Ladies and gentlemen, good morning, and welcome to the Quess Corp Limited Q2 FY 2024 earnings conference call hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Balaji Subramanian from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you. Ladies and gentlemen, good morning, and thank you for joining us on the post-results conference call for Quess Corp. I am Balaji Subramanian, and it is my pleasure to introduce the senior management team of Quess who are here with us today to discuss the results. We have Mr. Guruprasad Srinivasan, ED & Group CEO, Mr. Kamal Pal Hoda, Group CFO, Mr. Kushal Maheshwari, Head of Investor Relations and Strategic Finance, Mr. Lohit Bhatia, President, Workforce Management, Mr. Pinaki Kar, President, Global Technology Solutions, and Mr. Sekhar Garisa, President, Product-led Businesses. We will begin the call with opening remarks by the management team, and thereafter, we will open the call for the Q&A session. I would now like to hand over the call to Mr. Kushal Maheshwari to take the proceedings forward. Thank you, and over to you, Kushal.
Thank you, Balaji. Good morning, everyone, and thank you for joining our Q2 and H1 FY 2024 earnings call. The information, data, and outlook shared by the management during the call is forward-looking but subject to prevailing business conditions and government policy. All forward-looking statements are subject to economic growth or other risks faced by the company. Please refer to slide number two of investor presentation for the safe harbor clause. With that safe harbor clause, I will now hand over the call to our Group CEO, Mr. Guru. Thank you.
Thank you, Kushal. Very good morning to each and everyone on this call, and thank you for joining us today. For Quess, profitable growth has been the key theme for the year. Our effort towards consolidation of our operations and growing the high-margin segments across the platform have shown positive results in this quarter also. In Q2 FY 2024, we added over 21,000 associate headcount and closed the quarter with a total employee strength over 547,000. During the same period, EBITDA has grown by 21% year-on-year and 6% quarter-on-quarter respectively, demonstrating the economies of scale inherent in our business model, which has helped us to deliver the nonlinear growth in this quarter. Every platform has delivered impressive growth on year-on-year and quarter-on-quarter basis. Key financial highlights are as follows.
We have recorded a revenue of INR 4,748 crore, a growth of 3% quarter-on-quarter and 11% year-on-year. EBITDA stands at INR 164 crore, growing by 6% quarter-on-quarter and 21% year-on-year. GTS continued its profitable growth trajectory with INR 104 crore EBITDA in this quarter. OAM platform also achieved an EBITDA of INR 35 crore, which is the growth of 14% quarter-on-quarter and 26% year-on-year on the back of a solid operational streamlining. With this, PAT has improved by 79% year-on-year to INR 71 crore. Corresponding EPS has shown an increase of 71% year-on-year at INR 4.85 per share. Let me walk you through the business update and some areas of Q3 focus areas for us. The hiring environment was positive across sectors with industrial, logistic, and BFSI driving the hiring activity.
One significant exception was IT sector, where the hiring activity has plateaued due to global headwinds. Our sales engine continues to deliver sustainable revenue growth. We acquired 235 new customer contracts in Q2, setting us up well for growth in coming quarters. Now let me move on by platform. To begin with Workforce platform. The headcount of the Workforce platform has reached 430,000, adding 26,000 associates during the quarter accordingly. Revenue saw an increase of 14% year-on-year and 6% quarter-on-quarter. Sourcing contributed to 32% of new hiring, up from 27% last quarter, signifying our mode in terms of having a strength in our hiring engine. Workforce Management growth journey has been recognized in international forums. Quess has now become the world's 46th largest staffing company by revenue as per Staffing Industry Analysts ranking. We were ranked 54 a year ago.
Now, moving on to specific to general staffing. We added 25,000 headcount during the quarter led by manufacturing, BFSI, and FMCG sectors. New 83 client contracts were added during the quarter. Open mandates by end of September were at 38,000, driven by festive season hiring, specifically in e-commerce and logistics during the festivities around. Our vertically focused strategy has continued to give us great gains, which with the headcount growth in manufacturing and BFSI stood at 13% and 5% quarter-on-quarter. We have added about 24,000 headcounts in these two sectors in H1, and we are confident of similar momentum in Q3. The per associate per month gross margin profile, also known as gross margin PAPM, stayed stable around INR 700.
