Teamlease sees drop in profit again as rising costs, IT slowdown bite

By Bharath Rajeswaran 

BENGALURU (Reuters) - India's Teamlease Services 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)