Then there is Teamlease, the Bangalore-based recruitment consultant, who is the leader (5% market share by employees) in the formal flexi-staffing industry.
Its revenue has grown at 31% CAGR over FY11-15. The bottomline, too, turned the corner during this period. But the EBITDA margin stood at a poor 1.2% in FY15, with employee expenses eating into 97% of the revenue. Analysts though, estimate revenue growth of 26% CAGR over FY15-18.
Margins, however, are unlikely to rise given the competitive, fragmented and low-entry-barrier nature of the sector. The seasonal nature of the segment is an added pain point as demand fluctuates with commercial activity and economic conditions.
The stock at the issue price of Rs.850 got a valuation of 44x its FY15 earnings. On one-year forward basis (FY17 earnings), it is valued at 31x. Global peers like Adecco SA-REG and Randstad Holding NV, however, trade at 10x their estimated FY17 earnings.