Team Lease Services Ltd:Annual Report 2023-24 Analysis

TeamLease Services Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

• Founded in 2002 by Ashok Reddy and Manish Sabharwal.
• Aimed to address the formal employment gap in India.

Headquarters Location and Global Presence:

• Headquarters: Bangalore, India
• Presence: Primarily focused on the Indian market, with limited international presence.

Company Vision and Mission:

• Vision: To put India to work.
• Mission: To provide innovative human resource solutions that enable businesses to achieve their goals and individuals to realize their potential.

Key Milestones in Their Growth Journey:

• 2002: Established as a staffing company.
• 2007: Expanded into training and skill development.
• 2016: Initial Public Offering (IPO) on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).
• Expansion: Growth through acquisitions and organic expansion in various HR service areas.

Stock Exchange Listing Details and Market Capitalization:

• Listed on: National Stock Exchange (NSE) and Bombay Stock Exchange (BSE)
• Ticker Symbol: TEAMLEASE
• Market Capitalization: Varies based on market conditions (Check latest financial websites for current figures)

Recent Financial Performance Highlights:

• Revenue: Report figures from latest reports.
• Profitability: Report figures from latest reports.
• Growth Rate: Report figures from latest reports.
• Key Financial Ratios: Report figures from latest reports.

Management Team and Leadership Structure:

• Key Executives:
  • Ashok Reddy (Managing Director)
  • Manish Sabharwal (Executive Vice Chairman)
  • Ramani Dathi (Chief Financial Officer)
• Leadership Structure: A board of directors oversees the company’s strategic direction, with executive leadership responsible for day-to-day operations.

Any Notable Awards or Recognitions:

• Often recognized for its contributions to employment generation, skill development, and corporate governance. (Check company website for latest information)

Their Products #

Complete Product Portfolio with Categories:

• Staffing Solutions:
  • Temporary Staffing
  • Permanent Recruitment
  • Contract Staffing
• Payroll Processing:
  • Payroll outsourcing services
  • Compliance management
• Recruitment Process Outsourcing (RPO):
  • End-to-end recruitment solutions
• Training and Skill Development:
  • Apprenticeship programs
  • Vocational training
• Human Resource Outsourcing (HRO):
  • Comprehensive HR management services

Flagship or Signature Product Lines:

• Temporary Staffing: A core service that provides businesses with flexible workforce solutions.
• Payroll Processing: Addresses the complex regulatory environment of payroll management in India.

Recent Product Launches or R&D Initiatives:

• Focus on leveraging technology for efficient recruitment and training processes.
• Development of digital platforms for candidate assessment and skill development.

Primary Customers #

Target Industries and Sectors:

• IT/ITES
• Manufacturing
• BFSI (Banking, Financial Services, and Insurance)
• Retail
• Healthcare
• E-commerce

Geographic Markets (domestic vs. international):

• Predominantly focused on the Indian domestic market.

Major Client Segments:

• Corporates: Large and mid-sized companies across various industries.
• Startups: Providing staffing and HR solutions to emerging businesses.
• Government: Partnering on skill development and employment generation initiatives.

Major Competitors #

Direct Competitors in India and Globally:

• Indian Competitors:
  • Quess Corp
  • Adecco India
  • ManpowerGroup India
  • Randstad India
• Global Competitors:
  • Adecco
  • ManpowerGroup
  • Randstad

Competitive Advantages and Disadvantages:

• Advantages:
  • Strong brand recognition in the Indian staffing and HR solutions market.
  • Extensive network of branches and resources across India.
  • Technological advancements in its product offerings.
• Disadvantages:
  • Competition from global players with deeper pockets and broader service offerings.
  • Regulatory complexities and compliance challenges in the Indian labor market.

How they differentiate from competitors:

• Focus on technology-driven solutions for recruitment and training.
• Strong emphasis on compliance and regulatory expertise.
• Tailored solutions for specific industry verticals.

Industry challenges and opportunities:

• Challenges:
  • Regulatory compliance complexities.
  • Talent shortages.
  • Economic cycles.
• Opportunities:
  • Formalization of the workforce.
  • Increased demand for skilled labor.
  • Government initiatives promoting employment generation and skill development.

Market positioning strategy:

• Positioned as a leading provider of comprehensive HR solutions, focusing on compliance, technology, and talent development.

Future Outlook #

Expansion plans or growth strategy:

• Continued focus on expanding its presence in key industry verticals and geographic regions within India.
• Leveraging technology to enhance service delivery and improve operational efficiency.

Sustainability initiatives or ESG commitments:

• Increasing focus on ethical and responsible business practices.
• Promoting diversity and inclusion in the workplace.
• Supporting community development initiatives.

Industry trends affecting their business:

• Increased automation and digitization in HR processes.
• Growing demand for flexible workforce solutions.
• Emphasis on employee well-being and engagement.

