Aarvi Encon Management Discussions

Economy Overview

In 2022, the global economy faced a series of turbulent challenges. High inflation rates, the most significant in several decades, led to tightened financial conditions in most regions. Additionally, Russias invasion of Ukraine had a lasting impact on economic activity. The rapid spread of COVID-19 in China also hampered growth during the year. However, the recent reopening of economies has paved the way for a rapid recovery.

Global governing bodies have undertaken various initiatives to mitigate existing economic risks. Monetary policies are anticipated to focus on restoring price stability, while fiscal policies aim to alleviate cost pressures while maintaining a suitably tight stance. In addition, structural reforms can play a crucial role in lowering inflation by enhancing productivity and addressing supply-side constraints. These collective measures are expected to support economic stability and reduce the impact of prevailing risks.

As per the latest International Monetary Fund (IMF) estimates published in January 23, the global economy is projected to grow at 2.9% in 2023 (vs estimated 3.4% in 2022) and 3.1 % in 2024. In 2022, Middle East and Central Asia have been the highest contributor to the global real GDP, while Emerging and Developing Asia are expected to be the highest contributors in 2024. Euro area is estimated to grow at 1.6% in 2024, whereas United States and Latin America are expected to grow at 1.0% and 2.1% respectively in 2024.

Indian Economy Overview

The Indian economy has staged a full recovery, ahead of many nations and has positioned itself to ascend to the pre-pandemic growth path in the FY 22-23. However, India must also cope with the challenge of controlling inflation. Fortunately, actions taken by the government and RBI along with decline in global commodity prices has led retail inflation levels reaching to 5.7% in December 2022 and 5.66% in March 2023, which are within the RBI upper tolerance target of 6%.

As per IMF, Indias real GDP grew at 6.8% in 2022 (estimates) and expected to grow at 5.9% in 2023 and 6.3% in 2024, with resilient domestic demand despite external headwinds. As per CEIC, Indias per capita GDP reached USD 2,301 in March22, an all-time high resulting in a significant increase in demand driven by consumption. Industrial production also increased supported by persistent demand conditions. For the first half of FY23, the Industrial Sectors overall Gross Value Added (GVA) increased by 3.7%, above the 2.8% average growth seen in the first half of the previous decade.

In 2023, nearly 15% of the worlds growth is forecasted to come from India. These growth projections are partially based on the economys resilience, which can be observed in how quickly private consumption rebounded, while the governments capital expenditure, which surged by 63.4% in the first eight months of FY23 was also a major contributor. India will also be able to maintain a positive growth-interest rate differential owing to the governments policy of capital expenditure led growth, which will result in a sustainable debt to GDP over the long term. To connect India to international supply chains, the Production Linked Incentive (PLI) programs were created with an expected investment of 4 lakh crore during the FY 2022–27. As per the Indian Brand Equity Foundation (IBEF) In F.Y. 2022, investments under PLI programs totaled INR 47,500 Crs, which reached 106% of the years set objective. Due to PLI initiatives, production/sales of 3.85 lakh crore and the creation of 3.0 lakh jobs have been registered. The Indian economy has also begun to prosper from more formalization, greater financial inclusion, and economic possibilities brought forth by technologically driven economic reforms.

Global staffing

Global revenue in the staffing industry grew by 4% last year to USD 648 billion, slowing from the fast-paced growth of 23% in 2021. As per the Staffing Industry Analysts "Global Staffing Market Estimates & Forecasts May 2023" report, the growth is expected to slow further this year to 2% before picking up speed again in 2024. Of the global staffing revenue in 2022, three countries the US, Japan and UK generated 55% of the revenue. US was the largest contributor, representing 34%, with Japan representing 13% and the UK representing 8%. Another 12 countries have staffing revenue of at least USD 6 billion. Looking ahead in 2023, Asia Pacific staffing revenue is expected to grow by 9% year over year, and Middle East and Africa revenue is expected to increase by 3% in 2023. In the US, staffing revenue is expected to fall 3% this year, while Canadian staffing revenue is expected to rise by 2%. Overall, in America, revenue is forecast to decline by 3% year over year. In Europe, the staffing industry is expected to see revenue grow by just 1%, although performance varies by country. Hungary is expected to see revenue grow by 10%, but Slovenia is expected to see revenue decline by 9%.