We have invested in sourcing and support teams for the growth of this business in H2 and FY 2024-2025, given the large distributed project in manufacturing and industrial, driven by a marginal decline in terms of core to associate ratio. IT staffing business. The Indian IT staffing and selection business continues to remain impacted by headwinds. Open mandates have remained flattish on quarter-on-quarter basis. We were close to about 1.12 against 1.1K in terms of the open mandate. In such an environment, we will continue to focus on the niche profiles and bring in more IDC controls to drive margins. Moving on to GTS platform. GTS delivered sustainable revenue growth with 23% EBITDA growth year-on-year and 4% quarter-on-quarter. All three constituent business in GTS clocked their highest ever EBITDA in this quarter.
The platform has shown consistent margin improvement over last five quarters, increasing by 183 basis points in the period, once again demonstrating the economies of scale in action. We highlight under GTS five specific platform. To start with Conneqt. Conneqt continues to maintain its momentum with order book over INR 100 crore ACV closed during the quarter. This sets up well to sustain revenue momentum in coming quarters. BFSI segment accounted for almost 50% of new sales, with strong recovery in manufacturing and service sector evident during the quarter. The growth momentum in CLM business of Allsec continues with 18% year-on-year. This was driven by an excellent 21% year-on-year growth in North American market in Q2. Our non-voice BPM business grew by 34% year-on-year, with collection business growing by 35% year-on-year and finance and accounting transaction process business growing at 66% year-on-year.
This is on back of sustained investment over last three years to create a platform-based digital solution to create a differentiated solution in the market. In our BPM business, the customer experience segment as part of the Allsec EXM vertical in Allsec has strengthened its market leadership with 3.8 million pay slips processed during the quarter with a quarter-on-quarter growth of 3.5%. The vertical has added 21 new logos in the quarter, led by international sales, setting up well for coming quarters. Going forward, the focus is as follows: sustaining and accelerating the momentum of non-voice BPO in Conneqt and continued operational excellence for margin expansion as we drive volume growth. Leveraging on excellent growth momentum in North America market for Allsec in CLM business and growing a nascent healthcare practice around current anchor clients.
Accelerate new HRO product and platform over the next few quarters to consolidate market leadership and market expansion, especially in international markets. Coming to OAM platform. The platform registered top-line growth of 8% year-on-year and 2% quarter-on-quarter, and EBITDA grew by 26% year-on-year and 14% quarter-on-quarter. The platform has focused on delivering profitable growth. IFM saw a revenue growth of 3% quarter-on-quarter and EBITDA growth of 8.5% during the same period. Major sectors contributing to the growth are government and services, and added to that is industrial. The business added 22 new customer contracts during the quarter. Focus on execution saw IFM as getting recognized by two major clients for outstanding service delivery support.
Going forward, focus on housekeeping continues to be on healthcare, public infra, and industrial as we continue to see traction coming in into Q3 in this space. FMS business saw a gross margin improvement of 10% quarter-on-quarter and 33% year-on-year in Q2. The improvement in gross margin has been bought by improving operational efficiencies and mobilizing of contracts won during Q1. We expect the growth momentum to continue in Q3 on back of new contracts in education and healthcare. Security business saw a flat headcount in Q2. As we continue to pursue profitable growth, the business bagged a couple of major contracts in infra and manufacturing vertical towards the end of Q2. As a result, we expect to increase our headcount by 8%-10% in Q3.
The active infra business in the telecom sector had a good quarter for its best ever H1 in terms of revenue and EBITDA. The business had revenue growth of 40% and EBITDA growth of 43% when compared to H1 FY 2023. Moving on to product-led business. Foundit had another good quarter on the business and the product front. Sales grew by 35% year-on-year and 20% quarter-on-quarter, 20% driven by enterprise sales in India. The revenue in the quarter remained flattish on account of longer tenure deals and lower consumption in international markets, which contributed 35% to our business, continue to face some level of headwinds due to macro conditions. We successfully launched our disruptive AI-driven product, Foundit 2.0, for private beta customers with a very positive feedback. This will be open to all customers by end of Q3 FY 2024, positively impacting the sales and price realization.