Long-term vision and strategic goals:

• To be the leading provider of HR solutions in India.
• To contribute to the formalization of the Indian workforce.
• To empower businesses and individuals through innovative HR practices.

Financial Analysis: TeamLease Services Limited (FY24) #

Key Financial Performance (Consolidated) #

Source: MD’s Message, Board’s Report Financial Summary, Consolidated Statement of Profit and Loss, CFO Conversation. Note: EBITDA is as per MD’s message and CFO conversation; calculated EBITDA margin based on this.

Observations #

• Revenue demonstrated strong growth at 18.44%, driven primarily by staffing services, particularly in consumer, telecom, retail, e-commerce, and manufacturing sectors due to increased formalization.
• EBITDA grew by 7.0%, though the EBITDA margin contracted by approximately 15 bps. This margin pressure is attributed to pricing pressures from large clients and macroeconomic headwinds, despite efforts towards economies of scale and value-added services.
• PAT growth was marginal at 0.99%, indicating that while top-line growth was robust, increased costs or pricing pressures significantly impacted bottom-line expansion.
• The phase-out of the NEEM program impacted the Degree Apprenticeship business numbers initially but was mitigated by a focus on other apprenticeship schemes, achieving net positive headcount growth by Q4 FY24.
• IT Staffing continued to face headwinds, mitigated by a strategic shift towards Global Capability Centres (GCCs) and product companies, which offer higher margins albeit lower volumes.

Balance Sheet Analysis (Consolidated) #

Source: Consolidated Balance Sheet.

Observations #

• Total assets saw a marginal decline, primarily due to a decrease in current assets.
• Equity increased slightly, reflecting retained profits, offset by the share buyback.
• Non-current liabilities increased, mainly due to higher lease liabilities and employee benefit obligations.
• Current liabilities decreased, driven by lower trade payables and other financial liabilities.

Significant Changes in Major Line Items (>10% YoY - Consolidated) #

Detailed Analysis #

Financial Performance Analysis: TeamLease Services Limited (FY2024) #

Overall Performance Summary #

TeamLease Services Limited reported consolidated revenue from operations of ₹9,321.53 crores for FY2024, an 18.44% increase from ₹7,870.00 crores in FY2023. Consolidated Profit After Tax (PAT) stood at ₹112.66 crores, a marginal increase from ₹111.55 crores in the previous year. EBITDA (before exceptional/non-business expense) grew by approximately 7% YoY to ₹131 crores. Despite revenue growth, overall margin compression was observed, attributed to pricing pressures and macroeconomic headwinds, particularly in the IT staffing segment. The company maintained a strong balance sheet with free cash flow of ₹265 crores and a Return on Capital Employed (ROCE) of 36%. A share buyback was concluded during the year.

Revenue Analysis #

• Consolidated Revenue Growth: 18.44% YoY (₹9,321.53 crores in FY24 vs. ₹7,870.00 crores in FY23).
• Standalone Revenue Growth: 22.75% YoY (₹8,440.80 crores in FY24 vs. ₹6,876.17 crores in FY23).

Segmental Revenue Performance (Consolidated) #

• General Staffing and Allied Services: Revenue of ₹8,510.09 crores in FY24, up 18.20% from ₹7,199.83 crores in FY23. This segment remains the primary revenue driver. Growth was prominent in consumer, telecom, retail, e-commerce, and manufacturing sectors.
• Specialised Staffing Services: Revenue of ₹551.68 crores in FY24, up 6.60% from ₹517.52 crores in FY23. IT staffing within this segment faced headwinds, mitigated by a strategic focus on Global Capability Centres (GCCs) and product companies, albeit with lower volumes initially.
• Other HR Services: Revenue of ₹259.76 crores in FY24, a significant 70.17% increase from ₹152.65 crores in FY23. This includes EdTech, RegTech, and HCM solutions. The EdTech division saw new university partnerships and the launch of Digivarsity. RegTech and outsourced services showed stable growth.
• Geographical Distribution: All reported revenue is from operations within India.

Cost Structure Analysis (Consolidated) #

• Employee Benefits Expense: The largest cost component, amounting to ₹8,951.83 crores in FY24 (96.03% of revenue from operations), compared to ₹7,561.69 crores in FY23 (96.08% of revenue from operations). The slight decrease as a percentage of revenue suggests some scale efficiencies or changes in associate/trainee mix.
• Other Expenses: Increased to ₹235.14 crores in FY24 from ₹197.06 crores in FY23. As a percentage of revenue, it remained relatively stable at 2.52% in FY24 versus 2.50% in FY23.
• Finance Costs: Increased to ₹18.95 crores in FY24 from ₹16.30 crores in FY23, likely due to higher lease liabilities or increased utilization of working capital facilities.
• Depreciation and Amortization Expense: Increased to ₹46.99 crores in FY24 from ₹38.31 crores in FY23, reflecting investments in technology and infrastructure, including Right of Use assets.

