Ladies and gentlemen, good day, welcome to the TeamLease Services Limited Q3 FY23 earnings conference call hosted by ICICI Securities. 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 touchtone phone. Please note that this conference is being recorded. I now hand the call over to Ms. Aditi Patil from ICICI Securities. Thank you over to you, Aditi.
Thank you, Zico. Good evening, everyone, and thank you for joining TeamLease earnings call. Thank you TeamLease management for giving us the opportunity to host the Q3 FY23 earnings call. We have with us today Mr. Ashok Reddy, Managing Director and CEO. Ms. Rituparna Chakraborty, Co-founder and Executive Director, TeamLease and CEO, Degree Apprenticeship. Mr. Sunil, CEO, Specialized Staffing, and Ms. Ramani Dathi, CFO. We will start off with the remarks from management, after which we will open the floor for Q&A session. I now hand the conference over to Mr. Ashok Reddy. Thank you and over to you, sir.
Thank you, Aditi, welcome all of you to the conference call. Just as a early update, I think at the group level, our revenue grew 26% on a year-on-year basis and 3% quarter-on-quarter basis. However, we have noticed a much weaker festive demand in Q3 compared to prior years. I think, that's kind of accounting for the net growth in general staffing that we've had of only about 3,000 for the quarter. I think, we did add headcounts in the early part of the quarter in October and November, but we've had a much higher attrition at the end of festival onboarding in the December month.
I think if we extend into IT staffing also we've had a growth in headcount, of about 400, for the quarter, but relatively flat from a billing perspective, given the furloughs and lower billing days in quarter three. I think for us the biggest hit has actually come from the Degree Apprenticeship side, where and Ritu will cover that in more detail, but the NEEM program, a gazetted program from AICTE Higher Education Department, has been discontinued effective December. As a run-up to that and post the discontinuation, we've had to let go of nearly 20,000 trainees, who were under the training program under NEEM.
Even currently, we have further exposure of about INR 26,000 under NEEM that we are in dialogue with customers for continuation, moving them to other areas and so on. Overall, I think that kind of puts the pressure on the element of the headcount and the bottom line contribution as we go forward for the coming quarters. In HR services, there has been a delay in university billings from Q3 to Q4, which broadly from the commentary we do seem to believe should get done in Q4. I think overall, a weaker festive demand in general staffing and headwinds in specialized staffing have impacted our growth. The NEEM is a surprise element with the notification being canceled.
We have started working on alternate placement of apprentices, of the 26,000 across other alternate options. However, given all of that, there will be some pressure on margins for the coming quarters, with the soft demand realization pressure NEEM impact. We have taken the necessary actions on core headcount that we had called out in Q2, in rationalizing it in line with the softening of the market. We do have a reduction of about 200 core headcount, which is about 9% of our headcount in Q3. We do have some further adjustments that will happen in Q4 also, in line with how the market is, and that's something that we will continuously look at as we go forward.
From a staffing perspective, broadly, the other parameters of PAPM, productivity, core employee headcounts and all have been in line with the revenues and the top line. Even the CTCs, the hiring, has improved overall in terms of what we deliver to customers. No major call-outs of huge deviation happening in the staffing business as we look at it at this point other than the softer festive quarter. We will continue to look at seeing which verticals to focus on for driving growth as we go forward. Ritu will cover on a little more detail on DA, Sunil on specialized staffing, Ramani overall before we get into the questions.
Thank you, Ashok. Good evening, everyone. Like as mentioned, already shared by Ashok, the NEEM program has been discontinued with effect December 23, 2022, wherein we have to release 20,000 trainees who were under very short-term training programs. We have exposure of another 26,000 trainees under NEEM program who shall be migrated and new onboardings to move in, dialogue with the customers to our own, which is the TeamLease apprenticeship quota, the client apprenticeship quota under the Apprenticeship Act and Degree Apprenticeship program. PBT for the quarter has remained flat as exits remained effective end of December. The impact will show up in Q4 numbers. Outside of this, we have maintained a steady momentum in new logo acquisitions, having added 20 new logos, taking our YTD count to almost 70. Hiring contribution to gross remain constant.