Our operational metrics on both candidate and recruiter side remains positive, with job posting and 6 months active users up by 10% quarter-on-quarter. CSAT continues to remain healthy at 92%, with NPS scores are at an all-time high, validating the work that we have been doing on product. EBITDA achieved is as per annual operating plan. Foundit remains on course to deliver breakeven by Q4 exit. Moving on to general updates. Quess continues to drive positive change in lives of our associates. Among the associates who have joined us in Q2, 27% have entered into formal workforce for first time. 18% were female workforce. Median age was 25, providing entry-level employment for youth.
Before I hand over to Kamal, I along with my team would reassure you that we will continue to focus on operational discipline and aggressive sales, and we will reap the fruits of all our efforts in quarters to come. As we are nearing to festival of light, I also take this opportunity to wish you and your families happy Diwali and wish you all happy and prosperous new year in advance. I now hand over to Kamal, and we will come back to question and answers.
Thank you, Guru. Good morning, everybody, and thank you for joining us today. I extend a very warm welcome to everyone who has logged into this call. I hope you had a chance to look at the investor presentation and financial results for quarter two uploaded on our website. Let me now walk you through this quarter's financial performance. We saw healthy growth across all our platforms during the quarter, with revenue growing by 11% year-on-year and 3% quarter-on-quarter to clock INR 4,748 crore of revenue in quarter two. Our net headcount increased by 21,000 in this quarter. EBITDA stands at INR 164 crore, a growth of 21% year-on-year and 6% quarter-on-quarter, with the EBITDA margin at 3.4%, a growth of 10 basis points quarter-on-quarter.
Such increase in EBITDA margin is driven by customer margin, drives at cost, including cost to serve reductions that we started a couple of quarters back, and also reduction of burn in product-led business. Profit after tax grew by 79% year-on-year and 47% quarter-on-quarter on account of healthy EBITDA growth across all businesses, increase in other income by way of interest on tax refunds and deferred taxes in the quarter. Consequently, our EPS in quarter 2 has seen a 50% jump quarter-on-quarter to INR 4.85 per share. Our commitment to cash management and debt repayment continued in this quarter, with gross debt reducing to INR 473 crores, lowest in the last 10 quarters with a reduction of INR 45 crores during the quarter. Our DSO further reduced by one day compared to March 2023 at 56 days, and our Four Quarter Trailing EBITDA is at 62% for H1 FY 2024.
Platform-wise updates. Workforce management . Revenue stands at INR 3,315 crores, registering a growth of 13% year-on-year and 3% quarter-on-quarter. Growth is predominantly in staffing business, with key sectors being manufacturing, BFSI, and retail. IT staffing and APAC professional staffing has remained muted over last two quarters due to global headwinds. However, we have ensured to mitigate the downturn through cost actions. EBITDA has seen a good growth of 5% quarter-on-quarter and 10% year-on-year at INR 87 crores. EBITDA margin percentage has seen a nominal 5 basis point increase quarter-on-quarter on account of cost initiatives coupled with VAS, value-added services, push. Coming to GTS. Revenue stands at INR 584 crores with an EBITDA of INR 104 crores, an annual growth of 11% and 23%, respectively. This translates to a quarter-on-quarter growth of 4% each.
You might recall that this platform crossed an EBITDA of INR 100 crores in last quarter, and it continues its profitable growth in an EBITDA of INR 104 crores in Q2 with a 13% margin. Non-volume services revenue at INR 188 crores is a good growth of 34% year-on-year and 6% quarter-on-quarter. This can be seen in revenue per employee growth year-on-year, which now stands at 113,000 versus 104,000 a year ago. Our EXM vertical's total new sales exceed 50% in international geographies leading to its profitability. Our subsidiary also has surpassed a market cap of +INR 1,000 crores with a CAGR of 23% from our initial investment in 2019. Moving on to operating asset management. Revenue stands at INR 705 crores, a growth of 8% year-on-year and 2% quarter-on-quarter.
