Incorporated in 2007, Quess Corp Limited (formerly known as IKYA HUMAN CAPITAL SOLUTIONS LIMITED), is integrated business services provider in India mainly focused on emerging as the preferred partner for handling end-to-end business functions of their clients. It serves across 4 segments namely, Global Technology Solutions, People & Services, Integrated Facility Management and Industrial Asset Management. The company has operation in 8 countries: USA, Canada, Srilanka, UAE, India, Malaysia, Philippines and Singapore, over 1,20,000 employees with a pan-India presence of 47 offices across 26 cities and serves over 1,300 customers.
As of March 31, 2016, its Key Clients include some of the world's largest, reputable organizations, including 20 companies ranked in the 2015 Fortune Global 500 list.
- The Largest IT Staff Augmentation Provider in India based on number of employees
- The Third Largest General Staffing Company in India based on number of employees
Objects of the issue
1. Repayment of debt availed by the Company (Rs. 50 Cr.),
2. Funding capital expenditure requirements of the Company and their Subsidiary, MFX US (Rs. 71.7 Cr.),
3. Funding incremental working capital requirement (Rs. 159.9)
4. Acquisitions and other strategic initiatives (Rs. 80 Cr.) and
5. General corporate purposes (Rs. 38.4 Cr.)
The company posted strong revenue growth of over 75% CAGR in last 5 years. However, it operates with thin margins. Investors would not get benefitted by way of dividends as it generates small margins. However, the company relies extensively on short term borrowings for its business requirements which is the concern for now.
When compared with Peers such as TeamLease which is at 55, a P/E of ~45 of QUESS CORP looks attractive. Company asking price of 317 seems reasonably priced, considering the strong balance sheet and the diversified customer base.
In this case we are betting on the Management of Quess Corp, particularly Ajit Isaac, who has created a very strong moat around its business. We believe the barriers to entry are high in this business and hence it will command premium valuations.