TeamLease fixes IPO price band; eyes over $200M valuation

Staffing services company TeamLease Services Ltd has fixed the price band for its initial public offering (IPO) at Rs 785-850 a share.

The proposed IPO will hit the capital market on February 2 and close two days later. The company aims to raise up to Rs 150 crore (around $22.6 million) through a fresh issue of shares. In addition, there is an offer for sale of around 1.5 million shares each by entities related to Gaja Capital and ICICI Venture and of 153,321 shares by the promoters. The selling shareholders will pocket as much as Rs 274 crore from the issue.

The company is looking at a valuation of as much as Rs 1,445 crore ($213 million) with its aggressively priced issue. The firm has been on a high growth path with its top line rising almost three times between 2010-11 and 2014-15.

It also came out of the red in 2013-14 but has seen its margins take a hit this fiscal year. In the first half of this year, its operating margins narrowed to 1.44 per cent from 1.6 per cent a year earlier and 1.76 per cent for 2014-15 as a whole.

Its profit after tax fell to Rs 10.97 crore in the first half this fiscal year from Rs 17.2 crore a year earlier, as cushion from deferred tax benefits shrank and tax payments rose. On an annualised basis, the company may see a decline in net profit this fiscal year.

What is interesting is that the firm has priced the issue at this level despite the turmoil in the stock market. Already, some firms are rethinking  their proposed IPOs.

TeamLease would become a one-of-its-kind listed HR services firm in the country in a market that it otherwise dominates along with a few MNCs such as Manpower and Randstad. Quess Corp, part of Fairfax-controlled Thomas Cook and earlier known as Ikya, is another firm that offers staffing services and is contemplating a public issue.

The net offer of TeamLease will constitute a little over 25 per cent of the post-offer paid-up equity share capital, if the issue gets priced at the upper end of the price band.

From the proceeds of the fresh issue, the company plans to use around Rs 80 crore for its existing and incremental working capital requirements, Rs 25 crore for acquisitions and other strategic initiatives, and Rs 15 crore for upgrade of IT infrastructure.

TeamLease mainly offers temping services where it provides temporary workforce to its clients in bulk on a contract. This allows clients to hire without adding to their direct employee base. This employment and business model is closely associated with sectors like manufacturing, banking, BPO and retail, among others. However, temping also encompasses senior-level short-term flexi managers. TeamLease also offers permanent staffing services.

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