PremiumMUMBAI: Shares of temporary staffing company Teamlease Services Ltd rose more than 5% in early deals on Thursday on the National Stock Exchange. Investors were impressed by the company's March quarter performance. The stock had hit a new 52-week high of Rs4,097 apiece on 9 June following the earnings announcement.
Its key business vertical--general staffing--saw a sequential improvement of 5% in revenues and surpassed pre-covid levels. The general staffing core to associate ratio also improved from 334 to 352. In a post-earnings conference call, the company's management said the addition of 9,086 trainees in NETAP led overall volumes to increase 7.9% on a quarter-on-quarter basis.
The management said, going forward, the company will focus on engineering and gaming to drive revenues. Further, the IT staffing vertical is also likely to see healthy revenue traction in the coming quarters. That said, the company's performance in Q1FY22 may be hit by the second wave of Covid-led lockdown. Margins may also see a short-term hit due to the discounts given by the company. However, the management is hopeful of a pickup in revenues from Q2FY22 onwards.
It should be noted that Teamlease has adopted a new tax regime that has led to zero taxation and no cash outflow. The company's management said it was no longer required to pay minimum alternate tax and will get a benefit of 80JJA under the Income Tax Act. As a result, its cash conversion to profit before tax has risen, partly due to refunds and partly due to efficient working capital. In FY21, its free cash was at Rs250 crore.
According to analysts at ICICI Securities Ltd, the analysis of FY21 cashflow statement suggests that although provisions for bad debts had been a recurring problem, most of these were reversed and cash collections were not impacted.
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