Quess Corp IPO review (Apply)

Quess Corp Ltd (QCL) is the group company of Fairfax/Thomas Cook and one of India’s leading integrated business services providers focused on emerging as the preferred partner for handling end-to-end business functions of It’s clients. QCL offers comprehensive solutions including recruitment, temporary staffing, technology staffing, IT products and Solutions, skill development, payroll, compliance management, integrated facility management and industrial asset management services. As of March 31, 2016, it’s Key Clients include some of the world’s largest, reputable organizations, including 20 companies ranked in the 2015 Fortune Global 500 list. QCL’s Key Clients includes clients whose revenue meets one of the following criteria, (i) the client is a top 10 client in terms of revenue in a business segment, or (ii) the client contributes a minimum of 1.5% of the respective business segment revenue.

It’s service and product offerings include four broad operational segments: Global Technology Solutions
(“GTS”), People and Services (“P&S”), Integrated Facility Management (“IFM”) and Industrial Asset Management (“IAM”), which are offered under various brands. As of March 31, 2016, QCL’s operations were spread across India with 47 offices across 26 cities in India. The company also offers certain of its services in a number of jurisdictions in North America, the Middle East and South East Asia.

In Fiscal 2016 company’s top 10 clients contributed 30.40% of its total revenue while largest client, Samsung India Electronics Private Limited, contributed 7.40% of its total revenues in such period. QCL’s diversified service offerings across various industries and geographies enable it to ensure diversified revenue streams, stable cash flows and reduce vulnerability to economic cycles and geography-specific risks as well as reduce dependence on any set of significant clients. Company’s integrated service offerings also provide it with significant operating efficiencies as well as cross-selling opportunities.

For repaying it’s debt, funding capital expenditure, incremental working capital etc, the company is coming out with its maiden IPO of approx. 12618296 (based on upper price band) of Rs. 10 each via book building route in a price band of Rs. 310-317. Issue opens for subscription on 29.06.16 and will close on 01.07.16. Minimum application is to be made for 45 shares and in multiples thereon, thereafter. The issue has reserved quota of 75% for QIB’s 15% for HNIs and 10% for retail segment.

Post allotment, shares will be listed on BSE and NSE. BRLM’s to the offer are Axis Capital Ltd, ICICI Securities Ltd, IIFL Holdings Ltd and Yes Bank Ltd. Link Intime India Pvt Ltd is the registrar to the issue. Most of its equity issue is made at par except in December 2010 it issued some shares at a price of Rs. 56.68. It also issued bonus shares in the ratio of 3 for 1 in January 2016. Post IPO its current paid up equity capital of Rs. 113.33 crore will stand enhanced to Rs. 125.95 crore.

On the performance front, the company posted a turnover of Rs. 1008.15 crore with a net profit of Rs. 19.17 crore for twelve months ended 31.12.13. For 15 months period ended on 31.03.15 it has reported turnover of Rs. 2572.76 crore with a net profit of Rs. 67.22 crore. For the fiscal 2015-16 it has posted turnover of Rs. 3442.43 crore with a net profit of Rs. 88.52 crore. Thus the company has (on consolidated basis) posted CAGR of around 52 per cent in top line and around 81 per cent in bottom line.  Management is confident of continuing its quest of growth in coming years. If we attribute latest earnings on enhanced equity post IPO then the asking price is at a P/E of around 45. The company has no peer in strict terms, but recent IPO of Teamlease is considered as the nearest peer in human resource service sector that is trading at a P/E of 65 plus (as on 24.06.16).

On BRLM’s front, four BRLMs’ associated with this IPO handled 23 IPOs in past three years, of which 9 IPOs closed below the issue price on listing date as mentioned in IPO Ads.

Conclusion: This being a niche player with many firsts to its credit and having bright prospects ahead may be considered for medium to long term investment as it also enjoys first mover tag for the segment.