does TeamLease deserve to be on your team?
to paraphrase one of the world’s leading investors and Warren Buffet’s partner, Charlie Munger, many times diversification actually turns out to be ‘diworsification’ as it diminishes the returns of an investor or a company. the market seems to agree with that well-grounded wisdom. recently, it boosted the stock of TeamLease Services, a chiefly blue-collar job hiring portal, over 2% on the news that it had sold its subsidiary IIJT Education. IIJT had no operating income/revenue during the previous financial year, and was essentially dead wood for TeamLease to clear.
but apart from the narrowed focus on its core business, are there reasons to take an interest in its shares?
post the second wave of Covid-19, India has staged a remarkable economic recovery. it has followed up a record 20.1% growth in GDP for Q1 FY22 (over the corresponding year-ago period) with a resilient 8.4% growth for Q2 FY22 on the same scale. as the economy has gotten back on track, so have job opportunities. but they are evolving to adapt to the on-demand everything economy, and no longer the traditional 9-to-5 roles many of them used to be. the gig economy is well and truly here, and that is good news for companies such as TeamLease which employ a contractual model for providing skilled workers.
further, Teamlease expects that the massive hiring mandates of Indian IT services giants will cause the demand for contractual hiring in the IT-BPM sector to grow 17% YoY by March 2022.
the pandemic-led reverse migration from India’s metropolitan cities has caused a rise in economic activity in tier 2+ cities. blue-collar hiring in particular is in huge demand as ambitious conglomerates seek to meet increased sales and delivery expectations. that also necessitates warehousing, streamlined supply chain management, and retail workers. as per a TeamLease report, Hyderabad, Pune, and Chandigarh will be the top non-metro cities hiring in Q3 FY22. a quarter where tier-2 cities show 41% intent to hire and Tier-3 cities show 26%. TeamLease is perfectly suited to service these requirements, and tap into the emerging economies within India.
with over 3,500 employers on its client list, a near two-decade history, and a market cap of over Rs 7,000 crore, TeamLease is certainly a ‘blue chip’ of sorts among HR firms in India. if hiring activity continues to grow, there’s a good chance it will trend likewise.