The gross domestic product (GDP) and staffing/recruiting have a strong relationship. The employment market grows in line with GDP growth. The increase in foreign-born workers, rising staffing index, use of VMS and MSO, new business environment, high demand for experienced and qualified artisans, and stimulating job possibilities and hires are all factors driving the market. However, the markets expansion will be constrained by a declining labor force participation rate, an aging workforce, and a decreasing ratio of unemployed people to available jobs. Companies are recommended to invest in solutions that allow them to scale up a business without extending the staff and automate all time-consuming tasks if they want to increase their total competitive power. Generative AI (GAI) — i.e., tools like ChatGPT.

Recruitment Trends evolving in 2023:

85% of the Recruiters believe that remote work will become the new norm.Gig work has become a prominent topic in the professional landscape. With its rising popularity, individuals are increasingly inclined towards engaging in short-term work commitments involving multiple clients. These arrangements offer flexibility in terms of time management and quicker earnings. Consequently, this trend has brought about significant changes in how companies approach recruitment and the type of tasks suitable for project-based freelancers.

Indian Staffing

The Indian staffing market is currently a USD 10 billion industry, growing at 28% YoY. It is poised to become one of the largest by 2030. Economic volatility is a reality nowadays, and businesses must be more adaptable to market shifts. Given the size of the labor pool, Indias staffing industry is already huge and primed for fast expansion. According to Moorthy K Uppaluri, who is the CEO of Randstad India, the Indian staffing industry would be the largest in the world in the coming years. According to industry forecasts, temporary labor will account for 10% of Indias official sector employment by 2025, argues Mr. Uppaluri. In the financial year 2022-23, flexi staffing in India experienced a sizeable 14% growth, with the addition of 170,000 new flexi workers. This brought the total flexi workforce to 1.44 million, rising from 1.26 million recorded in the previous year. However, the rate of annual growth in flexi workforce slowed compared to the 220,000 flexi workers added in FY 2022. This growth includes both general flexi staffing and IT flexi staffing sectors, as stated by the Indian Staffing Federation (ISF).

Within the overall flexi workforce of 1.44 million, the general flexi staffing sector saw a robust 15.3% expansion, resulting in the addition of 140,000 new jobs. Conversely, the IT flexi staffing segment experienced a fall of 7.7% in new flexi jobs compared to the prior fiscal year. Looking specifically at the fourth quarter of FY 2023

(January-March 2023), data indicates a 0.4% growth in flexi jobs. The demand for employment in general flexi staffing emerged from various sectors including FMCG, E-commerce, manufacturing, and healthcare. On the other hand, the IT flexi staffing sector witnessed a 6% decline in the same quarter.

In terms of gender participation, womens involvement in the flexi workforce remained consistent, accounting for 24% in the FY 2023, a rise from the 21% representation in the broader industry.

Gig Workers

Global contract or temporary staffing services encompass the process of recruiting employees or skilled individuals for a limited duration or specific project within an organization. These arrangements can include fixed-term contracts designed for short-term projects, task-specific roles, as well as seasonal or casual positions such as day labor and festive season employment. Contract or temporary staffing services encompass both fixed-term contracts (FTCs) and casual work. The Contract or Temporary Staffing Market was valued at USD 90 Billion in 2021. The market is poised to grow to USD 130.20 Billion in 2030, at a CAGR of 9.06%. Employers will hire more contract workers as a hedge against uncertainty. Stephen Lochhead, SVP of Global Talent Acquisition at Expedia says "As uncertainty grows, businesses need to be nimbler and more responsive to sudden shifts in the market. To do so, employers may increasingly rely on contingent talent, like contractors or gig workers, whose labor can be scaled up and down on demand." In the US, for instance, LinkedIn job posts for contract positions are growing much faster than job posts for full-time employees, which are relatively stable. The share of U.S. paid job posts for contractor roles increased by +26% YoY, while full time roles only grew by 6% Y-o-Y. The gig economy in India is expected to grow at a significant rate, and the statistics show that it has a promising future. According to a report by the International Labour Organization (ILO), India is the second-largest gig economy in the world, with around 56% of all gig workers in the Asia-Pacific region working in India. According to a report by Nasscom, the gig economy in India is expected to grow at a CAGR of 17% with 23.5 million gig workers and the growth projection of reaching a market size of USD 455 billion by 2023 are impressive figures. The gig economy is predicted to be a significant building block in achieving Indias aim to become a USD 5 trillion economy by 2025, the reports indicated. This would assist in bridging the income and unemployment gap.

