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Home / Markets / Mark To Market /  The shadow of DHFL on TeamLease earnings

Temporary staffing firm TeamLease Services Ltd reported a mixed set of numbers for the September quarter. Its operating performance was decent, with revenue growth of about 11% on a sequential basis aided by a broad-based growth across its general staffing, specialized staffing and NETAPP verticals.

Recovery in demand because of the seasonality factor helped the firm add 25,000 associates in Q2, a record high. In a post-earnings conference call, the management said associate addition in general staffing stood at 14,000, specialized staffing had a net addition of 900, and NETAPP added 10,000 trainees.

Broad-based growth
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Broad-based growth

However, the firm reported an adjusted loss of 49 crore because of loss provisions in its PF trust on DHFL investment resolution. “This provision was surprising as TeamLease had earlier maintained that reserves and future gains will compensate for any shortfall. While we view this as a one-time hit, it’s likely to impact investor confidence," Motilal Oswal Financial Services Ltd analysts said in a report.

“TeamLease’s PF fund is also struggling to generate returns to provide an EPFO mandated 8.5% return. The provision of 75 crore also takes care of 10-15 crore annual losses for the next five years. However, there is a risk that any additional investment losses in PF trust may have to be funded via the company’s core operations," Prabhudas Lillad-her Ltd analysts said in a report.

As a result, shares of the firm ended Monday’s session down 7.5% on the NSE.

The management remains upbeat on the demand scenario, but expects increased headline billing, wage hikes and a rising insurance bill to weigh on margin in the short term. So, margins are likely to remain flat for two-three quarters, it said. Against this backdrop, the stock’s valuations are expensive, analysts said.

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