TeamLease Services IPO Review
TeamLease Services Limited is going to hit capital market with IPO on 2nd February. The price band is fixed at Rs.785 to Rs.850 per share with a minimum application for 15 shares are required. The company has planned to gather around Rs.254 to Rs.272 crore. Let?s see whether it?s worthwhile to invest in TeamLease Services IPO or not.
Business Overview of TeamLease Services Limited
TeamLease Services Limited is a Mumbai Based company established in year 2002 and engaged in providing human resource services in the organized segment to various industries across India under the Brand Name of IIJT and TeamLease. Company?s core business includes providing temporary staffing solutions, permanent recruitment services and regulatory consultancy for labour law compliances. Company?s employability offering includes different types of learning and training solutions, including retail learning solutions, institutional learning solutions and enterprise learning solutions.
As of 30th November, 2015, Company had over 1 lakh Associate Employees which makes it one of India?s leading people supply chain companies. Company has managed to cater the needs of 1252 clients with a network of nine offices and 1218 full-time employees across India.
Features of TeamLease Services IPO
- Issue Opens On: Tuesday February 2nd, 2016
- Issue Closes On: Thursday February 4th, 2016
- Issue Type: 100% Book Building
- Issue Price Band: Rs.785?Rs.850 per share
- Face Value Per Share: Rs.10
- Minimum Bid Lot: 15 Equity Shares and in multiples of 15 equity shares thereafter
- Minimum Order Value: Rs.11,775 to Rs.12,750
- Issue Size: Rs.252 crore to Rs.274 crore
- Proposed Listing: Bombay Stock Exchange and National Stock Exchange
- Lead Managers: IDFC Securities Limited, Credit Suisse Securities (India) Private Limited and ICICI Securities Limited
- Registrar: Karvy Computershare Private Limited
- Company Promoters: Mr.Manish Mahendra Sabharwal, Mr.Ashok Kumar Nedurumalli and Mohitkaran Virender Gupta
- Download TeamLease Services IPO Prospectus?HERE
Objectives of TeamLease Services IPO
Through IPO, TeamLease Services proposes to offer 3,219,723 Equity Shares and the funds receive from the IPO would be utilized in a manner as follows:
- Fulfilling the requirement of incremental working capital.
- Acquisition and other strategic initiatives.
- Updgradation of the existing IT infrastructure.
- General corporate purposes including brand building, better working culture etc.
Apart from above objectives, company will also receive the benefit of listing which would enhance the brand recognition of the company.
Allocation of TeamLease Services IPO
|Allocation (% of Issue Size)||Percentage|
|Qualified Institutional Buyers (QIB)||75%|
|Non?Institutional Buyers (NIB)||15%|
Financial Performance of TeamLease Services Limited
- TeamLease Services has reported CAGR of 23.91% over 5 years i.e. from 2011 to 2015. Company has able to increase sales figure to Rs.2,007 crore in FY 2015 from Rs.687 crore in FY 2011.
- EBIDTA has remained in negative from FY 2011 to FY 2013. In FY 2014 and FY 2015 company has able to book profits however, the EBIDTA margins are very thin of 1%. Higher EBDITA Translates into bright future of the company and vice-versa.
- PAT on sales ratio is also very low of just over 1% in the past 2 years. For earlier years company has reported net loss but from the past 2 years company has achieved positive figures.
- Return on net worth is 20% for FY 2015 which is a good sign but for the 6 months ended 30th September, 2015 RoNW has reduced to just about 7%.
- Company has reported Diluted EPS of Rs.19.36 in the last fiscal year and for the 6 months ended 30th September, 2015, the EPS remains at Rs.7.16 per share.
Turn-on Points of TeamLease Services IPO
- Company has given a CAGR of 30% over the past 4 years showing high potential in the industry.
- In the segment of organized staffing, there is no such recognized brand in India. Most of the players are small and medium thus TeamLease Services have very good chances of grabbing the front seat and expands its operations quickly. Currently, TeamLease Services enjoys a small market share of 5% in terms of Associate Employees however, even with this small share CRISIL ranked TeamLease as one of the leading companies in organized staffing providers.
- Company has PAN network through its large workforce of 1252 employees and nine offices.
- Company has able to achieve technological and operational excellence and is also determined to enhance its IT infrastructure through net proceeds of IPO.
Turn-off Points of TeamLease Services IPO
- Both EBIDTA and PAT on sales margins are very thin which translates into struggling future if any other competitor comes into the sector.
- Company has only reported profits in past 2 years out of 5 years and also no dividend has been provided by the company.
- Some of the promoters and key managerial personnel are facing criminal proceedings and any adverse verdict would jeopardize the business operations.
Should you Invest in TeamLease Services IPO?
India is second largest labour market of the world and has tremendous growth potential in terms of flexi-staffing. TeamLease may enjoy the position of front runner and leader in the market but they still require to do lot of work in improving their margins.
At a lower price band of Rs.785 per share, Company?s PE ratio comes at whopping 49X of the FY 2015 earnings, which seems significantly expensive in comparison to the global peers that are trading at maximum PE of 33X.
Based on the above calculation and profits margins of the company, the valuation of the company seems highly priced and I would suggest avoiding TeamLease Services IPO.
However, investment can be made later once the company manages to improve its margins and shows consistent growth but currently TeamLease Services IPO may not be good buy for retail investors.