The study conducted by Boston Consultancy Group (BCG) estimates that the Indian gig economy has the potential to create up to 90 million jobs in the non-farm sectors, which is about 30% of Indias workforce. The growth of the gig economy is expected to lead to efficiency and productivity gains, which can contribute up to 1.25% to Indias GDP. This indicates that the gig economy can have a significant impact on Indias economy by providing employment opportunities and boosting economic growth. The gig economy has already started to make an impact in various sectors, and with further growth and development, it has the potential to create a substantial positive impact on Indian Economys diverse range of sectors and industries.

Drivers of the gig economy in India

The drivers of the gig economy are factors that contribute to the growth and development of non-traditional work arrangements, where individuals work as independent contractors or freelancers, rather than as employees of a single company. The gig economy in India is fueled by various factors some are stated below:

Young demographic dividend: India boasts a substantial and increasing population of young, educated, and tech-savvy individuals. Many millennials highly value flexibility and a balanced work-life dynamic, making the gig economy an attractive avenue for them.

Technology: The advent of smartphones, high-speed internet, digital platforms and technologies enable work to be performed remotely and independently has been a key driver of the gig economy. These platforms provide gig workers with a way to connect with customers and clients and offer their services on a flexible basis.

Rising levels of education and skills: With a growing number of well-educated people in India possessing specialized skills, there is a rising interest in leveraging these talents through gig work opportunities.

Urbanization and rising consumer demand: Rapid urbanization in India is making middle class continue to grow, has created a large demand for gig workers in various sectors such as transportation, delivery, home services, and e-commerce.

Cost-effective labor: For businesses, gig workers can be a cost-effective alternative to traditional employees, as they can be hired on a project-by-project basis, without the need to provide benefits or other forms of compensation.

Flexible Work Arrangements: The youth prefer flexi work hours especially post Covid. Gig workers have the ability to set their own schedules and choose the types of projects they want to work on, which can be particularly appealing to those who value work-life balance over traditional employment arrangements.

Entrepreneurship: The gig economy has also given rise to a new breed of entrepreneurs who use digital platforms to start their own businesses and offer their services to customers around the world.

Supportive government policies: The Indian government has been supportive of the gig economy and has taken several initiatives to promote it, such as the Digital India program, Start-up India, and Skill India.

Challenges faced by gig workers

Lack of job security, income instability, lack of formalization, lack of legal and social security, unequal bargaining power, and uncertain employment status for workers are significant challenges in the gig and platform sectors. The uncertainty associated with regularity in the available work and income may lead to increased stress and pressure for workers. Platform workers are termed as "independent contractors". As a result, platform workers cannot access many of the workplace protections and entitlements

Benefits/ Advantages

? Cost-Effective HR

In scenarios where specific skill sets are required for short-term projects, setting up an entire in-house team demands significant time, monetary investment, and resources. A practical alternative is to engage Manpower Outsourcing services, allowing you to efficiently accomplish your project while saving substantial costs. Many businesses also opt to outsource their HR services, enabling them to integrate a skilled and professional system within their company without the substantial expenditure of establishing an internal HR team.

? Enables business to adjust more easily and quickly to workload fluctuations

Businesses often encounter fluctuations in their workload demand. During such periods, temporary help agencies can swiftly provide well-qualified staff to meet these requirements. Whether its project-driven, seasonal, or peak demand, or addressing employee shortages, these agencies offer a prompt solution.

? Maintains staffing flexibility

In the context of the prevalent and enduring trend of flexible work arrangements, staying attuned to the preferences of the modern workforce is crucial. Embracing temporary staffing is one avenue through which businesses can extend flexibility while simultaneously catering to their operational demands.