The non-recruiter channel contribution to overall hiring additions have been around 60%. The overall conversion has definitely gone up to about 33% as against about 28 last quarter. However, we are not where we would like us to be, given that the overall volume of open positions has been showing a declining trend on month-on-month basis, and is much below our expectation. Just to update you a little more on the recent surprise development, NEEM, which is the National Employability Enhancement Mission. It's a government notification scheme under the Ministry of Education run by AICTE. It has been, in spite of there being a renewal, beginning of December, suddenly closed by way of a notification circulated on 3rd January, putting almost 2 lakh active apprentices' future livelihood and learning in a precarious position.
Representation has been made by us with the AICTE and Ministry of Education to offer clarity on the future of the existing apprentices already enrolled, which from the notification is completely unclear, causing a lot of anxiety to both organizations as well as apprentices. We have, in addition, initiated legal deliberations by way of filing a stay order to ensure the existing lot of apprentices can be retained. We are assessing the impact of this new development closely and shall duly keep you informed. Thank you so very much. Sunil, over to you.
Thanks, Ritu. Good evening, everyone. Q3 is normally a seasonally weak quarter for specialized staffing. Hiring in I.T. sector has still not recovered while we were able to benefit from the hiring of tech and non-tech. However, the volumes are not comparable at this point of time. Most of our I.T. customers have either stopped or slowed down on hiring, with focus shifting towards improving the utilization factor. Unfortunately, the cautious approach of our customers also percolated to staff augmentation, which ideally should not have been the case, as in this market, staff augmentation is the best option. Our headcount grew 2% quarter-on-quarter basis and is broadly flattish when compared to the same period of the last fiscal year. The revenue grew 4% year-on-year basis and quarter-on-quarter basis, it's broadly flat.
Although we have seen marginal headcount growth, the revenue stayed flat on account of leaves and furloughs in Q3, impacting the profits for this quarter. We continue to focus on client acquisition and were able to bag 43 new logos YTD, including 18 strategic client wins. The client wins are a mix of tech and non-tech, keeping in view our long-term strategy to build a balanced portfolio. With uncertain macroeconomic trends, geopolitical turmoil, inflation and rising interest rate, we are uncertain on the compounding effect it will have on our clients' hiring strategy. We shall continue to focus on client acquisition, better fulfillment ratio and improve operational efficiency. We are confident of bettering our Q4 numbers compared to Q3. For the full year, it will still remain flattish. Thank you.
Thank you, Sunil. Good evening, all. We had about 3,000 headcount growth in staffing business in Q3, excluding the NEEM closure exits of 20,000 as of 31st December. EBITDA and operating margins have been flat on a quarter-on-quarter basis. However, there is a dip year-on-year because of reduced contribution from IT staffing and delay in the EdTech business compared to Q3 of last year. The quarter-on-quarter drop in PBT is on account of few write-backs, non-recurring write-backs and one-time hiring revenues. Unallocated EBITDA is now brought back to the regular quarterly run rate levels. Given the lower than expected closure of Q3 run rate in staffing, NEEM closure in DA business and overall external demand environment, we are projecting Q4 profitability to be flat or lower than Q3. Accordingly, we are bringing down our internal costs and core headcounts for the next few quarters.
In terms of income tax refunds, we have completed assessments up to financial year 2021, and the refunds can be credited over the next few months. There are no new queries that are received on NAPS front. Only the previous year, FY 2022 assessment is pending as of now with no other backlogs. Our current cash position is INR 270 crore and by end of the year, including tax refunds, we expect the number to go up to INR 350 crore. We currently do not have any active M&A discussions in the pipeline. Thank you.
Aditi, you can take the questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. Our first question is from the line of Vidit Shah with IIFL Securities. Please go ahead.
Hello. Thanks for taking my question. My first question was on this NEEM program, where 20,000 associates have been let gone off and 26 have further exposure. Could you just, I mean, it's quite basic, but just how this works in a sense, why not 46 have been let gone off? I mean, if the program's been discontinued, shouldn't all associates be let go of immediately?
