Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
IPO News

| More

TeamLease Services - IPO Note - Valuations expensive - Angel Broking

Posted On: 2016-02-06 09:54:57

TeamLease Services Ltd (TSL) is one of India's leading providers of human resource services in the organized segment. It's staffing business accounts for 98.8% of the revenues while HR services accounts for the balance. It has a market share of ~6% in the Indian Flexi-staffing Industry. It delivers staffing services across industries like banking, manufacturing, retail, telecom, etc. The company has shown significant growth over FY2011-15, posting a revenue CAGR of 30.7% and after posting losses till FY2013, the company has since turned profitable and reported net profit of ~Rs. 30cr in FY2015 vs. a net loss of ~Rs. 16cr in FY2012.

Lower penetration levels suggest huge growth potential: The flexi-staffing industry in India as of FY2014 was valued at around Rs. 180-220bn and the penetration level of the industry in India at ~0.4% is lower than in developed regions where the penetration level is between 1.5-3.0%. Going forward, as per industry reports, Flexistaffing industry is expected to report a CAGR of 25-30% and be around Rs. 610-640bn by FY2019 and the penetration level is expected to improve to 1.0% over the same period on back of increasing number of enterprises turning formal, skill development in the country, and regulatory amendments in favour of formal employment.

Focus on improving operating margins: The HR services business, which commands higher margin, accounts for a very small portion of company's overall top-line. HR services offers recruitment services, regulatory services, skills and development corporate training, and payroll services. The company is now focusing on such higher margin businesses apart from its regular staffing business. It is also looking for opportunities in the IT vertical and improving employee productivity.

Intense competition and lack of pricing power: The flexi-staffing industry is highly fragmented with intense competition. Almost 70-80% of the industry is unorganized consisting of smaller players and balance comprising of major players like Adecco, Randstad, Quesscorp, etc. TSL faces stiff competition from these companies as well as other small players, thus leading to lack of pricing power.

Outlook Valuation: TSL being leading staffing company in India and has the potential to further increase its market share. However, although the company has shown good growth momentum, it operates in an industry characterised by intense competition, lack of pricing power, low entry barriers and high degree of fragmentation which renders limited scope for margin improvement.

On the valuation front, at the upper end of the price band, the pre-issue P/E works out to 60.6x its 1HFY2016E annualised earnings. In comparison, its global peer Adecco is trading at 12.9x 9MCY2015 annualised earnings and has a better margin and ROE profile. Further, post the IPO, TSL's ROE is not expected to improve significantly in the near term. Considering the above mentioned business concerns and expensive valuation, we recommend a Neutral on the issue.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com





Other Headlines:

RITES Ltd - IPO Note - Angel Broking

Fine Organic Industries Ltd - IPO Note - Angel Broking

Avana Logistek Ltd files DRHP with SEBI for IPO

IndoStar Capital Finance Ltd - IPO Note - Angel Broking

IndoStar Capital Finance Limited Offer opens on May 9, 2018

IPO Note - SoftTech Engineers Ltd - Arihant Capital Markets Ltd

Hindustan Aeronautics Ltd to list on March 28, 2018

Expectations high on listing of Bandhan Bank shares tomorrow

Mishra Dhatu Nigam Limited IPO receives subscription of 1.21 times

Lemon Tree Hotels Limited - IPO Note - Angel Broking

Mishra Dhatu Nigam Ltd - IPO Note - Sushil Finance

ICICI Securities Ltd - IPO Note - Sushil Finance

Lemon Tree Hotels Ltd - IPO Note - Sushil Finance

Mishra Dhatu Nigam Ltd - IPO Note - Angel Broking

Mishra Dhatu Nigam Ltd - IPO Note - Avoid - Hem Securities

ICICI Securities Ltd - IPO Note - SSJ Finance & Securities

Mishra Dhatu Nigam Ltd - IPO Note - Subscribe - SSJ Finance & Securities

IPO Note: MISHRA DHATU NIGAM LTD - NOT RATED - Kotak

IPO Note: ICICI Securities Ltd - SUBSCRIBE - Kotak

IPO: Mishra Dhatu Nigam Ltd - IIFL

Sandhar Technologies Limited - IPO Note - Angel Broking

Hindustan Aeronautics LTD - IPO Note - HEM Securities

ICICI Securities IPO to open for subscription on Mar 22, 2018

IPO Note: Sandhar Technologies Ltd - SUBSCRIBE - Kotak

IPO Note: Hindustan Aeronautics Ltd - SUBSCRIBE - Kotak

Bandhan Bank Ltd - IPO Note - Subscribe - HEM Securities

HDFC Asset Management Company Ltd files DRHP for IPO

Bandhan Bank Ltd - IPO Note - Subscribe - SSJ Finance

Bandhan Bank Limited - IPO Note - Angel Broking

IPO of ICICI Securities Ltd to open on March 22, 2018

Bharat Dynamics Ltd - IPO Note - SUBSCRIBE - Kotak

Bharat Dynamics Ltd - SUBSCRIBE - IPO Report - HEM SECURITIES

Bandhan Bank Ltd - IPO NOTE - Arihant Capital Markets

Bharat Dynamics Ltd - SUBSCRIBE - IPO Note - SSJ Finance

Bharat Dynamics Ltd - IPO Note - Angel Broking

Sarveshwar Foods Limited - IPO NOTE - Arihant Capital Markets

H.G. Infra Engineering Ltd - AVOID - IPO Update - SSJ Finance

HG Infra Engineering - IPO Note - Angel Broking

IPO Note - Aster DM Healthcare Ltd - Avoid - By SSJ Finance & Securities

Galaxy Surfactants Ltd - IPO Note - SUBSCRIBE - SSJ Finance & Securities

Shalby Limited - IPO Note - Angel Broking

Future Supply Chain Solutions Ltd - IPO Note - Angel Broking

HDFC Asset Management Company Limited to file for IPO

Reliance General Insurance receives final observations from SEBI for IPO

Srei Equipment Finance Ltd files DRHP for IPO

Future Supply Chain Solutions Ltd IPO to open for subscription on Dec 6, 2017

New India Assurance Co Ltd - IPO Note - CSEC Research

Khadim India Ltd - IPO Note - Angel Broking

The New India Assurance Company Ltd - IPO Note - Angel Broking

Mahindra Logistics Limited - IPO Note - Angel Broking



Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2018