TEAMLEASE - TeamLease Services Limited Share Price

In the Q2 FY26 earnings call, TeamLease Management provided a positive outlook, signaling a consistent performance across its employment segments with a net addition of over 7,000 headcount. The company's total operating revenue grew by 5% quarter-on-quarter, while EBITDA saw a substantial increase of 24%. The management highlighted a mixed yet improving demand across sectors, particularly noting stabilization in the BFSI sector, positive signs in consumer business, and growth in technology hiring from Tier 2 firms. They reported onboarding 140 new clients, with around 23% of new hires coming from these new acquisitions.

Major forward-looking points included:

1. Headcount Growth: The company expects a recovery in headcount growth in muted sectors as the fiscal and monetary policies support employment.

2. Revenue Projections: Management anticipates continued momentum leading to double-digit EBITDA growth in the full financial year.

3. Staffing Segment Performance: The staffing business is projected to benefit from an increase in hiring across various sectors, with over 20,000 open positions available.

4. PAPM Stability: The average billing per associate metric (PAPM) remains stable, but efforts are being made to improve it by focusing on higher markup from smaller clients.

5. Global Capability Centers (GCCs): The GCC segment remains a key growth driver, contributing 62% of net revenue, along with significant engagement with tech-led hiring.

6. Apprenticeship Growth: There's an expected boost in degree apprenticeships due to recent government amendments aimed at enhancing the vocational education framework, including stipend increases.

7. Operational Metrics: The productivity metric has improved to 382, allowing the company to scale with existing headcounts.

Overall, management's confidence is bolstered by new client sign-ups, ongoing productivity enhancements, and expected favorable market conditions as they transition into the second half of FY26.

Here are the major questions from the Q&A section of the earnings transcript along with detailed answers:

1. Question: "Would it be fair to assume that most of the 23% gross hires from fresh clients are on a percentage-fee model and not a fixed-fee model? What was the PAPM for this quarter, and how has it moved from the past quarter?"

   Answer: Yes, you're correct that two-thirds of the new logo sign-ups are on variable mark-ups. Most variable mark-up clients are smaller, which doesn't significantly impact the PAPM. The 23% growth from new clients was driven by those on a fixed mark-up. Overall, PAPM has remained stable without significant fluctuations.

2. Question: "When do you foresee general staffing reaching a double-digit bandwidth growth in actual EBITDA terms, given the current modest performance?"

   Answer: This quarter's EBITDA shows linear improvement that correlates with revenue growth. With fixed costs absorbed, we anticipate incremental improvements leading to double-digit growth in staffing EBITDA this fiscal year.

3. Question: "Regarding the HR piece and profitability, are continual investments expected, or will operational level improvements come soon?"

   Answer: Currently, we are not increasing expenditures. We are optimally costed and focused on enhancing sales. The operational level improvements will emerge as product go-lives and sales begin generating tangible revenue.

4. Question: "Can you comment on the margins in the general staffing business, which have been flat, and how you see overall growth in the second half?"

   Answer: Absolute margins have remained constant, but we're focused on operational leverage and long-tail accounts that can improve margins. We expect the demand for new hires to lead to positive growth in the second half, aided by sector-specific recoveries.

5. Question: "What is the status of your tax issue regarding PF clearance, and will there be any reversals or provisions needed?"

   Answer: We've cleared all refunds, and the issues mainly revolve around legal definitions concerning employer responsibilities. There will be no need for reversals or incremental provisions, as we've resolved the necessary calculations with the department.

6. Question: "What are you seeing in terms of demand across different sectors and overall hiring metrics, will the situation improve in H2?"

   Answer: We believe demand has bottomed out and is on a positive trajectory across all sectors, including banking and FMCG. We expect consistent growth in net headcount and open positions, pending no new adverse regulations.

7. Question: "What are the implications of the recent amendments to the Apprenticeship Act introduced by the government?"

   Answer: The amendments have formalized degree apprenticeships and adjusted stipend levels. This includes provisions for virtual apprenticeships and recognizes the role of academic institutions, which should enhance the appeal and effectiveness of apprenticeships.

8. Question: "Can you provide clarity on whether the usual fourth-quarter seasonal bump will occur this year, considering investments in HR Services?"

   Answer: The investments mentioned are primarily in HR Tech and focused on sales. The usual seasonal increase in the fourth quarter regarding margin contributions will still occur, as the expected higher billing aligns with our historical performance.

These answers encapsulate the management's responses while retaining critical financial metrics and performance insights.