spite of a 25% growth YOY, reflects strong focus
on working capital management.
Depreciation and Amortization Expenses
The Consolidated Depreciation & Amortization (D&A) Expenses
increased 30% to 2.75 billion in FY23 from 2.12 billion in FY22.
The increase is majorly on account of depreciation on lease rentals for
office space in GTS platform.
Share of Loss in Associates
Share of profit in Associates during the year was at 0.84 million
against Loss of 16.87 million for FY22.
Stellarslog Technovation Private Limited (Taskmo) became a subsidiary
with a total holding of 53.91% effective April 2023.
Exceptional Items
During the year, the Company sold its 53% stake in Simpliance
Technologies Private Limited (Simpliance) with a carrying value of 45 million to
Aparajitha Corporate Services Limited (Aparajitha) and Dasa Consulting
Private Limited, acting as a Trustee company of Poornatha Wellness Private Trust.
Consequently, a gain on sale aggregating to 535.03 million was disclosed as exceptional
item during the year.
Income Taxes
Tax expenses during the year were 0.61 billion against 1.07 billion
in FY22. Effective tax rate for the year was 21.6%.
Balance Sheet Analysis
| Particulars |
FY 2023 |
FY 2022 |
| Leverage Metrics |
|
|
| Debt: Equity (#) |
0.20x |
0.24x |
| Working Capital Metrics |
|
|
| Receivable DSO |
57 days |
62 days |
| Return Metrics |
|
|
| RoCE (pre-tax) (#) |
11.89% |
16.60% |
| RoE (post tax) |
8.41% |
10.03% |
| Credit Rating |
|
|
| Long Term |
ICRA AA [Stable] |
ICRA AA [Stable] |
| Short Term |
ICRA A1+ |
ICRA A1+ |
Goodwill : Decrease in goodwill due to Sale of Simpliance during
the year -0.53 billion.
Property, Plant and Equipment:
Increase in Property, Plant and Equipment during the year with
investments made in computer equipment as a part of the normal refresh cycle.
Right of use assets : Right of use assets higher during the year
with investment made in new buildings to support growth especially in GTS platform.
Investments : Investments decreased due to Stellarslog Technovation
Private Limited becoming a subsidiary effective this year.
Receivable DSO: Receivable DSO decreased by 5 days to 57 days vs.
FY22 reflecting robust collection and working capital management.
Cash and Cash Equivalents: The cash and cash equivalent balance
including bank balances and current investments stood at 6.12 billion as of 31st
March 2023 in comparison to 6.04 billion as of 31st March 2022.
Borrowings: Long term Debt reduced by 142.03 million to 94.72
million as of 31st March 2023. Short term Debt decreased by 0.42 billion to
reach 5.2 billion as on 31st March 2023. Debt: Equity ratio reduced year on
year.
Non-Controlling Interest increased during the year due to dilution
of Quess stake in foundit.
Cash Flow from Operations: Cash flow from operations decreased by
16% from 5.54 billion in FY22 to 4.66 billion in FY23.
Financial Ratios
| Ratios |
FY 2022-23 |
FY 2021-22 |
| DSO days |
57 days |
62 days |
| Interest Coverage Ratio |
5x |
8x |
| Current Ratio |
1.27x |
1.35x |
| Debt Equity Ratio (#) |
0.20x |
0.24x |
| EBITDA Margin |
3.41% |
4.55% |
| Net Profit Margin |
1.30% |
1.83% |
| Return on Net Worth |
8.41% |
10.03% |
| Debtor Turnover Ratio |
12.45 |
12.65 |
| Working Capital Turnover Ratio |
22.22 |
15.68 |
# Few ratios have been re-stated as debt has been amended to include
current maturities of long term debt from other financial liabilities as per schedule III
of the Company Act.
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