Cash Management Analysis: TeamLease Services Limited (FY24) #

Cash Flow Statement Analysis (Consolidated FY24) #

Operating Cash Flow (OCF) #

• Profit Before Tax: ₹113.52 Crores
• Adjustments (Non-cash/Non-operating):
  • Depreciation & Amortization: ₹47.78 Crores
  • Finance Costs: ₹9.26 Crores
  • Interest Income: -₹34.52 Crores
  • Share-based payment expense: ₹(1.55) Crores (net reversal)
  • Provision/Reversal for ECL/Doubtful Advances: ₹(1.27) Crores (net reversal)
  • Exceptional Items (Net): ₹1.53 Crores (mainly loan impairment and buyback expenses, offset by PF Trust recovery)
• Operating Profit Before Working Capital Changes: ₹134.75 Crores (approx., after adjusting for key items)
• Working Capital Adjustments:
  • Increase in Trade Receivables: -₹168.39 Crores
  • Increase in Other Assets/Unbilled Revenue/Other Financial Assets: -₹31.55 Crores
  • Increase in Trade Payables/Other Financial Liabilities: ₹211.08 Crores
  • Increase in Other Liabilities/Employee Obligations: ₹27.82 Crores
• Net Cash from Operating Activities (after WC changes, before tax): ₹173.71 Crores
• Income Tax Payments: -₹43.03 Crores
• Net Cash Flow From Operating Activities (A): ₹130.68 Crores

Investing Cash Flow (ICF) #

• Purchase of Property, Plant & Equipment: -₹15.78 Crores
• Purchase of Intangible Assets (incl. under development): -₹20.06 Crores
• (Investments in)/Maturity of Fixed Deposits (Net): -₹50.89 Crores
• Interest Received: ₹34.10 Crores
• Recovery from PF Trust: ₹10.47 Crores
• Other minor items (loans to employees/related parties).
• Net Cash Flow Used In Investing Activities (B): -₹41.72 Crores

Financing Cash Flow (FCF - from company perspective) #

• Repayment of Principal Portion of Lease Liabilities: -₹23.36 Crores
• Finance Costs Paid (incl. lease interest): -₹9.30 Crores
• Buyback of Equity Shares: -₹100.00 Crores
• Tax on Buyback: -₹23.28 Crores
• Expenses on Buyback: -₹0.14 Crores
• Proceeds from/(Repayment of) Borrowings (Net): ₹1.20 Crores
• Net Cash Flow Used In Financing Activities (C): -₹154.88 Crores

Net Change in Cash & Cash Equivalents #

• Net Change in Cash & Cash Equivalents (A+B+C): ₹(65.92) Crores
• Opening Cash & Cash Equivalents: ₹331.20 Crores
• Closing Cash & Cash Equivalents (Consolidated): ₹265.28 Crores

Free Cash Flow (FCF) to Firm (Illustrative) #

• OCF: ₹130.68 Crores
• Capital Expenditure (PPE + Intangibles): ₹15.78 + ₹20.06 = ₹35.84 Crores
• FCF = OCF - Capex = ₹130.68 - ₹35.84 = ₹94.84 Crores (Consolidated)

Working Capital Management Efficiency (Based on Consolidated Figures) #

Key Components (FY24 Closing) #

• Trade Receivables: ₹565.75 Crores
• Unbilled Revenue: ₹42.98 Crores
• Trade Payables: ₹466.42 Crores

Debtor Days #

• Avg Trade Receivables (FY24, FY23): (₹565.75 Cr + ₹440.34 Cr)/2 = ₹503.05 Cr
• Avg Unbilled Revenue (FY24, FY23): (₹42.98 Cr + ₹38.07 Cr)/2 = ₹40.53 Cr
• Total Avg Receivables: ₹543.58 Cr
• Revenue from Operations (Consolidated FY24): ₹9321.53 Crores
• Debtor Days = (₹543.58 / ₹9321.53) * 365 = 21.25 days (Approx.)

Creditor Days #

• Trade Payables (₹466.42 Cr) cover a significant portion of Trade Receivables (₹565.75 Cr), indicating efficient management of supplier credit.

Cash Conversion Cycle (CCC) #

• Debtor Days - Creditor Days (Inventory Days are negligible for a service company).

TeamLease Services Limited (FY2024) Financial Analysis #

Revenue and Profitability Analysis #

TeamLease Services Limited reported consolidated revenue from operations of ₹9,321.53 crores for FY2024, an 18.44% increase from ₹7,870.00 crores in FY2023. Consolidated Profit After Tax (PAT) stood at ₹112.66 crores, a marginal increase from ₹111.55 crores in the previous year. Consolidated EBITDA (before exceptional/non-business expense) was ₹130.80 crores, up 7.0% year-over-year from ₹122.28 crores.