The growth is due to gain of traction in integrated service offerings for existing clients and new contract signs, key sectors being industrial and public infra, healthcare and education. EBITDA stands at INR 35 crores, a growth of 26% year-on-year and 14% quarter-on-quarter. Margin increase is aided by return of full business post academic holidays in quarter one for education sector clients, plus consolidation of low-margin clients in security and facility management businesses. Platform's EBITDA margins thereby have seen an increase of 40 basis points to 5% and is now at competitive sustainable levels. Our telecom business has shown a healthy growth backed by strong 5G rollouts across all operators in India and also deeper penetrations of 4G. Moving on to product-led business. Revenue stands at INR 143 crores in product-led business segment with a growth of 13% this quarter.
EBITDA losses excluding non-cash ESOP costs reduced by INR 5 crores and now stands at INR 16 crores in Q2. We founded a new product arm to improve price realization and focused approach to enterprise business. Software business orienting marketing to data-centric approach will get us to our commitment of breakeven by Q4 FY 2024. Breakthrough services business saw good growth in revenue and margin as Q2 generally is a seasonal purpose pay part driven by revenue across partners. Income tax update. Draft developments in tax matters from the last quarter. For FY 2017-2018, our appeal is at ITAT and the next hearing is expected in the current month. For the year 2018-2019, the DRP hearing has been completed and the final order was passed on 30 September, 2023. The adjustments for which we are also in line with the previous year.
For the year 2019-2020, the tax office had proposed special audit in line with the previous two years. Based on our factual representations, this move was dropped and a draft assessment order was passed by the tax office on 29 September, 2023. The company has filed objections before DRT against all the adjustments proposed by the tax office on 27 October, 2023. Moving on to some other corporate updates. Conneqt, MFX and Greenpiece merger update. As part of board approval of the scheme of amalgamation dated 7th July, 2021, Quess had filed for approval of the scheme with NCLT. Honorable NCLT has admitted the petition and hearing was completed on 30th October, 2023. The final order is awaited from the Honorable NCLT in this quarter, and we expect transaction to complete within this financial year. With this, I open the floor for questions and answers.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question, may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, if you wish to ask a question, you may please press star and one. A reminder to the participants on the conference, anyone wishing to ask a question, may please press star and one. The first question is from the line of Mohit from Guardian Capital. Please go ahead.
Thank you for this opportunity. I wanted some more
Mohit, we are not able to hear you clearly.
Can you hear me now?
Much better, sir. Please proceed.
Okay. I wanted some more clarity on this INR 143 million write-off that we have done. What is it for?
Mohit, can you elaborate the question? Which write-off are you referring to?
Sure. On the standalone income statement, there is this exceptional loss of INR 143 million, which is a write-off for SLPL. What is that?
Mohit, that is part of the structure simplification. There are multiple steps that we have taken in past and continue to do so. We had a 56% stake in one of our subsidiary Stellarslog where we have acquired the balance full stake and revalued the company on the date of acquisition. Basis which the investment in that company has been marked to market at a fair value and on the date of the balance sheet acquisition, and which is where we write off as a standalone.
What does the subsidiary do?
Okay. See, way back, we invested in a platform-based business, which is into the gig tasking program. We invested in this way back in 2021 January , and as part, we held 53% in this company. Basically what they do is there are taskers on one side. It is a gig platform where we match the task doers and the task givers any specific task to be executed. It could be onboarding of a merchant or onboarding completing a mystery audit at store.
So it is a big platform. And we integrated that business back into Quess as part of the workforce completely because post our acquisition, we incubated the business and giving the full power of workforce to it makes much more meaningful for it as well as it can accelerate well. So we integrated that back into Quess in this quarter. And as we said, the business has an annual revenue valuation of about INR 7 crores. And this was the right time for us to integrate into Quess.
Got it. And where is this recognized in the consolidated financial?
Workforce.
Okay. So it is not in other unallocated expenses because then if you exclude this, the workforce management margin could be actually higher than what you have posted. Is my understanding correct?
It is from a segment representation perspective, part of the Workforce Management. But in the current quarter, we have not had any losses to be consolidated. What happens is, Work Any Which Way is a subsidiary for us where we were consolidating this company for all the prior years. Operating profits have in the past been already consolidated just in the standalone when we are further acquiring the same, the investment has been revalued at the present market value. In the present quarter, there are no losses which have materially affected the WFM results.
