Hiring sentiment in the product and IT services space will remain subdued in the current quarter and may improve only in the next financial year, Quess Corp. group chief executive officer Guruprasad Srinivasan said.
The most active hiring was in auto, engineering, digital and telecom, which is for the 5G-backed technology stack, Srinivasan told Moneycontrol after the Bengaluru-based business services provider announced its Q3 earnings. And while hiring is subdued, demand continues for highly sought-after skills such as Java, full stack, cloud and machine learning/artificial intelligence.
“We are orienting ourselves in the sectors where active hiring is happening… building capability to hire for auto, engineering, digital, was a kind of turn that we took,” he said. “Overall hiring, barring those four specific verticals that I called out, is really not up to the active mark, but this cannot sustain for too long… By the end of March is when we will start seeing some demand that is going to come up and we are having those conversations with a couple of customers.”
The slowdown in hiring in the information technology and IT-enabled services sector has affected staffing companies as well, including Quess. Srinivasan said demand has dropped at least 60 percent in Q3 from Q1 levels and sentiment isn’t too positive for Q4 either.
Seasonally weak
India’s top five IT services companies said their cumulative net addition dipped into the negative in the third quarter as three of them ended the quarter with fewer employees than they had in the second quarter.
The steepest dip in IT staffing was in Q2, but since then, figures were up about 30 percent in Q3. The third quarter may be a seasonally weak quarter for IT companies, but Srinivasan pointed out demand was significantly lower this time. Quess usually had a demand for 4,000 workers as opposed to about 1,800 in Q3 of FY23, he said.
Quess’ net profit declined 3.25 percent to Rs 85.63 crore from a year earlier, while revenue grew 21.2 percent to Rs 4,465.55 crore, the company said on February 3. The total associate headcount reached 505,000 in the third quarter from 504,000 in the previous three-month period.
The company called off its merger with Allsec Technologies, in which Quess owns 73 percent, at the end of December, six months after it was announced in June 2022, in view of the “changed market scenario.”
Srinivasan told Moneycontrol that when the merger process started in June, Quess shares traded at about Rs 616 and Allsec shares were about Rs 430. “From the second quarter, after the IT slowdown, a bit of turmoil in the sector, and the overall sentiment around hiring and employment, I think the situation did not support the stock price,” he said.
He added that it was not the right time, and it was time bound by six months. However, he said, it is something they will consider in the future.
Quess Corp’s share price has lost 49 percent over the past year and currently trades at about Rs 373, close to its 52-week-low of Rs 351.45.
He maintained that integration between the two companies is under way. The tech teams have been integrated and are cross-selling and leveraging the back office as well.
On the company’s share price fall, he quipped that they are focussing on whether they are doing everything right and disclosing everything.
“That would entail a lot of other external factors. I would just leave it there and do all the right things for us to regain the momentum where we want to be, so that's what we're working on,” he said. “I think we had a little overhang on our leadership change and all of that I think will automatically settle down. I'm seeing a lot of confidence coming back from the analysts and investors.”
A year ago, former CEO Suraj Morarje’s sudden departure had led to concerns, which Moneycontrol at the time had reported was likely due to differences in strategy between him and Managing Director Ajit Isaac.
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