? Lets business evaluate a worker without commitment

Temporary staffing arrangements offer the advantage of evaluating a workers performance without a long-term commitment. This approach permits you to engage a temporary worker for a specific short-term role, or even extend a full-time position offer to a candidate whose abilities align with your business needs. This serves as a prudent and cost-effective strategy to assess new hires before making permanent commitments.

? Can save time and money

Engaging temporary workers is frequently more economical than hiring permanent employees with benefits. In the short run, opting for temporary staff generally proves to be more financially efficient. By partnering with an agency, you delegate the role of being the employer to the temporary worker. The agency takes on responsibilities such as recruitment, screening, testing, hiring, managing payroll, fulfilling payroll taxes, managing unemployment and workers compensation insurance, and administering any desired employee benefits.

? Specialized Project Hiring

In certain projects, there arises a need for individuals with specific and specialized skills for relatively short durations. After the successful completion of their designated tasks, their services might no longer be necessary. Opting for such specialized hires enables the Company to execute tasks with remarkable efficiency and precision.


1. Recruitment Has Become More Digital

In the evolving landscape of staffing firms, digitization has taken center stage, redefining traditional practices. While the essence of successful recruitment remains rooted in building relationships, adapting these connections to an online sphere poses challenges. The tools of choice now include LinkedIn, virtual conferences, webinars, and online advertising, which necessitate careful planning. However, this digital shift offers a unique advantage, enabling staffing firms to simultaneously engage with multiple potential clients. The transition to online relationship-building demands strategic adaptation but also enhances the scope for forging new connections.

2. Dearth of quality talent

Many bosses who hire people (hiring managers) are having a tough time finding really good candidates. This is a common problem because there arent enough skilled people for all the jobs that are needed. Sometimes, companies dont even know exactly what kind of person they want, and they usually think only the people looking for jobs online are available. But thats not true. The best workers often find jobs through their networks and recommendations, not just by applying online. Another problem is that companies often start looking for someone only when a job is empty. It would be better if they planned ahead and looked for great people even before the job opens up.

3. Expectation gap between recruiters and hiring managers:

This is a big reason why it takes a long time to hire people in many companies nowadays. About half of the people who find candidates (recruiters) say the bosses who want to hire (hiring managers) should explain better what they want in a person and give clear examples. But, 77% of hiring managers think recruiters dont choose the right candidates. Also, recruiters think bosses want them to find people really quickly, while bosses want recruiters to have a list of potential hires ready so they dont have to start searching from the beginning each time. If everyone plans together and talks about what skills are needed and how many people are needed, it will help reduce these problems

Demographic trend

Demographic trends mainly affect the staffing market that increases as the labor force supply increases. A shift in demographic transition can become a circumstance in dampening economic expansion and GDP increase, which in turn would cause a deterioration in the recruitment market.


India has a comprehensive understanding of the current industry demands and the high expectations that companies have for their workforce. To cater to these needs, the country offers staff on deputation to corporations, industrial segments, and engineering companies on a project-by-project or short-term basis. Businesses of all sizes, from multinational conglomerates to small and medium-sized enterprises, have embraced the advantages of outsourcing. By outsourcing support services, companies can focus on their core business activities and save time and energy to meet the ever-increasing business demands. This approach also helps them reduce costs and enhance employee productivity, ensuring they remain competitive.

Aarvi, a prominent outsourcing company, has an extensive database of over 800,000 trained and experienced engineers in various sectors, such as project management, construction, planning, safety, quality assurance/quality control, procurement, inspection, testing, and commissioning. As a result, Aarvis outsourcing services have gained significant traction. Our temporary workforce solutions simplify recruitment and replacements, making the process more efficient. Flexi-outsourcing is another beneficial aspect, benefiting both employees and employers. It allows organizations to hire staff on an as-needed basis, rather than committing to permanent positions.

Looking ahead, Aarvi is poised for further growth due to the changing dynamics of the industry and the increasing adoption of flexi-outsourcing both within India and overseas. This positions us as a key player in meeting the evolving demands of the market.