The company experienced pressure on margins. The MD’s message indicated an approximate 1% reduction in overall margins. Calculated EBITDA margin for FY24 is approximately 1.40% (₹130.80 Cr / ₹9,321.53 Cr), compared to approximately 1.55% in FY23 (₹122.28 Cr / ₹7,870.00 Cr). PAT margin for FY24 was approximately 1.21% (₹112.66 Cr / ₹9,321.53 Cr), down from approximately 1.42% in FY23.

Return on Capital Employed (ROCE), net of cash and current investments, improved to 36.3% in FY24 from 33.3% in FY23. Return on Net Worth (RoNW) also saw a slight improvement to 14.1% from 13.8%. The company maintained a healthy free cash flow of ₹265 crores.

Standalone revenue from operations increased to ₹8,440.80 crores in FY24 from ₹6,876.17 crores in FY23. Standalone PAT was ₹105.80 crores, up from ₹97.20 crores.

Market Position and Competitive Landscape #

TeamLease positions itself as one of India’s leading human resource service companies, having facilitated employment for over 2.3 million individuals since its inception. The company aims to be the largest private sector employer in India and the largest staffing company globally by headcount. Key value drivers include a base of 3,20,000 associates/trainees and over 3,800 clients.

The staffing industry, particularly general staffing, is seeing growth driven by formalization in sectors like consumer and manufacturing. However, this growth, especially with large clients, exerts pressure on Per Associate Per Month (PAPM) revenue and consequently, margins. The IT staffing segment continues to face headwinds from the broader IT industry slowdown, mitigated by a strategic focus on Global Capability Centres (GCCs). The company faces competition from regional players in blue-collar staffing and emerging digital-first staffing platforms.

Performance of Key Products and Services #

General Staffing #

This segment was the predominant driver of headcount growth, with a net incremental associate growth of approximately 35,000 (20% YoY net growth). Strong performance was noted in consumer, telecom, retail, e-commerce, and manufacturing sectors. The company is focusing on economies of scale, value-added services, and a strategic client mix, including a shift towards variable mark-up models with new, smaller clients to sustain margins. Hiring costs are approximately ₹2,200 per associate.

Specialised Staffing (IT & Telecom) #

The IT staffing business was impacted by industry headwinds, losing 50% of associate headcount on the IT services side. However, a focus on higher-margin GCC clients helped maintain revenue run-rates. Measures include headcount rationalization and cost optimization, with a goal to recover to an 8% EBITDA margin.

Risk Profile: TeamLease Services Limited #

Risk Management Approach #

TeamLease Services Limited employs a comprehensive and integrated risk management framework designed to identify, assess, and mitigate risks crucial for sustaining long-term growth and operational resilience. This framework is embedded into corporate strategy and daily operations. Risk oversight is integrated into the corporate strategy, with the Board of Directors, through the Risk Management Committee (RMC), ensuring alignment with long-term objectives.

Current Risk Analysis #

The following analysis categorizes identified risks, outlines their descriptions, mitigation strategies, and assesses their potential impact.

Strategic Risks #

Market Adaptability Risk #

• Description: The staffing industry is subject to rapid changes in market conditions. Failing to adapt strategy at pace with market demands could hinder growth and reduce market share.
• Mitigation Strategies:
  • Implementing an adaptive strategy with strong governance at market and sectoral levels.
  • Regularly reviewing performance to realign strategy with evolving market demands.
• Analysis:
  • Trend: The dynamic nature of the staffing industry suggests this is an ongoing and potentially increasing risk.
  • Potential Financial Impact: Could affect revenue growth, market share, and overall profitability.

Mergers and Acquisitions (M&A) Integration Risk #

• Description: M&A are key to the Company’s growth strategy. Poor integration of acquired entities could disrupt operations and result in missed synergies.
• Mitigation Strategies:
  • Deploying a dedicated Post Merger Integration (PMI) team.
  • Using an M&A platform for real-time tracking.
  • Ensuring seamless integration of acquired entities.
• Analysis:
  • Trend: Relevant as M&A is a key growth strategy.
  • Potential Financial Impact: Could impact expected synergies, increase integration costs, and disrupt existing operations, thereby affecting profitability.

Operational Risks #

Talent Retention Risk #

• Description: Success heavily relies on retaining skilled professionals. Losing key talent could disrupt operations and weaken market position.
• Mitigation Strategies:
  • Offering clear career progression paths and internal movement opportunities.
  • Regular upskilling and development programmes.
  • Enhancing employee engagement.
• Analysis:
  • Trend: Likely a persistent risk in a competitive talent market.
  • Potential Financial Impact: Increased recruitment costs, loss of productivity, impact on service delivery and client relationships.

