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Review By Dilip Davda on January 27, 2016

TeamLease Services Ltd (TLSL) is one of India's leading providers of human resource services in the organized segment delivering a broad range of human resource services to various industries with a vision of putting India to work.

TLSL’s services span the entire supply chain of human resources in India, covering aspects of employment, employability and education that include temporary staffing solutions, permanent recruitment services and regulatory consultancy for labor law compliance. Its employability offerings include different types of learning and training solutions, including retail learning solutions, institutional learning solutions and enterprise learning solutions. It had 1252 customers and 104,946 Associate Employees as of November 30, 2015, making the company one of India's leading people supply chain companies. All of its businesses operate on an asset-light model with low capital expenditure requirements. Company’s core business is providing staffing solutions across industry sectors and diverse functional areas. The majority of its Associate Employees are engaged in sales, logistics and customer service functions. TLSL focuses on people, processes and technology to enhance business productivity by enabling its clients to outsource their staffing requirements and allowing them to focus on operating and growing their core businesses. Company’s revenue comes from 95% of repeat contracts and the rest from new ones and other activities. It has created a niche place in 'Staffing infrastructure'. Overall 29% of the workforce is outsourced and of that roughly 1% is in the formal sector. TeamLease has a 5-6% share of the formal portion of the business. Ongoing labor reforms with more transparency augur well for organized players like TeamLease, who is confident to raise its market share in double digits in coming few years. All staffing is placed on a yearly contract basis with employers and the associates are taken on nine month’s contract. Billing for entire CTC including statutory dues and TLSL’s margins are done by the company that generates its revenue model.

India is the second largest labour market of the world and has massive growth potential for flexi-staffing. TLSL that is leader in India aims to be the biggest player globally in this segment. In last five year's TLSL has marked Associate growth of 17% and revenue growth of 32%.

To part finance the up gradation of existing IT infra, working capital needs and acquisition and other strategic initiatives, the company is offering around 19.11 to 17.65 lac fresh equity shares of Rs. 10 each (based on lower and upper price band) along with offer for sale of 3219723 equity shares via book building route in a price band of Rs. 785-850. Minimum application is to be made for 15 shares and in multiples thereon, thereafter. Issue opens for subscription on 02.02.16 and will close on 04.02.16. BRLMs to this issue are IDFC Securities Ltd, Credit Suisse Securities (India) Pvt Ltd and ICICI Securities Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE. The aggregate size of the offer is Rs.  402.75 cr. To Rs. 423.68 cr.  based on lower and upper price band. It issued equity at par between 2003-2008 and in November 2009. It also issued equity at a price of Rs. 2540.60 to Rs. 8805.10 per share (based on Rs. 10 paid up value) between 2009 to 2011 and issued bonus in the ratio of 29 shares for every 1 share held in July 2015. Its current equity capital of Rs. 15.33 crore will stand enhanced to around Rs. 17.00 crore.

On performance front, company's top line grew from Rs. 698.32 crore (FY2011) to Rs. 2018.46 crore (FY 2015) and its bottom line that was in red till FY 2013 turned positive for last two fiscals with a net profit of Rs. 17.86 crore (FY14) to Rs. 29.69 cr. (FY 15). For six months ended 30.09.15 it has posted net profit of Rs. 10.97 crore on a turnover of Rs. 1215.79 crore. If we attribute these earnings on annualized basis on fully diluted equity post IPO, then the asking price is at a P/E of  60 plus. This IPO is from the first mover in the staffing segment with no peers to compare with.

Merchant bankers have mixed trends for their past mandates.

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