Indian staffing firm Teamlease's profit drops again as rising costs, IT slowdown bite

Teamlease Services

26/07/2023 10:25

By Bharath Rajeswaran
       BENGALURU, July 26 (Reuters) - India's Teamlease
Services  TLSV.NS  reported a lower profit for a third straight
quarter on Wednesday, on weak demand for its specialised
staffing services in the IT industry and as rising costs
outweighed growth in its general staffing business.
    The company, which hires and trains people in various skills
before supporting their placements, said consolidated net profit
fell 0.5% to 264 million rupees ($3.22 million) in the
April-June quarter.
    Overall revenue rose 15.5% year-on-year to 21.72 billion
rupees, aided by growth in Teamlease's general staffing
business, which accounted for 92.2% of total revenue.
    However, while the total revenue growth of 15.5% was a tad
better than in the previous two quarters, profitability was hurt
by a rise in total costs.
    Wage increases offset the 17.5% growth in the general
staffing business, while rising concerns of a slowdown in the IT
industry affected the specialised staffing segment.
    Analysts have said the pushback in staffing contract rates
and seasonal weakness in HR services have led to the moderation
in revenue growth and hurt the company's margins as well.
    The company's earnings before interest, taxes, depreciation,
and amortisation, or EBITDA, margins contracted to 1.21% in the
quarter, from 1.33% a year ago, due to a 16% rise in total costs
as per Thomson Reuters' calculations.
    "Core employee annual hikes, reduced contribution (to)
specialised staffing led to margin pressure," said Ashok Reddy,
managing director of Teamlease Services.     
    The discontinuation of the government's National
Employability Enhancement Mission Scheme in December 2022 hurt
Teamlease Skills University (TLSU), analysts say, also weighing
on results.
    The company's stock was up 0.33% as of 2:54 p.m. IST. It has
risen about 6% since mid-May after its previous quarterly report
but is still down nearly 3% so far this year.
    
($1 = 82.0030 Indian rupees)
    

 (Reporting by Bharath Rajeswaran in Bengaluru; Editing by Savio
D'Souza and Janane Venkatraman)
 ((bharath.rajeswaran@thomsonreuters.com; +91 9769003463;))