Quess Corp CFO speaks on Conneqt deal, business and jobs in Covid's wake

Ravi Vishwanath, Group CFO, , talks about the Conneqt acquisition deal and about the overall India business & jobs scene in the wake of the second wave. Edited excerpts from his interview with ET Now:

ET Now: Shed some light on the details of Quess Corp’s deal with Conneqt . What is it that Conneqt brings to the table?

Ravi Vishwanath: We had entered into an agreement with the Tatas way back in 2017 to acquire Tata Business Solutions. As part of the deal, over the years, we have increased our stake to 70%. The balance 30% was still with the Tatas, which we have now acquired.

Following this acquisition, Conneqt has become a 100% subsidiary of Quess Corp. We would now use Conneqt as the vehicle for our acquisition of Allsec Technologies as well.

As part of the deal, the Tatas have had a put option which they can exercise. We have now completed the transaction by paying Rs 208 crore for the balance 30% stake which the Tatas were holding.

What kind of earnings impact do you see from the money you paid for the rest of the Conneqt stake?

Conneqt has performed exceedingly well over the last couple of years. It is one of the businesses that recovered quickly during the pandemic itself.

The EBITDA margins of Conneqt are fairly healthy right now. Between Conneqt and Allsec (which is a subsidiary of Conneqt), we would be having the total valuation multiple translate roughly to a very attractive 4x of EV/EBITDA for us.

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Overall, I think it will be cash- and EBITDA-accretive. More than that, I think strategically it offers us a kind of a springboard to develop our technology business and take it pan-India.

The combination of HR outsourcing through Allsec and the collection in other businesses through Conneqt are expected to give us a great platform to go pan-India, and even take it global.

What has been the impact of the mini state or local lockdowns on clients’ mood?

I will answer specifically with regard to Quess and not with regard to Conneqt. Up until last week we have not seen any impact of the current situation. Talking of a year ago, the impact was seen not immediately in Q1 but was seen during the later part — more during June-July.

The knee-jerk reaction being seen — the new migrant trail etc — is mostly from people employed in the unorganised/informal sector, and not so much in the formal sector which we are part of.

We would expect that the current situation would pass quickly. Anything impact that you see would be more like a blip; we should be able to bounce back quite strongly.

We started this FY on a rather strong note, with our numbers almost back to pre-Covid levels. As of now, Q1 is looking pretty good. I am not saying we would dump our original Q1 forecast, but I think things continue to be good even as we speak. We are waiting and watching to see how our clients react.

What does the current situation mean in terms of the overall employment scenario? What impact could these localised/mini/weekend lockdown have on the job market?
Like I said, I do not think the kind of jobs that we cater to would be impacted significantly. It is more the daily wagers and the unorganised sector workers who are more likely to be impacted.

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These kind of lockdowns are not long-term in nature. They are more like evening lockdowns or weekend lockdowns. You still need people to work during the week. You still need people to work during the day.

That is where we will have to come up with something interesting and attractive for our clients. But I do not think this kind of lockdowns would impact our businesses significantly.

On the contrary, I believe things like these would only propel the informal sector to go the formal way over time, because that is where there is a certain level of job security.

Tell us about the total head count of the company at the end of Q4. Which sectors saw a pick-up, and which ones saw employee demobilisation?

We are currently in a silent period. I am not going to talk specifically about numbers right now. All I can tell you is that we were almost at our pre-Covid levels of head count as of March 31.

That should give you an indication that hiring is back, and that we have bounced back quite strongly from Q2 onwards. Q4 has been a particularly strong quarter for us.

The sector where hiring has come back strongly are e-commerce, BFSI, telecom and manufacturing. There are certain sectors such as facility management business and security services that depend largely on offices reopening. So they are still a bit subdued.

But we do believe that with the current levels of vaccinations offices would reopen soon, following which those businesses will be back on track.


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