The thing is that the ones that have been let go off have been on account of clients, certain clients choosing to kind of off-board them. There have been because of the unrest, caused some attrition from the trainee side as well, but largely on account of certain organization taking that call. However, the balance, essentially the organizations have, at the moment, choosing to retain until and unless there is ample clarity provided from the AICTE and Ministry of Education on. The notification as such, it can be, it need not necessarily be interpreted as the ones who are existing. However, it's a gray area.
However, we are actively talking to these organizations because they have a clear intent to continue with these apprentices to move them or shift them to alternates around the Apprenticeship Act, which is using their own quota of apprenticeship, using our quota of apprenticeship and also to Degree Apprenticeship wherever we can. I think, and of course the, the, this is something which will start becoming clearer over the next month or next two, three months. Meanwhile from our side, we have put all our weight behind getting a legal stay order in place, file for one and filing for one.
We've also made a very active, aggressive representation to the AICTE that at least because this means the future livelihood of not just our trainees, overall 200,000 apprentices across India and their stipend and as well as their learning, to be honest.
I think with this, the extension of that, is that ideally a scheme that's in place, could have a glide path to an exit, which is to say that people who have already been onboarded as trainees, should effectively finish that training period or kind of, exit as they do, as a part of, natural attrition. The notification could be to the effect that you don't onboard anybody new and kind of keep feeding that fund. I think while some organizations have taken it as a closure and wanted to kind of, exit, some do want to give the benefit of continuance to the trainees. That's really where representations have been made to AICTE about an acknowledgement that no new onboardings of trainees will happen under the scheme.
To give continuity for those who have already been onboarded till the training period complete. Similarly, as Ritu was mentioning, we are also exploring legal options for a say to create continuity for these people. I think the continuance of the 26,000 is more customer choice at this point in time, where there is dialogue to see whether they will continue, whether we can migrate them to alternate options and so on.
Just to clarify, we are still being paid INR 400-600 per trainee per month.
Yes.
by the existing customers for the-
Yes. Yes.
ones that are not let go.
Yes. Yes. Yes.
Okay. What's the average training period? In the sense, let's say, if this program were to be discontinued and the existing ones, were to allowed to be complete their training, after what period would all these associates will let go, no?
It's normally a three-year training program, that is there for the NEEM aspect. By natural, element of completion, about 9,000 of the 26,000, will complete in the next year. In the next financial year, about 9,000 will complete. Over and above that, we also have to factor some natural attrition that does happen on this front.
Okay, understood. Also could you just shed some light on the other HR services? I mean a few quarters back, we had guided to around 8%-9% of EBITDA margin. Now I understand some of the billing has been delayed, would we catch up to the extent and achieve our margin target? You know, is this expected to be impacted by delayed billing?
I don't think the full year should get impacted at this point in time with it, because the indication from the counterparty entities of universities and institutions is that the billing would happen in Q4 because services have been delivered. From that perspective, I think the belief that the Q4 billing should happen with no further delay at this point in time and should come back to the yearly 8% that we had indicated.
Okay, got it. Just lastly, if I could bother you for a data point. Could you, so disclose the cash flows for 3Q and for the year to date for the company or the operating cash flows?
currently we are at 70% conversion of EBITDA on operating cash flow. That's stands for full year nine months as well as for the quarter result.
Over and above that, given two years assessment is done, we are expecting that money to come in over the next three to four months.
We already received assessment orders for FY20 and FY19. Between the two years, we are expecting refunds of about INR 80 crore. In the next few months, that will be added to our cash balance.
Okay, thanks. That's very helpful. I'll get back in queue. Thank you.
Thank you. A reminder, to ask a question, please press star and one on your touchtone telephone. Ladies and gentlemen, you may press star and one to ask a question. Our next question is from the line of Soumitra Chatterjee with Avendus Spark. Please go ahead.
Yeah. Hi, good evening, and thanks for the opportunity. Ashok, just wanted to check on this decision of this February third board meeting to proceed with the buyback. Why are we not contemplating increasing the dividend payout? That is one. Second question to Ramani is on the EdTech side. What is the impact of in third quarter, revenue and EBITDA that you have lost because of you were unable to bill?
