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TeamLease Services IPO to Buy or Skip

TeamLease Services ltd, a leading human resource outsourcing and staffing services company in India, has come up with it's IPO in a price band of 785 to 850 and issue will be open till February 04, 2016.

IPO Issue Details

Issue Closing : February 4, 2016 | Price Band : 785 - 850

About the Company

TeamLease Services Ltd. (TLS), founded in 2002, is one of India's leading providers of human resource services in the organised segment delivering a broad range of human resource services to various industries

TLS services spans the entire human resources supply chain covering employment, employability and education

Employment services include temporary staffing solutions, permanent recruitment services and regulatory consultancy for labour law compliance; employability offerings include learning and training solutions, including retail, institutional, and enterprise learning solutions.

Risks

The company's margins in the staffing services segment are wafer thin. The risks also emanates as it's highly dependent on this business, which contributes about 97 per cent of revenues.

Going forward, the company aims to step up focus on high margin services such as recruitment services, regulatory services, skills development and corporate training, amongst others. However, it will be a gradual process and competition in most of these services will be a key monitorable.

Among industries, the company intends to focus on hospitality, healthcare and provide services across the entire chain of human resource in India. It will also focus on employment, education and employability aspects going forward. Notably, the unorganised sector forms 70-80 per cent of the flexi-staffing industry and is highly fragmented.

Client contracts are typically of a year and the company has increased realisations by six to seven per cent on an average in the past few years. However, given intense competition and lack of strong entry barriers, any player – including TeamLease – has limited pricing power.

Verdict

Seeing the risks associated with the company we will recommend to skip this IPO. Preferably wait till listing and let the dust settle and if sustains price and one can lap it up.

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