Supply Chain Stability Risk #

• Description: Reliance on a reliable supply chain (vendors, workforce). Disruptions could adversely affect service delivery.
• Mitigation Strategies:
  • Developing alternative vendors and suppliers.
  • Maintaining strategic inventories (contextually, a talent pipeline).
  • Building skilled procurement teams supported by digital tools.
• Analysis:
  • Trend: May fluctuate with market conditions and workforce availability.
  • Potential Financial Impact: Disruption to service delivery, increased costs, potential loss of revenue.

Workplace Safety and Health Risk #

• Description: Ensuring a safe and healthy work environment is crucial. Workplace incidents could result in penalties, loss of productivity, and harm to employee well-being.
• Mitigation Strategies:
  • Implementing regular safety training programs.
  • Enforcing strict safety protocols and reporting procedures.
  • Conducting regular internal and external safety audits.
• Analysis:
  • Trend: An ongoing operational concern requiring continuous attention.
  • Potential Financial Impact: Penalties, compensation costs, loss of productivity, reputational damage.

Data Protection and Cybersecurity Risk #

• Description: Handling sensitive personal and financial data makes the Company vulnerable to cyber threats. Breaches could result in financial losses, reputational damage, and legal implications.
• Mitigation Strategies:
  • Aligning Information Security Management System (ISMS) with ISO 27001:2013.
  • Implementing strong incident monitoring and response measures.
• Analysis:
  • Trend: A significant and growing risk in the digital age.
  • Potential Financial Impact: Significant financial penalties, legal costs, loss of customer trust, and reputational damage.

Financial Risks #

Pricing and Profitability Risk #

• Description: Operates in a highly competitive market with pricing pressures and fluctuating demand posing threats to profitability.
• Mitigation Strategies:
  • Implementing cost improvement initiatives and automation.
  • Establishing strategic partnerships.
  • Pursuing market differentiation.
• Analysis:
  • Trend: Likely a persistent risk due to market competition.
  • Potential Financial Impact: Reduced margins, lower profitability, potential impact on cash flow.

Compliance/Regulatory Risks #

Labour Law Compliance Risk #

• Description: Must adhere to complex and evolving labour laws. Non-compliance could lead to legal penalties, operational disruptions, and loss of credibility.
• Mitigation Strategies:
  • Establishing a comprehensive compliance monitoring system.
  • Conducting regular audits.
  • Continuously training employees on regulatory requirements.
• Analysis:
  • Trend: Constant risk due to evolving nature of labour laws.
  • Potential Financial Impact: Legal penalties, fines, operational disruptions, reputational damage.

Governance and Statutory Compliance Risk #

• Description: Adhering to statutory requirements and governance standards is vital. Non-compliance can lead to fines, legal challenges, and operational setbacks.
• Mitigation Strategies:
  • Using advanced systems to track statutory requirements.
  • Providing timely reminders and compliance tracking.
  • Engaging external consultants for regular reviews.
• Analysis:
  • Trend: An ongoing requirement for all listed entities.
  • Potential Financial Impact: Fines, legal costs, operational disruptions.

Ethical Compliance and Integrity Risk #

• Description: Maintaining high ethical standards is critical. Ethical breaches could cause significant damage to reputation and financial standing.
• Mitigation Strategies:
  • Enforcing Code of Business Conduct, Anti-Bribery and Corruption Policy, Risk Management Policy, and Whistleblowers Policy.
  • Conducting mandatory annual ethics training.
• Analysis:
  • Trend: A foundational and continuous risk.
  • Potential Financial Impact: Reputational damage leading to loss of business, potential fines.

Financial Analysis Report: TeamLease Services Limited (FY24) #

Overall Financial Performance (FY24 vs. FY23) #

TeamLease Services Limited demonstrated robust top-line growth in FY24. Consolidated Revenue from Operations reached ₹9,321.53 crores, an 18% increase from ₹7,870.00 crores in FY23. Consolidated EBITDA (before exceptional/non-business expense) grew by 7% YoY to ₹131 crores. However, overall margins experienced a reduction of approximately 1%. Consolidated Profit After Tax (PAT) stood at ₹112.66 crores, a marginal increase from ₹111.55 crores in FY23. The company maintained healthy balance sheet metrics with free cash flow of ₹265 crores and a Return on Capital Employed (ROCE) of 36%. Standalone performance also showed growth, with Revenue from Operations increasing to ₹8,440.80 crores from ₹6,876.17 crores and PAT rising to ₹105.80 crores from ₹97.20 crores.

Long-Term Strategic Goals and Progress #

The company’s overarching vision is “Putting India to Work,” aiming to become India’s largest private-sector employer and the world’s largest staffing company by headcount. Progress is centered around the “3Es”: Employment, Employability, and E-workforce.

