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Teamlease surges 13% as FPIs investment limit hiked

TeamLease Services surged 13% on the BSE after the Reserve Bank of India raised the investment limit for foreign portfolio investors (FPIs) in the company to 75% on Tuesday.


“The Reserve Bank of India has notified that the Foreign Portfolios Investors (FPIs) investment limit under Portfolio Investment Scheme in TeamLease Services has increased from 24% to 75% of its paid up capital,” the RBI said in a press release.



The stock is currently trading at Rs2,292.05, up by Rs260.35 or 12.81% from its previous closing of Rs2,031.70 on the BSE.



The scrip opened at Rs2,076.95 and has touched a high and low of Rs2,387.25 and Rs2,070.05, respectively.


Team Lease Services generated 96% of FY17 revenue from staffing and allied services, 3% from IT staffing services and rest from other. It commands ~6% market share in organised flexi-staffing segment in India.



The company is likely to benefit from growth of organised flexi-staffing (~20-30% CAGR expected in coming 4-5 years). This will be driven by rising preference for organized staffing providers and organised business footprint expansion in tier- 2/3 cities. Flexi-staffing industry provides huge potential for company’s growth, as it is in emerging stage (0.2% domestic penetration against ~2% globally). Also, penetration into high- yield industry like healthcare and hospitality is expected to aid revenue growth. Consequently, we expect revenue to grow at 23.0% CAGR over FY17-20E. Further, in FY17, it acquired ASAP, Nichepro and Keystone (high margin IT staffing) which is expected to be margin accretive.  IT staffing business has ~15% margin vs ~1.5% of general staffing business. Notably, lower tax rate due to sec 80JJAA would also drive PAT at 29.4% CAGR over FY17-20E.


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