Industrial Operation and Maintenance (O&M) services have emerged as non-core activities for power, steel, and cement plants. In pursuit of enhanced equipment uptime, reduced maintenance costs, and improved operational excellence, companies are increasingly opting to outsource their O&M activities. With a simultaneous surge in infrastructure growth and capacity expansion of plants, the O&M industry is expected to reap substantial benefits. The company, having garnered profound insight into the distinctive needs and challenges of numerous industries, has become the preferred partner for O&M services among its clientele. Prominent organizations such as HPCL, GSPC, Cairn, and GSPL, to name a few, rely on the companys O&M services for their operational efficiency.


Aarvi Encon, a leading Technical Manpower Supply company, provides permanent and temporary manpower services in a variety of industries. It has been providing industrial solutions to the organized sector for over 35 years. Aarvi adds value to various verticals by providing technical staffing solutions and qualified engineers in areas such as electrical- instrumentation services, erection & commissioning, operation & maintenance, instrument calibration, plant shutdown, equipment services & support for O&Ms, airport maintenance, and so on.

Aarvi is one of the most well-known workforce outsourcing firms, providing temporary staffing to a wide range of industries, including EPC firms, power plants, oil and gas refineries, chemicals and petrochemicals, construction, infrastructure projects, renewable energy, ports, terminals, telecom, fertilizers, cement, automation, automobile, aviation, metro & monorail, railway, metals, minerals and so on. Throughout the year, the company successfully welcomed and integrated over 50 new clients into its portfolio.

The company has added O&M services to its service offering. O&M activities currently account for 17% of our revenue. Aarvi Encon has become the preferred partner for O&M services during the previous five years. The FY 2022-23 marked the beginning of Aarvis Green Transformation, whereby our manpower outsourcing services in the renewable sector accounted for an impressive 8% of the total revenue, underscoring the positive impact of our initiatives on the companys overall performance and our pivotal role in supporting the growth of renewable energies.

It has successfully expanded its operations internationally by leveraging its track record in India, and has provided a wide range of engineering services on various international projects, particularly in the UAE, Saudi Arabia and UK, to prestigious clients such as Larsen & Tourbo Limited, Tecinmont, Reliance Industries Limited, Indian Oil, Cairn, HMEL, and others.


The Company has in place adequate Internal Financial Controls with reference to financial statements and such internal financial controls are operating effectively. Your company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to the Companys policies, the safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and timely preparation of reliable financial statements. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. The Internal Auditors monitors and evaluates the efficacy and adequacy of internal control systems of the company, its compliance with applicable laws/ regulations, accounting procedures and policies. Based on the report of the Internal Auditors, corrective actions were undertaken and controls were thereby strengthened. Significant audit observations and action plans are presented to the Audit Committee of the Board.

Results of our operations:

The function-wise classification of the Consolidated Statement of Profit and Loss is as follows:


2023 % 2022 %

Revenue from Operations

436.52 100 288.54 100
Employee Benefit Expenses 291.61 66.8 216.66 75.1
Finance Cost 1.76 0.4 0.73 0.3
Depreciation and amortisation expense 1.23 0.3 1.02 0.4
Other Expenses 126.71 29.0 59.16 20.5

Total Expenditure

421.3 96.5 277.57 96.2


18.66 4.3 13.91 4.8

Profit before tax

15.68 3.6 12.15 4.2
Current Tax 1.11 0.3 0.11 0.0

Profit for the year

14.51 3.3 12.06 4.2

Consolidated Performance a. Revenue from operations at Rs. 436.52 Crore as against Rs. 288.55 Crore of previous year shows the increase in revenue by 51% than the previous year. b. The Net profit after tax for the year grew by 20% to Rs. 14.51 Crore from Rs. 12.07 Crore. c. The Working capital (Net current assets) increased by Rs. 11.90 Crore i.e. from Rs. 51.89 Crore to Rs. 63.80 Crore.

Significant changes in key financial ratios as compared to the previous year:


2022-23 2021-22 Y-o-Y change (%)

Reasons for the Increase/ Decrease.

Debtors turnover (days)

79.46 102.48 (22.46)

The Companys robust and efficient recovery process has led to a reduction in debtor turnover days.

