Quess Corp Ltd (QCL), promoted by Thomas Cook, is coming out with an initial public offering (IPO) of 1.26 crore shares at a price band of Rs. 301 to 317 per share to raise about Rs. 400 crore. The issue opens on June 29 and closes on July 1.
The fresh issue will constitute 10 percent of the post-issue paid-up equity share capital of the company. At the upper end of the price band, the pre-issue price-to-earnings (P/E) works out to 40.6x its FY2016 earnings.
Quess Corp Ltd. is engaged in recruitment, staffing, payroll and compliance management services in India. The company — earlier Ikya Human Capital Solutions Limited — was acquired by Thomas Cook in May 2013 when the travel and holiday solutions company took a controlling stake.
Quess Corp Ltd. generates about 86 percent of its revenues from India and has taken the organic growth route in the past three years to drive revenues, according to a note by brokerage Angel Broking.
Quess Corp Ltd.'s promoters are CEO Ajit Issac and Prem Watsa's Fairfax Holdings through Thomas Cook (India) Ltd. The promoters' stake in the company will come down to 89.5 percent after the public issue from the current 99.5 percent.
Thomas Cook (India) shares gained 1.44 percent to close at Rs. 218.30 on the BSE on Monday.
Purpose of the issue
The company plans to repay debt of Rs. 50 crore, spend Rs. 72 on capital expenditure, use Rs. 80 crore for acquisitions and the rest for general corporate purposes.
Comparison with TeamLease Services
TeamLease Services, which raised Rs. 423 crore via public issue earlier this year at an issue price of Rs. 850 per share, made a lacklustre debut on Feb. 12, with its shares listing at a premium of 1.17 percent. The stock gained later in the day to close at Rs. 1,021.95, up 20 percent. It closed at Rs. 906.85 on Monday on the BSE.
Highlights of the company (complied from Angel Broking's note)
QCL is among India's leading integrated business service providers, focused on emerging as the preferred partner for handling end-to-end business functions of its clients.
It has a pan-India presence with 47 offices across 26 cities, as well as operations in North America, the Middle East and South East Asia.
As of Feb. 29, 2016, QCL had employed more than 1.20 lakh employees, including over 3,400 core employees and over 1.17 lakh associate employees, i.e. employees placed with its clients.
The company's top 10 clients accounted for 30.4 percent of its revenue in FY2016.
At the upper end of the price band, the pre-issue P/E works out to 40.6x its FY2016 earnings.
The company's operations can be classified into four key business services - Global Technology Solutions (GTS), People and Services (P&S), Integrated Facility Management (IFM) and Industrial Asset Management (IAM).
The company's net profit was Rs. 89 crore on net sales of Rs. 3,435 crore for the financial year 2015-16.
The offer price is attractive because the pre-issue P/E works out to 40.6x its FY2016 earnings as against its peer Team Lease, which is trading at 63.1x FY2016 earnings.