When looking for a new job online, a lot of openings from Team Lease is found. No, it is now hiring people. That is just its marketing move. Because Team Lease Service Ltd. is a staffing solution provider to several industries and “to put India to work” as its vision, it needs more and more of those who are looking for employment.
Team Lease is now coming up with its IPO, early next month. The issue is an offer for sale as well as some new shares will be out.
About the company
Team Lease was incorporated on February 2, 2000. Exactly 16 years later, on February 2, 2016 its public issue will open. It is a Bangalore based company and has a prominent place in India’s ‘organised’ human resource sector. This staffing company acts as the middleman for businesses and the job seekers (who are known as Associate Employees).
The company was co-founded by Manish Sabhrawal and Ashok Nedurumalli, who are now the chairman and managing director of the company, respectively.
For companies, it makes available employment service like hiring temporary staff, permanent recruitment service and to help employers comply with labour law, it offers regulatory consultancy. As of 30th November 2015, Team Lease has served 1,252 clients. To name a few-Microsoft, ICICI Lombard, Bata, L&T, LG, etc. are among its important clients.
On the other side, to help people with employability it offers training and learning facility at its 40 training centres, which are handed over to run as franchises.
Team Lease has made 1.12 million people employed from 2002 to march 2015. Accounting as per Associate Employees, Team lease had 5-6% of the staffing market share in 2014.
The business operations of the company, divided into two-staffing services bring in more than 98% of the total revenue and – HR services the remaining 2 %.
The Staffing service being its central business operation, Team Lease provides temporary staffing; where they need to find out Associate Employees that accurately fit into their client’s requirements. From every Associate Employee they charge a one-time registration fee and a part of their monthly salary as additional fees.
Under HR services, there is a permanent recruitment service. Here, Team Lease help the clients find permanent staff and charge a one-time fee from the client. The revenues from these individual activities are mentioned below.
In the regulatory compliance consulting business, Team Lease has 116 employees who provide this service across India. It had a portfolio of 118 key clients in this segment, as of 31st March 2015.
To run the complete chain of staffing and recruiting industry, Team Lease has four subsidiaries:
- IIJT Education Private Ltd (IIJT)
- Team Lease Education Foundation (TLEF)
- Indian Tourism and Hospitality Skills Education Private Ltd. (ITHS)
- National Employment Apprenticeship Services (NEAS)
Although India is the world’s 2nd largest labour market, only 10% of the labourers have formal employment. Staffing sector runs on this little populace only, which includes companies like Adecco, Randstad, Innovsource, Quesscorp to compete with Team Lease.
With very low barriers to entry, this staffing service market is highly competitive and exploded. There is a lot of price competition, not only for the fees, but at what salary package can you get an employee.
The commercial activities of the clients’ businesses and the economy as a whole, widely affects this sector. An economic slowdown may turn down employment opportunities, thus upsetting the staffing service. Also, most of the clients being MNCs, a global slump may hurt Team Lease’s business.
Adding hitches, this sector is regulated by strict laws – ESI Act, Minimum Wage act, and a lot more rules that differ in every state of the nation.
Yet, the Indian staffing service sector will soon be on the top, largest among all global players.
The gross revenue from operation of Team Lease from its top five clients only is:
- 64% for the year ended 31st March 2015
- 86% – 31/3/2014
- 20% – 31/3/2013
…of the total gross operational revenue.
Team Lease is planning to raise Rs. 400 to 500 crore by freshly issuing 1500 million shares and offering for sale 3,219,733 equity shares:
- 275,977 sharesby GCIF
- 76,660 shares by GAPL
- 1,180,569 by GIL
- 1,533,206 by IAF
- 153,321 by HROV.
Promoters of the company will still be able to control the company as they hold around 50.99% of the outstanding equity shares.
Gaja capital and ICICI ventures are offloading 20% of their stakes.
250 million from the net proceeds of the IPO are projected to be used for acquisition. However, no certain plans have been drawn on it. Based on FY’15 number and taking in picture fully diluted equity post IPO, the P/E comes to about 50. There are no pears for them in the market so no comparison with any one can be provided.
The offer has been graded by CRISIL Research as 4 out of 5 indicating that the fundamentals of the offer are above average relative to other listed equity shares in India.
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