Strong volume, soft organic margins; Quess 2.0 offsets near-term caution

GS +15% YoY, PS +3% YoY, Overseas +17% YoY; PS missed prior double-digit expectation

₹261 Cr tax refund + ₹176 Cr one-time labor code revenue inflated results; underlying operational PAT weaker

Target was 2.4% medium-term; 2.0% is below guidance despite one-time 176 Cr revenue boost

Only 3% YoY growth (9% QoQ); prior call guided for double-digit re-acceleration in FY27

1.5% normalized ex-one-time aligns with call; sequential EBITDA down 2% despite YoY +12%

Prior guidance: FY27 return to double-digit revenue growth; Q1 delivered 3% YoY (only 9% QoQ). Still at 11% margin but growth momentum weaker than guided

GS profit contribution dropped from 65-68% (FY26) to 50% (Q1), with PS/International now 50%. Target 35% GS / 65% higher-margin by FY30

Japan corridor now live (vs in-discussion prior call); 5 focus segments (Healthcare, Tech, MEP, Hospitality, Finance) with target 20-25% revenue by FY30

Management bullish on 2,407 GCCs in India with only 10% captured; 250-300 new GCCs entering annually

Regulatory constraints on outsourcing now limiting factor; GS BFSI saw marginal decline YoY

Manufacturing requires sourcing intensity, infrastructure (65 offices), tech; new variable contracts (38% this Q) will scale slowly. Flat-fee business erosion offset by AI/tech investments.

2,407 GCCs exist; only 10% captured. New GCCs entering India 250-300/year. Confidence high on further GCC penetration despite maturation in some. No explicit quantified pipeline for IT hiring.

One-time YTD booking for 68% of customers. Remaining liability smaller (estimate <₹170 Cr remaining). No recurring benefit; is pass-through (matched by cost).

Festive season upcoming; 37,000 open mandates; 86 new contracts will yield incremental headcount in Q2. Q1 was light; confidence high on sequential ramp.

GCC revenue per associate ₹1.5-2.5 lakh/month; comparable to PS/Overseas on PAPM. Margin trajectory will be international-corridor + professional-corridor level, below GS but above blended. No exact number until MSAs signed and execution begins.

Currently 482k (ranked 3rd-4th globally). Need 125k more to become #1. Growth in India (demographic dividend through FY45), not via M&A or heavy overseas capex. Focus on Quess 2.0 corridors (capital-light, partner-led).

No benefits yet. Will disclose when received.

Q1 added 5k (backloaded to Q2+ via 86 new contracts + festive season); achieved in-year not immediately

Japan corridor live; Europe, Israel in advanced discussions; North America early stage; timeframe FY27-FY30

Diversified across geographies; 37 new logos added; currency headwinds managed

Current 2.0% below 2.4% target despite ₹176 Cr one-time revenue; merit cycle + labor code offset gains

Delivered 11% in Q1; guidance range maintained; double-digit margins even after merit cycle

Two markets already double-digit; rest sub-5%; scale expected to lift blended rate

Q1 PS growth 3% YoY (vs prior guidance for double-digit FY27). GCC now 71% headcount; if GCC hiring slows due to client maturation, limited runway from traditional IT to offset.

GS EBITDA margin normalized to ~1.5% (ex-one-time 176 Cr labor code revenue). Shift to higher-margin Manufacturing (5-6% gross margin vs Consumer 2-3%) requires sourcing intensity and time to scale. Merit cycle depresses Q1 margins every year.

Japan corridor live, but Europe, Israel, North America still in discussion/early stages. Margin profile estimated at 'international corridor + professional corridor level' but no quantified target. Capital-light model relies on partner performance; Quess retains hiring/delivery risk.

Labor Code implementation created ₹176 Cr one-time revenue in Q1; 68% of customers covered. Remaining liability expected smaller. BFSI saw marginal decline due to regulatory restrictions on what can be outsourced. Overseas expansion faces potential visa/labor mobility headwinds (acknowledged by analyst).

Q1 EBITDA 2.0% includes ₹176 Cr one-time labor code revenue with no margin impact; sequential margin down 2% despite YoY +21% growth (due to merit cycle + labor code drag). Normalizing for both effects, sustainable margin ~1.5%. Medium-term target of 2.4% appears ambitious without significant Professional Staffing scale or Quess 2.0 traction.