Mm-hmm. Okay. Got it. Second question was on your Workforce Management. I was just not able to reconcile these two, three things. One is your per associate per month contribution is flattish while your ratio for core to associate that has weakened, but still the EBITDA spread is up a little bit. How do I actually fit all three of these facts together?
Okay. One, I will start explaining on the core to associate then I will look in Lohit also to come in. See what happens is, the core to associate is dependent on the number of core headcount that we onboard to serve the associates. During June up to Diwali, it is a season, and we will have more recruiters, the field force that we will be bringing into the system to fulfill the open mandates that we have. For example, as of 30th September , I called out in my speech as well, our open mandate size is about 38,000. Even despite a bit of turbulence in the market, we still have specific demand coming in from manufacturing, retail and BFSI segment.
We still stand at about 38,000 open mandates. If you look at manufacturing as a segment, it is doing really well and the kind of open mandate that we are getting, generally post-season we used to downsize the number of recruiters because post-e-commerce sale and season completes, we used to offload few headcount. Now what we are doing this time, we are not offloading the headcount.
We will continue to actually recharge and continue to keep that team so that the demand coming in from other sector, because being the largest in the country, our demand size is also going up and we will continue to keep this team, which is where the core to associate is not reducing, which means it will have impact on revenues being added in Q3 and Q4. Which is why you are not seeing the season decline and offloading of those recruiters are not happening this time, and we are continuing to keep them. Which is where you are seeing core to associate slightly flattening, which is a good thing to happen for Q3 and Q4. Now let me get Lohit to add.
Good morning, and thanks for that question. While Guru has explained it well, let me just summarize what you said because your questions are three broad things. Why is WFM in some ways flattish, core to associate ratio has gone downwards while the margin increased and the EBITDA has marginally gone upwards. You have to see it from the perspective that WFM broadly has three businesses. There is the general staffing India business. Core to FT ratio reflects only that business. It does not reflect the other businesses. In that, Guru very well articulated and explained that the core to associate ratio has marginally gone down because this is the time of the year when you, A, invest for season, and you have seen the rock solid growth of 26,000 headcount that we have already achieved in Q2 on the back of 17,000 headcount in Q1.
We are already up about 43,000 people in the first half of the year. This year, we will particularly continue to carry this because manufacturing and industrial investments is a little more gestational investment, and it is long-term. Unlike the recruiters which work out of branches, in manufacturing, we have to work from the field or closer to the customer, which is the manufacturing plant location. Similarly, there has to be account management and implants which have to be given for manufacturing. Coming back to your second point, in spite of this headcount going up, gross margin remaining flattish at INR 700, again, that INR 700, let me remind you, is only for the general staffing India business.
If you come to professional staffing business, professional staffing average gross margin has now crossed INR 14,000. I am talking about the India business, it is at about INR 14,300. We are at 35% of our book size in professional staffing today, comes from medium margin to high margin, which could be anywhere between 10,000 to 15,000 headcount PAPM, going right up to 50,000 headcount PAPM and more. That also comes in. The third element, in spite of all of this, we have been able to grow and inch upwards. That is where I will bring the international context. In spite of the global headwinds, our international business has remained very steady. On top of that, we have been seeing increase in revenue in our Quess North America and reduction in cost.
The two elements have given us a reduction in the burn in this quarter as far as Quess North America is concerned. So that is how you will have to see the entire business, taking the three broad elements into consideration. Overall, I think WFM has done a very steady result for all the three categories, which is India at yet adding stellar headcount and customers, India professional staffing, which has grown, and international, which has remained steady. I hope that kind of explains the context.
Yeah, makes sense. What is the loss in the North American business? I think it used to be INR 4 crore-INR 5 crore. Lower than that, can you give some number?
Yeah.
Because you had guided for breakeven by the end of the year, right?
Mohit, you are right. It was INR 4.5 crore in quarter one, which has been brought down to INR 2.5 crore in quarter two, and we are confident of breaking even during this financial year.