Employment (Staffing) #

General staffing headcount grew 23% YoY in gross revenue terms. Total headcount increased by approximately 37,000 employees in FY24. Strong performance was noted in consumer, telecom, retail, e-commerce, and manufacturing sectors, driven by formalization trends. The IT staffing business faced headwinds but mitigated this by focusing on Global Capability Centres (GCCs) and product companies, securing higher-margin accounts despite lower volumes.

Employability (Skilling & Training) #

The Degree Apprenticeship business saw a net positive headcount growth despite the exit of NEEM programmes, by broadening other apprenticeship schemes. TeamLease EdTech expanded partnerships with universities and corporates, launching the Digivarsity platform. TeamLease Skills University continues its degree-linked apprenticeship programs.

E-workforce (Tech Solutions) #

The RegTech business and outsourced services activity showed continued growth. The HCM platform is under ongoing development and investment for comprehensiveness.

Financial Performance Analysis of TeamLease Services Limited for FY2024 #

Overall Consolidated Performance #

TeamLease Services Limited reported consolidated revenue from operations of ₹9,322 crores for FY2024, an 18% increase from ₹7,870 crores in FY2023. EBITDA (before exceptional/non-business expense) grew by 7% YoY to ₹131 crores. Profit After Tax (PAT) stood at ₹113 crores, a marginal increase from ₹111.55 crores in the previous year. The company maintained a strong balance sheet with free cash flow of ₹265 crores and a Return on Capital Employed (ROCE) of 36%. Despite revenue growth, overall margins experienced a reduction of 1%, attributed to pricing pressures, macroeconomic headwinds, and the phase-out of the NEEM programme. The company concluded its first share buyback during the year, signaling prudent capital management with a free cash balance exceeding ₹250 crores.

Segment-wise Performance #

General Staffing #

• This segment was the predominant driver of overall headcount growth, which saw a net addition of approximately 37,000 employees company-wide.
• Staffing headcount in gross revenue terms grew 23% YoY.
• Strong performance was noted in consumer, telecom, retail, e-commerce, and manufacturing sectors, partly driven by a wave of formalization.
• A key challenge remains pressure on Per Associate Per Month (PAPM) rates, impacting margins, especially with large client growth.
• Strategic focus included new logo acquisition, with 60% of 142 new sign-ups on a variable mark-up model to sustain margins against future salary inflation.
• Hiring costs for general staffing are approximately ₹2,200 per associate. Tech investments aim to optimize these costs.
• Net incremental associate growth (year-to-date) was 35,000, a 20% increase YoY, supported by investment in the hiring team.

Specialised Staffing (IT Staffing) #

• The IT staffing business continued to face headwinds from the broader IT industry slowdown, resulting in a 50% loss of associate headcount in IT services.
• Strategic shift towards Global Capability Centres (GCCs) and product companies, which offer higher margins (though lower volumes), helped maintain revenue run-rate.
• The company aims to recover to an 8% EBITDA margin trajectory in this segment, contingent on IT hiring recovery and an optimal mix of services and captive clients.
• Corrective measures included headcount rationalization and cost optimization.
• Hiring costs are ₹35,000 to ₹40,000 per associate; tech investments target a 50-60% reduction.
• Transitioned 650 resources from low-margin telecom business to general staffing.

Degree Apprenticeship (DA) #

• The phase-out of the NEEM programme (affecting over 45,000 apprentices at ~₹1,000 PAPM) had an estimated profitability impact of ₹22-₹24 crores.
• This impact was mitigated by successfully transitioning to other high-margin apprenticeship programmes and focusing on broadening apprenticeship offerings under various schemes.
• The business achieved breakeven in Q4 FY2024 from the NEEM phase-out and is expected to contribute positively to profits in FY2025.
• Saw a 28% increase in enrolments for specific programmes and a 9% growth in trainee enrolments & 46% revenue growth with existing organizations under NAPS.

EdTech (TeamLease EdTech) #

• Reported 15% revenue growth and 100% growth in Profit Before Tax (PBT).
• University partners increased by 50%, student base by 20%, and employer partners by 300%.
• Launched Digivarsity, a platform aligning educational services with career progression.
• The EdTech vertical exhibits seasonality, with Q1 being the weakest and Q4 the strongest due to student admission and examination cycles.

E-Workforce (HCM Solutions & RegTech) #

• HCM Solutions: The HRMS platform was upgraded (Node.js, microservices, Vue.js). Future additions include DIY Payroll, Asset Management, and Advanced ATS. The HCM platform is still in an investment phase.
• RegTech (Avantis): Continued to see growth and has stabilized on platform and performance. Covers 1,500+ legal acts with a database of 69,000+ compliances, serving 325+ live customers.

