Quess Corp (QCL) IPO review.
Quess corp will open for
subscription from 29th June 2016 to 1st July 2016 in the
price range of Rs. 310-317. Applications can be made of 45 shares and in
multiples thereafter.
Quess Corp is the Bangalore based staffing and IT
solutions company. It has 47 offices across 26 cities. It serves over 1300+
customers across 4 segments namely Global Technology Solutions, People 7
Services, Integrated Facility Management and Industrial Asset Management.
Quess offers services across many sectors like IT and
ITES staffing, Managing Facilities, F&B sector, Skill development training,
general staffing, HR solutions, Engineering services, etc.
The promoters of the company are:
1. Ajit Isaac, human resources industry veteran.
2. Thomas Cook India Limited (TCIL).
2. Thomas Cook India Limited (TCIL).
The objects of the issue are:
1. Repayment of debt availed by the
Company.
2. Funding capital expenditure requirements of the Company and their Subsidiary, MFX US.
3. Funding incremental working capital requirement.
4. Acquisitions and other strategic initiatives.
5. General corporate purposes.
2. Funding capital expenditure requirements of the Company and their Subsidiary, MFX US.
3. Funding incremental working capital requirement.
4. Acquisitions and other strategic initiatives.
5. General corporate purposes.
Out of the
total INR4 billion, the company plans to utilize INR1.59 billion for funding
its working capital requirements while INR800 million are proposed to be used
towards acquisitions and other strategic initiatives. INR717 million are
proposed to be used to meet capital expenditure of QCL and its subsidiary MFX
US and another INR500 million will be used to reduce debt.
Financial report
Quess Corp’s consolidated financial performance (in INR
crore)
|
|||||
FY12
|
FY13
|
FY14 (Apr
13 – Dec 13)
|
FY15
(Jan 14 – Mar 15)
|
FY16
|
|
Total
revenue
|
639.4
|
1,004.3
|
1,008.1
|
2,572.7
|
3,442.4
|
Total
expenses
|
626.3
|
980.0
|
979.2
|
2,468.5
|
3,317.6
|
Profit/(loss) after
tax
|
6.2
|
12.0
|
17.8
|
67.2
|
88.5
|
Net
profit margin (%)
|
1.0
|
1.2
|
1.8
|
2.6
|
2.6
|
Source:
Internet
Comparison with Peers
The nearest
competitor/peer of QCL is Teamlease. If we compare the PE ratio of QCL which
comes around 40 to that of Teamlease which is around 60 at present. Then QCL IPO
seems to be appropriately valued.
Even when
Teamlease IPO was floated it was at a PE of 44.
Pros of QCL
1. Over past 4 years company has
reported strong growth of around 50% on yearly basis.
2. Huge growth opportunities: QCL’s
presence in diversified business will help it to maintain a strong foothold in
the industry and at the same time propel it to increase its business and
revenue at rapid pace.
3. Leading Business Service provider.
4. Solid track record in terms of
Inorganic growth.
5. Long term established relations with
Major clients. Most of the top 25 Clients have been with QCL for more than 15
years.
Cons
of QCL
1. Too much dependence on some clients.
In 2016 top 10 clients contributed around 30% of its revenue. In case any
client decides against renewing the contract then it will have significant
adverse effects in the revenue of QCL.
2. The gross margin of company is on
the lower is on the lower side. Company need to focus on improving this.
3. QCL is too much dependent on Ajit
Issac and Thomas Cook India limited.
Most
important Question: To invest or give the IPO a miss?
With the high growth potential of company
and well known management, I give thumbs up to this IPO. QCL looks to me a good
buy for long term.
Most brokerages like Angel Broking,
GEPL Capital, etc have recommended “Subscribe” rating for this IPO.
Please
note: The analysis done above is my own
and I have no personal relation or investment in the company. I STRONGLY recommend performing thorough
analysis before making any investment.
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