TeamLease IPO sees robust demand

Institutional investor-backed issue subscribed 66 times

Despite difficult market conditions, recruitment and staffing company TeamLease Services’ Initial Public Offering (IPO) attracted bids worth around Rs 16,000 crore.

The company’s IPO was worth Rs 435 crore, of which Rs 190 crore was raised from anchor investors a day before the issue opened. The remaining 2.9 million shares, worth Rs 245 crore, saw 190 million bids, worth Rs 16,200 crore or 66 times the shares on offer. Including the anchor investors, the IPO was subscribed 38 times.

Despite lofty valuations, TeamLease attracted bids from all three categories of investors. The Qualified Institutional Buyer (QIB) segment was subscribed 27 times, The high-net worth individual (HNI) category garnered 185-times subscription, while the retail segment was subscribed 10 times.

As the company had already raised 44 per cent of the issue size from anchor investors, TeamLease had to raise only Rs 245 crore in the IPO. The Securities and Exchange Board of India (Sebi) now allows companies to raise nearly half of the QIB portion from anchor investors.

TeamLease had reserved nearly 75 per cent of the issue for institutional investors. The retail and HNI buckets were 10 per cent and 15 per cent, respectively.

TeamLease had fixed the price band for the IPO at Rs 785 to Rs 850 a share. The issue was valued at 41 to 44 times its 2015-16 estimated earnings, much higher than some global peers.

Adecco SA and Randstad Holding NV, despite superior margin profiles, are trading at 12 times and 15 times their respective calendar year 2015 estimated earnings.

Experts said TeamLease’s potential and business model attracted investors.

The company is engaged in providing flexi-staffing solutions and enjoys the highest market share of around five per cent in the industry. TeamLease is a major provider of staffing services in the banking, retail and telecom sectors.

There is currently no domestically-listed company with similar business. However, following TeamLease's success, more companies in the sector are likely to tap the capital markets.

On Wednesday, Bengaluru-based Quess Corp, promoted by Thomas Cook India, filed its offer document with Sebi to raise Rs 400 crore.

According to estimates, the domestic staffing services sector is valued at Rs 22,000 crore and is pegged to grow 25 per cent annually till financial year 2019-20.

Success and liquidity generated by TeamLease will also boost IPO prospects of companies that are waiting to launch public issues. L&T Infotech, GVR Infra Projects, Infibeam and HealthCare Global are some such companies.