Financial Health and Capital Allocation #

• Margins: EBITDA margin enhancement strategy focuses on economies of scale (digital transformation for recruitment and operational efficiency), expanding revenue adjacencies (value-added services, hiring solutions, tech offerings), and optimizing product/client mix (variable mark-up model, penetrating blue-collar staffing).
• Cash Flow & Liquidity: Achieved an EBITDA to operating cash flow conversion rate of over 80%, with a closing cash balance of ₹265 crores.
• Capital Allocation Priorities:
  • Inorganic growth opportunities to enhance revenue adjacencies in Employment, Employability, and Employee productivity solutions.
  • Continued technological investments to drive productivity, cost efficiencies, and expand service offerings.
  • Organic growth support by scaling capabilities and expanding into new verticals.
• Standalone Performance (FY24): Revenue from operations at ₹8,440.80 crores (up from ₹6,876.17 crores). EBITDA (excluding other income and exceptional items) at ₹84.97 crores (up from ₹76.79 crores). PAT at ₹105.80 crores (up from ₹97.20 crores).

Operational Metrics & Outlook #

• Total headcount grew by ~37,000 employees during FY2024.
• Catered to 3,20,000 associates/trainees and 7,50,000 students/apprentices, serving 3,800 clients.
• The company aims to leverage its cost structures and technological investments for future growth. M&A opportunities that promise growth and innovation remain an area of exploration.
• The company is focused on profitable, capital-efficient growth.
• The successful mitigation of the NEEM program’s financial impact and the strategic focus on higher-margin areas are expected to support future profitability.

Key Risks Impacting Financials #

• Pricing Pressure: Ongoing pressure on PAPM in the general staffing segment, especially from large clients.
• IT Industry Headwinds: Continued slowdown affecting the specialized (IT) staffing business.
• Regulatory Changes: Impact of program phase-outs like NEEM, requiring agile adaptation.
• Integration of Acquisitions: Successful integration of past and future M&A is crucial for realizing synergies.

TeamLease Services Limited FY24 Financial Analysis #

Executive Summary & Overall Performance #

TeamLease Services Limited reported a revenue of ₹9,321.53 crores for FY24, an 18.44% increase from the previous year. EBITDA grew by 7% to ₹130.80 crores. PAT stood at ₹112.66 crores. The company maintained a healthy balance sheet with free cash flow of ₹265 crores and ROCE at 36%.

Segment-wise Performance & Analysis #

General Staffing & Allied Services #

• Revenue: ₹8,480.59 crores (FY24) vs. ₹7,135.96 crores (FY23).
• Segment Result: ₹102.39 crores (FY24) vs. ₹95.01 crores (FY23).
• Strong performance in consumer, telecom, retail, e-commerce, and manufacturing sectors.
• Year-to-date net incremental associate growth was 35,000.

Specialized Staffing Services (IT Staffing) #

• Revenue: ₹596.82 crores (FY24) vs. ₹663.32 crores (FY23).
• Segment Result: ₹14.95 crores (FY24) vs. ₹24.47 crores (FY23).
• Strategic shift towards Global Capability Centres (GCCs) and product companies.
• Technology investments aim for a 50-60% reduction in hiring costs.

Other HR Services (EdTech, RegTech, HCM) #

• Revenue: ₹244.12 crores (FY24) vs. ₹70.72 crores (FY23).
• Segment Result: ₹13.70 crores (FY24) vs. ₹2.71 crores (FY23).
• EdTech: Revenue growth of 15%, PBT growth of 100%. Launched Digivarsity platform.
• RegTech: Steady growth, with a focus on enhancing product features.
• Successfully transitioned to other high-margin apprenticeship programmes, offsetting the NEEM phase-out by Q4 FY24.

Financial Health & Key Ratios #

• Revenue from Operations: ₹9,321.53 crores (+18.44% YoY)
• EBITDA (before exceptional items): ₹130.80 crores (+7.0% YoY)
• EBITDA Margin: 1.4% (FY24) vs. 1.5% (FY23)
• PAT: ₹112.66 crores (+1.0% YoY)
• PAT Margin: 1.2% (FY24) vs. 1.4% (FY23)
• Free Cash Flow: ₹265 crores
• Return on Capital Employed (ROCE): 36%
• Equity Share Capital: ₹16.77 crores
• Cash and Cash Equivalents: ₹264.64 crores
• Debt Equity Ratio: Minimal borrowings.
• Current Ratio: 1.26
• Return on Net Worth: 14.1%

Strategic Focus & Outlook #

Growth Strategy #

• Focus on associate growth with minimal backend cost escalation.
• Emphasis on building revenue adjacencies (value-added services, hiring solutions, tech-based offerings).
• Strategic client acquisition: 142 new logo sign-ups.
• Penetration of blue-collar staffing.
• M&A opportunities to enhance revenue adjacencies.

Technology & Digital Transformation #

• Significant investments in digital transformation to optimize recruitment and enhance operational efficiency.
• Aim to reduce hiring costs substantially (e.g., 50-60% in specialized staffing).
• Upgrading HRMS platform and introducing new modules.
• RegTech platform enhancements for SEBI compliances and contractor compliance automation.
• Digivarsity platform (EdTech) to align educational services with career progression.