Okay. Perfect. And the Foundit cash burn, are we still on track for ending that by the end of the year?
Yeah, we explained that during both Guru's comments as well as my comments that we are confident of ending this year with a breakeven in Foundit.
Perfect. Can we just ask one more question?
Can I ask you to come back in the queue so that other people can ask their questions?
Got it.
Thank you. You can just ask again in the queue.
Thank you. The next question is on the line of Guneet Singh from CCIPL. Please go ahead.
Hi, sir. Congratulations on a great set of results, and thank you for this opportunity. Looking at the results in Q2, can we expect this to be the base going forward so that this would be, say, the benchmark or the minimum quarterly revenues that we can expect going forward from here on? My second question would be regarding the margins, operating margins. Currently, we are operating at about 3% margins. But in FY 2022 and before that, we were operating in the range of 5%-6% operating margins. What is the reason for this drastic decline in operating margins over the years, and can we expect to reach those margins back again, and if so, by when? What would be the margin guidance for the rest of the year and for FY 2025?
Sure. Guneet, as I alluded in my speech, our effort on consolidation of our operation and the high margin segments doing well, both GTS and OAM, it is playing out well in terms of its nonlinear growth to our EBITDA, which we always emphasized, and now we can see the real results coming on to buy scale of economies coming into. That has really accelerated. If you look at 26% growth in OAM in terms of EBITDA, 23% in GTS. This coming in in terms of coming back to sustaining of our margins is something that we are quite confident about. These are business contributions which are coming in. There are no any one times or seasonal spike in this. So that gives us the confidence to say that, yes, we will be able to sustain.
Adding to that, our largest growth also comes from the low margin business, which is also staffing, and we are also leaders there. We cannot stop that team, and they will continue to deliver. The higher growth coming in from that will have a blended, where we are currently is blended margin of about 3.4%. As is where we are, we are able to sustain, and as and when our investments that we have made in Foundit in North America will start turning positive, which we are confident the way the trajectory looks like, and we have delivered it in Q3 and Q4, we can separately see slight improvement in margin coming in.
Yeah, just to add to what Guru said, Guneet, your comparison point being FY 2022 from a 5% to presently a 3.5%. A couple of reasons. I think, one, Guru already captured that. General staffing, which is a 2.2% margin business, has been growing fantastic for us, and it is a business which is a negative working capital business, and it is an annuity business. So that has been growing very well for us. There are also contributions from high margin businesses which you see in the current quarter, which is GTS and OAM, which has gone up on a quarter-on-quarter. They have gone up reasonably well. GTS has gone up quarter-on-quarter 4% on an annual basis in EBITDA, and OAM has also gone up 14%. The other thing which is actually a very good investment for us is Foundit.
While it is Mathematically, looking at a lower EBITDA margin on an overall basis for us, which we actually offset by investments. We are already at 4%+ margins on a consolidated basis. With expected breakeven in Foundit by end of this year, the expected breakeven in North America this year, and some of the restructuring that we are doing, Stellarslog acquisitions, we are bringing our losses continuously down, and the margin uptick will obviously be there in the coming quarters.
All right. That is heartening to hear. Do we have any guidance for FY 2024, at what levels of revenues should we want to end the year? What kind of growth are we looking at internally for FY 2025?
Typically, Guneet Singh, we do not give any guidances. I think the management has given quite a lot of inputs for you to do your modeling. But for overall things, I think the overall view of the management is positive from here in terms of overall business performance and margins.
All right. So in terms of optimizations that we are doing currently, and we are breaking even in two of our businesses. By the end of FY 2024, can we expect to be in 4%+ operating margin range?
It is a little difficult to tell you right now, but I think the management's intent and the guidances that we would like to break even by the end of this quarter. And add to that, Guru has already told you that our biggest business driver is general staffing. So how it contributes to the overall margin will shape up the overall consolidated margin, which is a little difficult to guide you right now, sitting here at the end of Q2. Probably by next quarter, we will be able to give you a better guidance.
All right. Thank you for answering all my questions. Wish you all the best.
Thanks.
Thank you.
Thank you. The next question is on the line for Hrishikesh from Robo Capital. Please go ahead.
