Quess Corp Limited. Wealth Management

Transcription

1 IPO NOTE Key Details: June 27, 2016 Issue Key Highlights: Price*: `310 - `317 Issue Opens: 29 th June 2016 Issue Size*: `400Cr Issue Close: 1 st July 2016 Particulars No of No of Sh. at Shares higher at lower band price (Cr) band(cr) %age Higher band Amount (`Cr) Lower band Amount (`Cr) QIB % Non-Inst % Retail % Employees Total Issue % Issue Details: Industry Services (Human Resource Services) Promoters: Ajit Abraham Issac & Thomas Cook (I) Ltd Capital Structure: Pre Issue Equity Fresh Issue (@FV) Offer for Sale (@FV) NA Post Issue Equity Capital Total Issue as % of total capital 10.02% (Post-Issue) Face Value 10 IPO Grade NA *** All Calculations at Cap Price Issue Route Book Build Issue Bid Lot (Shares) 45 Lead Managers Axis Capital Ltd, ICICI Securities Ltd, IIFL Holdings Ltd and YES Securities (India)Ltd Registered Office Bengaluru, Karnataka Registrar Link Intime India Pvt Ltd Listing BSE, NSE Key Investment Details for Retail Investors: Min No. of Shares application by Retail Investor Amount to be paid on the Min. Application (`) ASBA Application is mandatory 45 14,265 Objects of the Issue: Fresh Issue: The proposed utilisation of the Net Proceeds of the Issue is set forth in the table below: Particulars Total Amt Repayment of debt availed by our Company Funding capital expenditure requirements of our Company and our Subsidiary, MFX US Funding incremental working capital requirement of our Company Acquisitions and other strategic initiatives General corporate purposes Business Overview: Quess Corp limited (QCL), is one of India s leading integrated business services provider, emerging as the preferred partner for handling end-to-end business functions of the clients. They offer comprehensive solutions including Recruitment, Temporary Staffing, Technology Staffing, IT Products and Solutions, Skill Development, Payroll, Compliance Management, Integrated Facility Management and Industrial Asset Management Services. Quess Corp Limited [ ] Wealth Management Subscribe As of March 2016, company s operations were spread across India with 47 offices across 26 cities in India. They also offer certain of their services in a number of jurisdictions in North America, the Middle East and South East Asia. As of Feb 2016, we employed more than 120,000 employees, including over 3,400 Core Employees and over 117,000 Associate Employees, i.e. employees placed with our clients. As of March 31, 2016, we had more than 1,300 clients, based on ongoing contracts as of such date. Investment Rationale: Leading integrated business services provider in diversified business segments, industries and geographies: QCL is a leading integrated business services provider in India providing comprehensive business solutions to a wide range of industries, including Recruitment, Temporary Staffing, Technology Staffing, IT Products and Solutions, Skill Development, Payroll, Compliance Management, Integrated Facility Management and Industrial Asset Management Services. The company is the largest IT staff augmentation provider and one of the largest general staffing companies in India. In addition, it is among the leading industrial asset management service providers and among the largest integrated facility management service providers in India. They provide a comprehensive range of service offerings across multiple industries, including in the Ecommerce, Technology, Banking and Financial Services, Insurance, Real Estate, Infrastructure Facility Management, Power, Energy, Oil and Gas, Chemicals, Metals, Automotive, Engineering, Telecom, Healthcare, FMCG and Retail industries. Robust recruitment capability, deep domain knowledge and knowledge of labour regulations: Company s ability to meet the staffing and other business service requirements of their clients across various jurisdictions and industries in a timely manner provides them a significant competitive advantage. The management, recruiters and sales force streamlined to specific business verticals and industry segments, which has enabled the company to strengthen client engagement and develop deeper domain knowledge. As of February 2016, it has employed over 1,050 full-time specialized recruiters across various business segments and industries, significantly increased their recruitment team for the GTS business segment, which requires specific experience and domain knowledge of the IT and technology solutions industry. Expand the service portfolio and operations globally through strategic acquisitions: The company intend to continue the strategic expansion plans through inorganic growth opportunities in underserved markets and geographies that complement the existing operations. The company intends to pursue strategic opportunities in complementary service offerings, among others, in payroll and compliance management services, IT staffing, facility management, asset management, safety and quality audit, financial analysis and planning, and background verification services, to offer a comprehensive range of business and managed service offerings to their clients. Capitalize on the rapid growth of e-commerce in India and pursue other B2C opportunities: The company intend to capitalize on the rapid growth of the e- commerce ecosystem in India. The company provides managed services to a number of leading e-commerce players in India including Amazon and Urban Ladder, and as of Feb 2016, about 12,500 Associate Employees were deployed with e-commerce clients. The company continue to move away from personnel and material contracts to SLA based contracts, in particular providing last mile delivery services under the Dependo brand. As of March 2016 they operated last mile delivery services across seven cities. Risks: QCL had negative operating cash flows in the past. Any negative cash flows in the future would adversely affect cash flow requirements. QCL operate in a highly competitive and fragmented industry with low barriers to entry. Inability to compete successfully may dent market share. QCL face significant employee related regulatory risks and any significant disputes with employees and/or concerned regulators may adversely affect business. Outlook & Valuation: The top-line of QCL has grown at a CAGR of ~52% from FY12 to to Rs 3,442 Cr. EBITDA margins remained near 5% during the period. With improvement in M from 1% in FY12 to 2.6% in, has grown at a CAGR of 94%. We expect QCL to maintain its trajectory of inorganic growth in the near future. With its String of Pearls strategy, the business services super-mart should see a shift of service portfolio towards higher margin businesses. Therefore, we recommend a Subscribe with a long term perspective.

