Quess Corp demerger process likely to complete within a year: Chairman

The demerger process of Quess Corp, aimed at unlocking value at India's biggest third-party supplier of private-sector staffing needs, is likely to be completed in up to a year. The company may soon file an application with the National Company Law Tribunal (NCLT), Ajit Isaac, its chairman, told ET.

"Re-rating of its businesses is one of the reasons for the demerger due to a simplified structure, as it allows each of these companies to focus better by providing greater capital allocation flexibility, improved market position, and other benefits," Isaac said.

Quess Corp stock has rallied 44% in the past year compared to a 22% gain in the Sensex. Currently, Quess Corp is trading at 30 times its trailing twelve months' earnings, compared to 44 times its listed peer TeamLease currently trades. Quess Corp's operating profit margin was 4% in FY24, while TeamLease's profit margin for FY24 was 1%. Quess enjoys a better operating profit margin, while TeamLease performs better on the return on equity front.

Quess Corp has a workforce of more than 550,000 associates. It announced a demerger in February this year, citing that it will create a simplified corporate structure by separation into independent entities and provide enhanced clarity and management focus to accelerate growth. It will also result in an optimal capital allocation strategy for each entity to invest in their strategic priorities.

As per the proposed demerger scheme, the workforce management business will remain in Quess Corp, while Digitide Solutions will have the business process management (BPM), insurtech and human resource outsourcing (HRO) businesses.

Its facility management, industrial services and investment businesses will be demerged into Bluspring Enterprises.

In the case of Quess Corp, the company's existing businesses have already achieved a sizable market position, said Isaac.

"Our staffing business and payroll business is already the largest in India, while the tech business is among the top three. Similarly, our operating asset management business is the largest by the number of services we provide. So all of them have a fairly distinct market leadership position, and the demerger will provide them with an ability to attract differentiated pools of capital," he said.

With India expected to be the fastest-growing major economy, each of the demerged entities will cater to separate business segments, providing a better growth opportunity, according to Isaac. "For instance, Digitide Solutions will operate in the business process management and related sectors targets to achieve a revenue milestone of $1 billion, a significant increase from its current revenues of over $320 million," he said.

Quess Corp acquired a majority stake in AllSec Technologies in April 2019 through an open offer at ₹320 per share. Since then the stock has rallied 260%, currently trading at ₹1,165.