Just on the February third meeting, I think the board wanted to deliberate, no decision taken yet, around the fact of our current cash reserves and the refund that is happening or expected to happen for the two assessment years. Our M&A pipeline has depleted a little bit. We don't have as many active dialogues as we were in the past, having given early due diligence findings and also the element of counterparty issues and so on. While we do have some dialogue going on, the pipeline for inorganic is not very large.
I think from that perspective, the board wanted to deliberate on the capital allocation, with the fact that we would have in excess of about INR 300 odd crores by the end of the year, as to what to do as a next step. I think, I mean, we just couldn't complete that dialogue. They have initiated it and will be taking it up at the February 3rd meeting.
Soumitra, on the EdTech billing, about INR 3 crore in revenue is what got delayed to Q4. The same INR 3 crore will be the impact on EBITDA level as well because all the related costs have already been taken into consideration.
In fourth quarter you will be billing including this INR 3 crores which has been lost in this quarter. regular billing plus.
Over and above their regular Q4 billing, this would be additional.
That's how we are saying that on a full year basis we'll get to 10%-8% EBITDA margin on HR services.
Okay. One more question to Ritu. What would be the annual impact of assuming that the NetApp business is discontinued and from FY24 there will be no more NetApp trainees. What would be the annual impact on the EBITDA?
It would be about INR 10 crores. we, I mean, from a net revenue perspective, it would be about INR 22 crores. from an EBITDA perspective, it would be around INR 10-11 crores.
Okay. Lastly, on this unallocable expenses, historically, it used to be about INR 6 crores-7 crores. Do we see the INR 10 crore number on a quarterly basis reaching there, or it will remain at the current levels?
It can remain at the current INR 10 crore per quarter under it, Ramji. With no other costs increasing for next year actually, we believe plus minus we can maintain this trend.
Okay. Thanks. That's all from my side. Thank you.
Thank you. A reminder, to ask a question, please press star and one on your touchtone telephone. Our next question is from the line of Kunal Shah with Edelweiss Securities. Please go ahead.
Yeah, hi. Thanks for the opportunity. My first question is on general staffing. You know, in terms of sectors can you spell out as into which is seeing some traction for general staffing in terms of new clients and where are we seeing a slowdown?
Yeah. I think, like I said, the festive element of a volume we did not see kind of across the board. It was quite muted. Overall, if we look at it for the quarter and for the nine months, BFSI and consumer have kind of been growing. Where we have seen an element of actually negative is in what we call emerging, which is the element of fintech, EdTech, and other new sectors that play out on volumes for us. And some of the e-commerce has also been relatively soft. I think, industrial has kind of been flattish, hasn't been growing at the rate that we would have expected, and telecom has kind of been flattish.
I would say 2 verticals have been positive, 2 have been flattish, and 2 have been on the negative, overall. Typically, consumer and BFSI are where we normally get, element of a festive, volume kicker, which has been more muted this year.
Got it. in terms of the headcount growth, the guidance that you used to maintain of 20%, do we still see it to be possible in FY24?
We used to normally have a 14%, 15% associate growth. I think overall this time we would have, slightly lower than that. Also, I mean, IT has been impacted and, the DA impact has been quite substantial on account of the notification. While purely in staffing, I think we will have, we have had and will have the associate growth. We are impacted from the other two verticals. Overall, I don't think we will be at that. At a revenue level, we will still end up, with about a 20%-plus growth. The associate growth will be a little more muted.
I was talking more about FY24, the year afterwards.
I mean, early to call that out, at this point, Kunal, primarily from the perspective that, in Specialized Staffing, IT is still quite uncertain about how the future is holding out. Like, Sunil had called out earlier, we have managed to keep it flat for the year. You know, normally December is when most of the companies do their internal planning and kind of come back with their outlook for the coming year. We still haven't heard from the companies around their outlook for the coming year. I think to that extent, in Specialized Staffing, we aren't very sure how things are going to play out, though in some companies we are getting feedback about some vendor consolidations to happen and so on.
From a DA perspective, clearly the 26,000 could be a potential risk, which we will try and mitigate by conversion into other avenues of onboarding that we could do, and also have to drive the natural growth that comes about. I think in staffing, some of the sectors we are getting positive feedback around demand that they are having and potential open position pipeline that they are giving to us. But I wouldn't yet say that it is back to across sectors and across companies, a very aggressive open position situation at this point in time. I think it's a wait and watch. We will have to see how the macros play out for us to be more clear about the associate growth for next year.