2 Service Sector Growth, Global, GDP Growth by Sector, India, Source: Source: Economic Survey F&S Report 2016, RHP Source: Ministry of Statistics and Programme Implementation, World Bank - F&S Report 2016, RHP Country Break-down of Staffing Market, World, 2012 Least Penetrated Markets, World, 2013 Rank Country Penetration Rate 1 Latvia 0.03% 2 India 0.10% 3 Russia 0.10% 4 Turkey 0.10% 5 Greece 0.20% 6 Lithuania 0.20% 7 Romania 0.20% 8 Bulgaria 0.30% 9 Mexico 0.30% 10 New Zealand 0.40% Temporary General Staffing Market Payroll and Compliance Market Professional IT Staffing Market Revenue Forecasts, India, Revenue Forecasts, India, Revenue Forecasts, India, Forecast for Hard and Soft Service Market FM Market Revenue Forecast, , India Forecast of the Industrial Revenues in India, Asset Management Market, India,

3 Service and Product offerings: Breakdown of CNG filling stations: Key Matrix: Segment (Rs in Cr, except %, number of ratios) Global Technology Solutions Fiscal 2012 Fiscal 2013 Fiscal 2014 (9M) Fiscal 2015 (15M) Fiscal 2016 GTS Total Income As % to Total Income 32.05% 26.76% 26.01% 28.66% 26.77% GTS EBITDA Associate Employees 5,063 7,328 7,296 8,748 8,077 Core Employees People and Services P&S Total Income , As % to Total Income 56.70% 61.94% 61.38% 54.56% 56.64% P&S EBITDA Associate Employees 31,128 44,146 46,652 63,141 82,170 Core Employees Integrated Facility Management IFM Total Income As % to Total Income 11.16% 11.18% 12.47% 11.74% 10.82% IFM EBITDA Associate Employees 6,871 9,040 12,312 17,619 20,012 Core Employees Industrial Asset Management IAM Total Income As % to Total Income % 5.61% IAM EBITDA Brief Financials : Quess Corp Limited Year Price Mcap Net Sales EBITDA Margin Margin 310 3, % % % , % % % 11.6 FY15 (15M) % % % - FY14 (9M) % % % - FY % % % - FY % % % - EPS P/E ROE P/BV

4 Peer Comparison: Companies Price Mcap Revenue EBITDM M 310 3,913 3, % % % 11.3 Quess Corp 317 3,993 3, % % % 11.6 Teamlease 922 1,577 2, % % % 5.1 Services CMP as on June 24, 2016 EPS P/E ROE P/BV Overall competitive landscape: P & L Cost Items Quess Corp Competition Staffing Payroll and Compliance Operations and Maintenance Facilities Management Direct Labor Randstad Adecco Teamlease Marketing Services Adecco Teamlease IT Services and Manpower Maintenance SourceOne Training & Skill ILFS Skills Development Datapro Computers Salaries ADP Compliance Aparajitha Employee welfare Sodexo ISS Energo McNally Bharat Power Mech Projects Dusters Total Solutions Services (DTSS) BVG India Ltd Global Peers Offering Integrated Business Services Interserve ISS World Sodexo Compass Group Serco

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