Yeah, hi. Thank you for the opportunity. Sir, my question is with respect to the product-led business. How are we looking to grow here quarter-on-quarter, and at what revenue level will we achieve the breakeven by this year end?
If you see the historical trends as well as what we have reported numbers for Q1 and Q2, on a year-over-year basis, we have grown consistently at 35%, despite a challenging external environment. On a sequential quarter-on-quarter basis, we grew 20% from Q1 to Q2. Historically, our H2 in Q3 and Q4 has been significantly higher than H1. As you know, we are in a SaaS/subscription business, which means the base effect of last year's H2 will help us grow faster in this year's H2. We expect the growth to continue in H2, robustly as we did in the last year's H2, as the base effect kicks in as well as the new product launch happens.
Our new product, as Guru mentioned, Foundit 2.0, is now in public preview with several customers using it, and all of the customers will be on the new platform towards end of the quarter. That delivers two things for us. Improves our competitiveness in enterprise segment, which we called out. Secondly, our ability to price up on whatever offerings we are giving to the customers. All of this, the combination of the base effect in H2, new product that is being launched, and the uplift that we will see in terms of our ability to price better, all of this will ensure that we will continue our growth journey in H2. Combination of growth and slight optimization on cost will lead us to breakeven by end of this year.
Okay. Sir, could you also touch upon the WFM EBITDA margins? I think there was the U.S. business burn, which you have said that it is at peak now, and I think in couple of quarters we have some visibility that there should be some visibility on 3% margins for WFM. Could you also touch upon that?
Yeah, Dhwani. North America, I have already clarified that the burn has come down from INR 4.5 crores in Q1 to INR 2.5 crores. We are confident that by the end of this financial year, we will have no more losses to consolidate on North America. On the overall WFM margin, Dhwani, you want to come in?
Yeah. Kamal rightly said, one of the drivers for margins in WFM at the moment is North America. As that turns positive, obviously that is a clear direct uptick for us than that INR 2.5 odd crores as we did now, closer to INR 4.5+ crores last quarter, is sequentially coming down and that will definitely aid WFM. I must repeat, this is an investment for the future. WFM for its size, for its volume, for its margin profile, needs a market which is steady state for the next couple of years, decades, which is both large as well as not just volumetric, but it is also a high margin market, and that is why the investment in North America. Having said that, I think the other two elements of India business is professional staffing on one side, which is primarily IT versus non-IT business, which is general staffing.
General staffing works at a 2% EBITDA margin range. Professional staffing works upwards of 7% or 8%. We have been seeing about four to six quarters of tough headwinds from the IT business with some green shoots which have come in September for sure. One, our permanent recruitment business has again turned back into the black and has started giving us positive EBITDA with the growth of permanent and lateral hiring. The second green shoot continues to be the margin improvement there. The third green shoot is the GCCs, where we are very actively pursuing and bagging more contracts from there. These are the play. Mix makes a huge difference for us. You can see 2% versus 7%+ . The mix itself aids many of these things.
Also, we have an aspirational EBITDA margins. We talk about 6%, which we also used to do before. Once we achieve breakeven on our Quess North America INR product-led businesses, fair to say from next year onwards, we should see likely around 1.5% EBITDA margin improvement per year.
In this case, what I would allude you or guide you is that our absolute EBITDA will improve over the coming quarters. But when you focus on absolute EBITDA margins, it is a little difficult for the management to guide you, because as Guru has already told you that our biggest growth driver is general staffing. And Lohit has already told you that it is a 2% EBITDA margin business. So when you focus on margins, you lose out on the absolute EBITDA growth that the business has been delivering. And overall, on a year-on-year basis, our absolute EBITDA has increased by 21%, so which is what I would guide you, even though our EBITDA margins have not improved, but our absolute EBITDA has grown by 21%.
Got it. No problem. Thank you.
Thank you. The next question is on the line of Vidit Shah from Spark Capital Private Wealth Management. Please go ahead.
Hi, good morning, and thanks for taking my question. Just a couple of questions from my side. One is on the North America business, you alluded to improvement in EBITDA losses. But could you shed some light on how the revenue trajectory out there is? How are we growing? Because that's one of the key growth drivers going forward, right, that we are planning on tapping.