Clearly, what we are doing as against for the current year where as a run-up from last year, we expected the demand to be very high and had made large investments in our core teams for delivery for customers. This year we are taking the reverse approach of saying "Let us rationalize our headcounts. Let's reduce the costs, and only on the back of clear demand coming in, we will start adding back the headcounts.
Just to add on the associate headcount growth, Kunal, last year, FY22, we had 22% growth.
Q1 we had 12,000, so, we thought we can sustain the 20% growth in headcount this year as well. Q3 is a big surprise, because we usually have the highest attrition in Q3 in a year, because of the festive season, which didn't reflect. That would bring down the associate headcount growth on a clear basis, to maybe 14%-15% kind of level.
Okay. Got it. And also this, INR 10-11 crore hit that you said, on NetApp if this program is withdrawn, that will only be for the NEEM program, right?
Yeah.
NEEM also has certain additional headcount in NetApp.
Yeah.
Yeah. We have a total headcount as of now of about 59,000, of which 26,000 are in NEEM and the other headcount would continue.
Okay. Got it. Got it. Okay. Just help me explain, I'm actually not aware, how is the Degree Apprenticeship program different from NEEM? You know, how can you transfer from one to the other?
The thing is, the Degree Apprenticeship program, essentially the one big advantage is will be under the Apprenticeship Act. Most importantly, I think, this allows for there being a degree linkage essentially with the apprenticeship program. Which means the attractiveness of this particular option from a candidate perspective, the long-term gains for the organization, from this program definitely is there. That's essentially the outside view or the customer benefit view of it. The more important thing is that this allows organizations to have apprenticeship for a longer duration, which is 3 years, as against the NAPS or the Apprenticeship Act program, which kind of mandates or restricts it to 1 year. Right?
Okay.
In case of NEEM, of course, there was a flexibility of having people for three years. However, given the absence of NEEM today, the Degree Apprenticeship definitely stands out as a very attractive proposition for customers.
I think, just to add on to that, Kunal, it's a layer on top, where there is historically most of the apprenticeship training program was certificate driven, for a shorter term period. But our belief is that at the profile of candidates that are coming in for learning on the job, creating a corridor effect for a degree, helps from a retention perspective and also from a learning outcome perspective. I think it's longer engagement, coupled with the aspect that the signaling value of a degree is always better than that of a certificate program.
Just one more thing I'd like to add. This degree essentially is a UGC and NCVT approved curriculum, hence, the apprentices, and it's credit-based, which means that this is something which holds good for them to have mobility in their learning process. Essentially starts with a certificate program, a diploma program, an associate degree, and can be scaled up to a degree program. It's a lot more fungible, flexible, even from the candidate perspective.
Got it. Got it. Also on the financial benefit to the clients. One was the tax advantage. That remains the same in both cases?
No. The set off against, CSR expense will not be there.
Okay.
The thing is that the financial benefits is twofold from the apprenticeship program. One was that does it qualify for set off against the CSR criteria. This does in many ways actually qualifies under the skill development category for organization. Some organization do take a benefit out of it. More importantly, there is a subsidy which comes to from the government side for every trainee up to one year. Earlier it used to be directly coming into organization as a, as a reimbursement, but now that has moved to the trainee directly getting up to INR 1,500 per month. However, as you can see with schemes and benefits and it's there today, but we don't know really the continuity of it in future.
Okay. Got it. Thanks. One last question. In terms of the core headcount for us, where would we stand right now?
The current number is about 2,200.
Okay. Got it. The markups for Q3 in general staffing?
It's kind of flattish at around INR 695.
Okay.
thank you, Mr. Kunal.
Yeah, thank you.
May we request you that you return to the question queue for follow-up questions, as there are several participants waiting for their turn. Thank you. Our next question is from the line of Aasim Bharde with DAM Capital Advisors Limited. Please go ahead.