Interest Coverage Ratio

10.40 17.61 (40.94)

Interest coverage ratio reduced due to increase in financial cost

Net capital turnover ratio

6.84 5.56 23.02

Net capital turnover ratio increased in line with the increase in the Revenue from operations of the Company.

Current Ratio

2.29 1.99 15.08

The Current Ratio has risen due to the Companys augmentation of Current Assets and reduction in Current Liabilities.

Debt : Equity Ratio

0.03 0.07 (57.14)

Debt Equity Ratio decreased due to the decrease in the debt levels of the Company.

Operating profit margin (%)

4.19 4.46 (6.05)

The Companys Operating Profit Margin experienced a slight reduction due to elevated Employee and Finance Costs.

Net profit margin (%)

3.32 4.18 (20.57)

The Companys Net Profit Margin saw a slight decrease attributed to the rise in Employee and Finance Costs.

Return on Net worth/ Return on Capital Employed (%)

16.36 12.70 28.82

The rise in the Companys EBITDA has resulted in a parallel increase in Return on Net Worth/ Return on Capital Employed.

Return on investment (%)

14.84 12.02 23.46

The increase in the Companys Net Profit has correspondingly elevated the Return on Investment.

Standalone Performance a. Revenue from operations at Rs. 382.70 Crore as against Rs. 274.51 Crore of previous year which is upward increase by 39 % year on year, reflecting good results in key markets and segments. b. The Net profit after tax for the year grew by 15% to Rs. 14.12 Crore from Rs. 12.31 Crore. c. The Working capital (Net current assets) increased by Rs. 6.56 Crore i.e. from Rs. 40.20 Crore to Rs. 46.76 Crore. Significant changes in key financial ratios as compared to the previous year:


2022-23 2021-22 Y-o-Y change (%) Reasons for the Increase/ Decrease.

Debtors turnover (days)

75.09 92.06 (18.43) The Companys robust and efficient recovery process has led to a reduction in debtor turnover days.

Interest Coverage Ratio

9.70 17.95 (45.96) Interest coverage ratio reduced due to increase in financial cost

Net capital turnover ratio

8.19 6.83 19.91 Net capital turnover ratio increased in line with the increase in the Revenue from operations of the Company.

Current Ratio

2.03 1.85 9.73 The Current Ratio has risen due to the Companys augmentation of Current Assets and reduction in Current Liabilities.

Debt : Equity Ratio

0.04 0.08 (50) Debt Equity Ratio decreased due to the decrease in the debt levels of the Company.

Operating profit margin (%)

4.46 4.78 (6.69) The Companys Operating Profit Margin experienced a slight reduction due to elevated Employee and Finance Costs.

Net profit margin (%)

3.69 4.48 (17.73) The Companys Net Profit Margin saw a slight decrease attributed to the rise in Employee and Finance Costs.

Return on Net worth/ Return on Capital Employed (%)

17.49 14.82 18.02 The rise in the Companys EBITDA has resulted in a parallel increase in Return on Net Worth/ Return on Capital Employed.

Return on investment (%)

14.53 13.95 4.16 The increase in the Companys Net Profit has correspondingly elevated the Return on Investment.

Material Developments in Human Resources / Industrial Relations Front

The Company believes that Human Resources are its key assets. The total number of employees and consultant of the Company is 5427. The Companys HR policy focuses on developing the skill and competencies of all the employees, facilitating team work and total employee involvement, providing a happy work environment to the employees and support to their families and remaining a socially responsible Company contributing to the society.

Learning is given the utmost importance in the Company. Training programs focus on improving employees current skills and competencies as well as developing them for their future roles as part of their career development. The Company ensures overall development of every employee and all inputs are provided to reach the expert level of their skill and competency.

In the Company, HR processes are aligned to make employees feel that they are a part of the Company family. The Company creates the platform for employees to voice their opinion and make suggestions to improve the working environment. The Company maintains regular communication with employees to make them feel connected with the Company and perform their jobs most effectively.

The Company focuses on inculcating the habit of continuous improvement and motivating employees to participate in improvement activities for the organization. The Company continues to maintain its record of industrial harmony.