TeamLease Focusing On Other Sectors Amid Slow IT Hiring, Says CFO

Bengaluru-headquartered TeamLease Services Ltd. has shifted its focus to segments other than information technology services due to headwinds in the industry, according to Chief Financial Officer Ramani Dathi.

The IT sector contributed 70% to the company's specialised staffing business, Dathi told NDTV Profit in an interview. However, ever since headwinds in the sector, the recruitment services company is focusing on non-IT companies as they are expanding digitally.

While BFSI will continue to be the major growth driver, TeamLease is also looking into global capability centers and business companies, product companies and captives. This has resulted in an increase in contribution from non-IT companies to 50% from 30% in the last one year, Dathi said.

"Looking forward, we can build other verticals like finance, legal, and human resources, as these are profiles GBCs are looking for...Except for IT right now, rest all industries are adding numbers on hiring."

It is a little early to comment on whether the demand from IT will recover in the fourth quarter, according to Dathi. The sector has peak employee utilisation, she said, adding that the companies haven't hired for five to six quarters, so they cant keep it on hold for so long.

"We believe that there should be some pick-up in hiring in Indian IT companies in the next 1-2 quarters ... But we'll have to see the Jan-Feb trend; whether there are any green shoots happening on IT front."

While the highest demand is coming from Bangalore, Chennai and Mumbai, there is expansion in hiring in tier-2 cities like Coimbatore, Nagpur, Chandigarh, Indore, and Chandigarh, Dathi said.

"BFSI has been one of the major growth drivers for the last 4-5 quarters and will continue to give good numbers in the tier-2 and tier-3 places as well."

Other than BFSI, the demand from retail and consumer segments is also increasing in tier-2 and tier-3 cities, she said.

Growth in Q3 may be weighed by lower-than-expected demand in festive season and the RBI's caution on unsecured loans and riskier credits.

However, sequential growth will be decent and the last quarter will be the highest contributor in the current fiscal in terms of profit and margin, Dathi said. The company maintains top line growth guidance upwards of 20% and will consistently expand margins sequentially.

All industry segments are on very good hiring spree, according to the company's CFO. In this business, margin expansion comes from operating leverage, she said.

"We have not added any cost in the backend, fixed cost is fully absorbed and entire topline growth flows in to the bottomline. With that, we are confident on expanding margins by 5-6 bps sequentially."

"At the group level, with contribution coming from HR services and other high margin verticals, we'll sequentially grow margins from hereon," she said.