Yeah. Hi. Thanks. Just one question was on the Specialized Staffing margins. You are at sub 7% in Q3. Adjusting for the lower billable hours, et cetera, is it still a 9% odd EBITDA margin in Q3? We always maintained around between 8%-9%. We should be able to maintain a similar margin.
I mean, at this point in time, given his Q4 outlook, he should get back to that 8%-9%.
Yeah. Okay. Q4 he should be back to.
Yeah.
8%-9%. Got it. Secondly, on the general staffing bit, I think you answered it partly in the previous participant's question, but just want to get a sense. For the year, on general staffing headcount growth, that should still be around 13%-14%, right, for FY23?
That's right, Aasim. It should be around 14% on a full year basis. In terms of revenue growth, we would be at, 20%-21% growth.
Okay. Okay.
There's inflation also factored.
Hello.
Prior periods.
Got it. Got it. Just one clarification. I think in Q2, we had the skills business bloating other income and unallocated expenses. Is that not there in Q3?
No. Skills business is still there in Q3 as well. However, we don't have any new provisions hitting on account of skills business.
You had shifted the reporting from revenue to other income, right? Because it was in sunset mode or something. That, that's what I was expecting.
Correct. Correct. The income levels have remained flattish, Aasim. Only difference between Q2 to Q3 is, in Q2 there is a provision that we made on skills business-
Okay.
on account of delayed collection. We don't have any incremental provision made under unallocated.
Okay. Okay. Okay, thanks. I'll get back in the queue.
Thank you. A reminder, to ask a question, please press star one on your touchtone telephone. Our next question is from the line of Amit Chandra with HDFC Securities. Please go ahead.
Yeah. Hi, sir, and thanks for the opportunity. My question is related to the the closure of the NEEM program. What's the rationale behind closing the program? Was it expected, or we were expecting some some kind of closures to happen, or it was an surprise for us also? In terms of the revenue impact as the as the closure happened at the end of December. The impact on the headcount we have seen, but have we seen the impact, the full impact will come in the next quarter?
Yeah.
Yeah. The full impact will come in the next quarter, Amit, from that perspective. I think, just to add, I mean, so one, to answer the prior question, while the notification to end was kind of in the coming, When it did come, it was a surprise, and to the nature of how it was worded, it was a surprise. I think the rationale or the approach that the government was taking. It was kind of throw the baby out with the bathwater kind of a situation, where some of the authorized vendors were misusing the provisions of the NEEM gazetted scheme. They wanted to correct that, but instead of so-called correcting it, they have ended it.
The government has been in talks with the vendor partners, who are authorized to roll the scheme, to create corrective action and so on. We believe that it would be better enforcement that would get driven, not an ending of the scheme per se.
Okay. In terms of the margins we have been seeing the general staffing margins are at bottom for the last few quarters. We are still seeing some some of the other headwind that is coming up every quarter. How we see the margins from here on? The HR staffing margins are also like, yet to recover, and the margins for the specialized staffing is also coming down. How to see the, like, margin for FY24? Is it, is it going to be under pressure, or can we see some recovery there?
I think there will be, at least 2, 3 quarters of softening on the margins front as a translation of the volumes going down and the aspect of seasonality that does exist in the HR services front. Where typically Q3, Q4 is large for them, while this Q3 has been not so high. Like Ramani had called out, it has been moved to Q4, so there'll be a strong Q4. They open with a very weak Q1, as always. Specialized staffing also has kind of been flat, which is the other driver to margin improvement. So kind of outlook on growth coming back in there is going to be key.
I think general staffing, the aspect of margin pressure, given that 75% of our billing is on a fixed markup model, has been under pressure at a percentage level, given the wage escalations that kind of happened last year and probably to some extent will happen next year. The variables of productivity and all of that have been playing out at that end. Like I called out a little earlier, on that front, Amit, I think in this financial year, we made a conscious call on the head, on the tailwinds of last year's growth and client outlooks to add a lot of headcount and cost structure.
Going into the coming year, we will hold all of that constant, as other than revisions, annual revision that would happen in Q1. To effectively back-ending costs and hirings, to actual demand growth, that comes in from customers. I think, I take your point, some surprise or the other. The next two, three quarters, we do expect it to be softer. Thereon, I think if business sustains, at the rate that even current year has been, we should be able to recover on the margins front.
