TeamLease Services IPO reaches halfway mark, subscribed 0.45 times

NEW DELHI: The initial public offering (IPO) of TeamLease Services was close to the halfway mark on the Day Two of the issue opening. By 1 pm on Wednesday, the IPO had received bids for 13,06,485 shares, or 0.45 times the total issue size of 28,92,063 shares on offer.

While combined figures for both BSE and NSE were unavailable at the time of writing of this report, NSE data suggests retail individual investors (RIIs) have bid for 0.56 times the quota limit of 5,12,056 shares. TeamLease’s employees have bid for 15 shares.

The human resource services company, which has set the price band at Rs 785-850 has raised Rs 190 crore by selling shares to 15 anchor investors, including Goldman Sachs, Reliance Capital and ICICI Prudential, among others, at Rs 850 apiece.

The Bangalore-based staffing company hopes to raise between Rs 400 crore and Rs 423 crore through the issue. The IPO comprises fresh share issue worth Rs 150 crore with the rest being offer for sale by promoter entities and other investors.

Brokerage Prabhudas Lilladher believes given the company’s industry leadership and the past track record, a 25-30 per cent revenue growth is likely over FY15-19. With increased scale, Ebitda margins should expand from 1.2 per cent reported in FY15, the brokerage said.

“This could result in Ebit/EPS growth in the range of 30-50 per cent going forward. Considering all the above factors, we believe TeamLease is a good medium term structural growth story and the stock can sustain high valuation multiples,” the brokerage said.

Angel Broking, on the other hand, said: “In comparison, its global peer Adecco is trading at 12.9 times 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 business concerns and expensive valuations, we recommend a neutral rating on the issue."