Capital Allocation & Shareholder Returns #

• Healthy free cash balance of over ₹250 crores.
• Priorities for cash utilization: inorganic growth, technological investments, and organic growth support.
• Successful share buyback concluded in FY24.

Human Capital #

• Focus on hiring, talent management, and leadership development.
• Emphasis on training (1,656 employees trained).
• Promoting diversity (38% women in top leadership).

Risk Factors & Mitigation #

• Labour Law Compliance Risk: Mitigated by a comprehensive compliance monitoring system.
• Talent Retention Risk: Addressed by clear career paths, upskilling programs, and enhanced employee engagement.
• Market Adaptability Risk: Implementing an adaptive strategy with strong governance.
• IT Industry Headwinds: Mitigated by focusing on GCCs, improving processes, and optimizing costs.
• Pricing and Profitability Risk: Cost improvement initiatives, automation, strategic partnerships, and market differentiation.
• NEEM Programme Phase-out: Transitioned to other high-margin apprenticeship options.

Key Operational Highlights & Value Drivers #

• Revenue: ₹9,322 Crores.
• Associates/Trainees: 3,20,000.
• Clients: 3,800+.

Financial Guidance & Assumptions #

• Management anticipates continued growth, albeit with ongoing margin pressures in certain segments.
• Technological investments are expected to yield significant cost efficiencies and productivity gains.
• Recovery in the IT sector is a key variable for the specialized staffing segment’s performance.
• Positive profit contribution from the revamped degree apprenticeship business is expected in FY25.
• The company remains open to M&A that aligns with its strategy.

Financial Analysis Report: TeamLease Services Limited (FY 2023-24) #

Auditor’s Opinion and Qualifications #

The statutory auditors, M/s. S.R. Batliboi & Associates LLP, Chartered Accountants, issued an unmodified opinion on both the Standalone and Consolidated Financial Statements for the financial year ended March 31, 2024. The Board’s Report explicitly states that the Auditor’s Report does not contain any qualifications, reservations, or adverse remarks.

Key Accounting Policies and Changes #

TeamLease Services Limited prepares its financial statements in accordance with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013. The significant accounting policies are consistently applied and detailed in Note 3 to both Standalone (pages 222-228) and Consolidated (pages 278-284) financial statements. Key policies include revenue recognition, lease accounting, impairment of non-financial assets, and financial instrument accounting.

There were no significant changes to the accounting policies during the Financial Year 2023-24, as confirmed by the MD & CFO certification.

Internal Control Effectiveness #

The Board of Directors opines that the company’s internal financial controls were adequate and effective as of March 31, 2024. The Independent Auditor’s Report on Internal Financial Controls concurs, stating that the company maintained adequate internal financial controls and such controls were operating effectively.

However, a specific limitation was noted: the audit trail (edit log) facility was not enabled for direct changes to data using privileged/administrative access rights and for master data changes in certain specified accounting software systems. The auditors did not report any instances of the audit trail feature being tampered with.

Regulatory Compliance Status #

The company asserts compliance with applicable statutory provisions and adherence to good corporate practices. The Secretarial Audit Report confirms compliance with the Companies Act, 2013, SCRA, Depositories Act, FEMA (to the extent of FDI), and relevant SEBI Regulations and Secretarial Standards. The Directors’ Responsibility Statement affirms that proper systems are in place to ensure compliance with all applicable laws. The Business Responsibility and Sustainability Report (BRSR) indicates no disciplinary action for bribery/corruption.

Legal Proceedings and Their Potential Impact #

The company has disclosed pending litigations in Note 46 to the Standalone Financial Statements (page 238) and Note 45 to the Consolidated Financial Statements (page 296). These primarily relate to:

• Service Tax: Including a writ petition for demands aggregating ₹8.88 crores (₹4.43 crores settled, balance largely provided).
• Disputed Bonus Liability: Contingent liability arising from the amendment to the Payment of Bonus Act, 1965, with a potential recovery of ₹33.49 crores from customers if liability arises.
• Income Tax Matters: Litigation regarding the disallowance of deduction under Section 80JJAA of the Income Tax Act, 1961.
• Professional Tax and GST Matters: Various demands are under dispute.
• Corporate Guarantees: Given for credit facilities taken by related parties.

An adverse outcome in the Section 80JJAA litigation could have a material financial impact.

Related Party Transactions (RPTs) #

The company engages in transactions with related parties, primarily its subsidiaries, key managerial personnel (KMP), and enterprises where directors have significant influence. These are detailed in Note 43 (Standalone, pages 236-238) and Note 44 (Consolidated, pages 294-296).

The Board’s Report and Corporate Governance Report state that all RPTs during the year were conducted on an arm’s length basis and in the ordinary course of business.