Okay, sir. Thanks and all the best.
Thanks.
Thank you. Our next question is from the line of Nitin Padmanabhan, Investec. Please go ahead.
Yeah. Hi. Good evening. Thanks for the opportunity. Just wanted your thoughts on how the open positions look both in Specialized Staffing and general staffing. I think in the last quarter on Specialized Staffing, you mentioned that the open positions are down 70%. How should we sort of think about this? How is it at the current point in time, and how should we think about this on a going forward basis? The second question was on the margins. Well, you mentioned that margins will remain soft. Next quarter, we should see a bounce back in other HR services margins and Specialized Staffing as well. Are you suggesting that margins will remain soft despite that, or are you speaking about next year?
Those are the 2 questions. Thank you.
Sorry, I'll just answer the second question before Sunil gets into the first one. I think, while the seasonality element, I mean, not the furlough and the lower billable days of Q3 will go away, there'll be a marginal bounce back of that 1% in specialized staffing margins. The aspect of the HR services will bounce back with the backlog of the revenues that didn't happen in Q3 happening in Q4. The NIM impact is really what will be large from a perspective for the full quarter. I think that is really where we are expecting a softness rather than anything else.
I think broadly in general staffing also at this point in time, in addressing the first part of the question, there is demand of open positions that is with us across some of the sectors. I wouldn't say it's across all sectors, but at least three, four sectors do have active open positions with us, with an outlook of that they will be looking at growth in Q4. I think we're still looking at a positive number coming into play for staffing in Q4, and continuance on that. From a specialized staffing perspective, Sunil will.
Yeah. Q3 is normally a seasonally weak quarter for hiring, so the demands were pretty low. However, if you look at Q2, Q3, both the quarters, the fulfillments from our point of view has been around 60-65% of the demands what we used to get earlier. Normally by this period, we get to know how the Q4 is going to be, but unfortunately, as of now, we don't have clarity. We are hoping that some hirings might pick up in the next quarter, and that will help us to get a glide path towards next year.
I think, underlying of that, Nitin, effectively, is that at this point in time, open positions are still 70%-75% down from what they used to be. December, which is where typically, IT company planning happens, and they come back with a outlook and, larger open positions, hasn't yet happened. We are hopeful. Having said that, we have also, at the back end, adjusted, headcounts in the Specialized Staffing business in a large way, and would kind of rebuild, basis the aspect of demand coming back.
Sure. Fair enough. Lastly, how much would be the overall headwind on revenue and margin from the NEEM impact for the next for what we already know for next quarter?
Would have to work that in completely, Nitin, not yet factored in, because we've been actually working on the overall base and how to protect it and how to reassign it and so on. Wouldn't have a number immediately, but could come back.
Sure. Fair enough. Thank you so much, and all the very best.
Thank you. Before we take the next question, a reminder to all participants that you may press star and one to ask a question. A reminder to all participants, you may press star and one to ask a question. To ask a question, please press star and one on your touchtone telephone. As there are no further questions.
Actually, if there are no further questions, I mean, maybe there was little time between the announcing of the results and people's absorbing of the numbers. I could just conclude to say that we did have a surprise from the NEEM perspective. We are trying to mitigate as much as possible from the other 26,000 trainees that are still there. There has been an element of a seasonality push from the HR services, and there is still uncertainty from the specialized staffing demand perspective. I think we do have some softness across the businesses that is playing out into the margins and the growth per se.
I think, our preparation this year will be very different from how we entered last financial year. From that perspective, like I called out, we would have 2, 3 quarters of softness in margins. With the glide path of the business trajectory, we should be able to start getting back to improvement on the margins front as we go forward. I think, we are still. There is demand coming in from some of the verticals for staffing, and we continue to deliver on that front. As of now, there are no headwind, broader headwind views for the general staffing business other than the fact that the festive season was clearly lower than anything that we have seen in the past.
We will continue to stay prudent around the cost structures. We will rebuild teams and costs in line with the demand and the macro situation coming to play out on that front. I think, we will effectively look at the element of capital allocation in line with the market and the utilization that we have into the future. With that, thank you very much.
Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.