Thank you, Vidit, for your question. I would ask Lohit to give some inputs on this question, please.
On an extremely small base, the revenue has gone up by about 92% this quarter. The cost has gone down by about 30%, as we had already kind of explained last call itself. And both these things have overall reduced the investment or the burn by about INR 2 crores quarter- on- quarter for this quarter. At this stage, we are at the juncture of coming closer to a steady state revenue run rate and staffing headcount addition, which should give us the breakeven at a country level or a business level by the end of the year, as already explained by Guru and Kamal. I must also add that this is a market which operates between $1,500 gross margin pattern to as high as about $4,500 if you work in with these profiles. And I think that's how we are building up ourselves with good customers.
What was the exit in 2Q in terms of revenue, that rate that we can look at? I remember we had got a couple of S&P 500 sort of customers. Have we added to that list, or are times tough in IT staffing in U.S.?
Vidit, at the moment, it is very insignificant in terms of the revenue and the losses, I mean, burn that we are doing there. We have less than 10 headcount that we have deployed. As it becomes substantial, we will start probably declaring it. We are also getting our feet right there in terms of how do we ramp up and how do we set the delivery structures. We are in the right direction, but I think we will have more to share as we come into Q3 and Q4.
Okay. Thanks. Maybe one for Kamal in terms of the income tax matters. Just some clarity on the latest verdict that came in at the end of September. I sort of missed your opening remarks. Could you just explain where we stand right now?
Vidit, I did cover it in my commentary also. This tax matter that is going on for us is for multiple years. For 2017, 2018, we came out of DRT and we are in tribunal. The next hearing for ITAT is within this month. That will be the first date of hearing. For 2018, 2019, the DRT hearing was completed, and the final order was passed on 30th September . This order was again in line with the previous order, where principally the double jeopardy and the depreciation on goodwill was disallowed to Quess, and we have taken very similar grounds, and we are now going into tribunal. This will follow the course of what 2017, 2018 would be. For 2019, 2020, there was a proposal for doing special audit for Quess, which was again proposed by department in line with the previous two years.
But we have successfully represented with all the facts, and department has dropped the special audit. This is the first year that there is no special audit for Quess, and the draft assessment order has been passed by the tax office themselves. Again, the order is in line with the previous two years, where they have principally disallowed both the matters. We have taken a board of going to the DRT because we want to be consistent with our stand and the legal recourse that we have taken.
Okay. So all the orders are consistent in summary. That is the understanding. Correct, right?
Yeah, that is correct.
Right.
Okay, thanks so much for the clarifications, and all the best.
Thanks to you.
Thank you. The next question is on the line of Mohit from Guardian Capital. Please go ahead.
I know that this is a small amount, but I just wanted to understand how was the Vedang stake that we have valued? Is it much higher margin than the normal operating asset management business?
Mohit, Vedang is a subsidiary which we continue to hold prior to this acquisition also, 92.5% is with us. We have a balanced stake with Ashish Dhawan, who is running this company as a CEO. In terms of shareholder's agreement, which was there since 2017-2018, had laid out how the rest of the acquisition would be done. Basically, put options which is there. There's no fresh valuation that has been done for this, it is just which is the earlier shareholder's agreement that we have followed the course. Ashish continues to hold 3% in this company post the acquisition, and he continues to run this company. This company is going through a fantastic phase of the 5G transition, and he's creating this company in a very robust manner.
Okay. Let me just put it another way. Can you give some clarity about the EBITDA margin that is posted by this business? Because I think it would be higher than our OAM business.
Yes. This business on an average delivers us anywhere between 9%-10% of EBITDA margins.
Okay. Then it makes sense. Okay.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. As there are no further questions, I now hand the conference over to the management for the closing comments.
All right. I would like to once again highlight that we are very well placed across platforms to maintain our growth trajectory. With this note, wishing you all again the festivities around happy Diwali and prosperous new year, and look forward to interacting with you soon. Thank you so much for joining us today.
Thank you, members of the management team. Ladies and gentlemen, on behalf of IIFL Securities Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.