Key Details: June 27, 2016

Issue Key Highlights:

Price*: `310 - `317 Issue Opens: 29th June 2016

Issue Size*: `400Cr Issue Close: 1st July 2016

Particulars

No of Sh. at higher band (Cr)

No of Shares at lower

price band(Cr)

%age

Higher band

Amount

(`Cr)

Lower band

Amount

(`Cr)

QIB 0.95 0.97 75% 300.0 300.0

Non-Inst. 0.19 0.19 15% 60.0 60.0

Retail 0.13 0.13 10% 40.0 40.0

Employees - - - - -

Total Issue 1.26 1.29 100% 400.0 400.0

Issue Details:

Industry Services (Human Resource Services)

Promoters:

Ajit Abraham Issac & Thomas Cook (I) Ltd

Capital Structure:

Pre Issue Equity (Rs.Cr.) 113.34

Fresh Issue (@FV) (Rs. Cr.) 12.62

Offer for Sale (@FV) (Rs. Cr.) NA

Post Issue Equity Capital (Rs. Cr.) 125.95

Total Issue as % of total capital (Post-Issue)

10.02%

Face Value 10

IPO Grade NA

*** All Calculations at Cap Price

Issue Route Book Build Issue

Bid Lot (Shares) 45

Lead Managers Axis Capital Ltd, ICICI Securities Ltd, IIFL Holdings Ltd and YES

Securities (India)Ltd

Registered Office Bengaluru, Karnataka

Registrar Link Intime India Pvt Ltd

Listing BSE, NSE

Key Investment Details for Retail Investors:

Min No. of Shares application by Retail Investor

45

Amount to be paid on the Min.

Application (`) 14,265

ASBA Application is mandatory

Objects of the Issue: Fresh Issue: The proposed utilisation of the Net Proceeds of the Issue is set forth in the table below:

Particulars Total Amt (Rs. Cr.)

Repayment of debt availed by our Company 50.00

Funding capital expenditure requirements of our Company and our Subsidiary, MFX US

71.72

Funding incremental working capital requirement of our Company

157.90

Acquisitions and other strategic initiatives 80.00

General corporate purposes [●]

Business Overview: Quess Corp limited (QCL), is one of India’s leading integrated business services provider, emerging as the preferred partner for handling end-to-end business functions of the clients. They offer comprehensive solutions including Recruitment, Temporary Staffing, Technology Staffing, IT Products and Solutions, Skill Development, Payroll, Compliance Management, Integrated Facility Management and Industrial Asset Management Services.

Quess Corp Limited IPO NOTE Subscribe

As of March 2016, company’s operations were spread across India with 47 offices across 26 cities in India. They also offer certain of their services in a number of jurisdictions in North America, the Middle East and South East Asia. As of Feb 2016, we employed more than 120,000 employees, including over 3,400 Core Employees and over 117,000 Associate Employees, i.e. employees placed with our clients. As of March 31, 2016, we had more than 1,300 clients, based on ongoing contracts as of such date.

Investment Rationale: Leading integrated business services provider in diversified business segments, industries and geographies: QCL is a leading integrated business services provider in India providing comprehensive business solutions to a wide range of industries, including Recruitment, Temporary Staffing, Technology Staffing, IT Products and Solutions, Skill Development, Payroll, Compliance Management, Integrated Facility Management and Industrial Asset Management Services. The company is the largest IT staff augmentation provider and one of the largest general staffing companies in India. In addition, it is among the leading industrial asset management service providers and among the largest integrated facility management service providers in India. They provide a comprehensive range of service offerings across multiple industries, including in the Ecommerce, Technology, Banking and Financial Services, Insurance, Real Estate, Infrastructure Facility Management, Power, Energy, Oil and Gas, Chemicals, Metals, Automotive, Engineering, Telecom, Healthcare, FMCG and Retail industries.

Robust recruitment capability, deep domain knowledge and knowledge of labour regulations: Company’s ability to meet the staffing and other business service requirements of their clients across various jurisdictions and industries in a timely manner provides them a significant competitive advantage. The management, recruiters and sales force streamlined to specific business verticals and industry segments, which has enabled the company to strengthen client engagement and develop deeper domain knowledge. As of February 2016, it has employed over 1,050 full-time specialized recruiters across various business segments and industries, significantly increased their recruitment team for the GTS business segment, which requires specific experience and domain knowledge of the IT and technology solutions industry.

Expand the service portfolio and operations globally through strategic acquisitions: The company intend to continue the strategic expansion plans through inorganic growth opportunities in underserved markets and geographies that complement the existing operations. The company intends to pursue strategic opportunities in complementary service offerings, among others, in payroll and compliance management services, IT staffing, facility management, asset management, safety and quality audit, financial analysis and planning, and background verification services, to offer a comprehensive range of business and managed service offerings to their clients.

Capitalize on the rapid growth of e-commerce in India and pursue other B2C opportunities: The company intend to capitalize on the rapid growth of the e-commerce ecosystem in India. The company provides managed services to a number of leading e-commerce players in India including Amazon and Urban Ladder, and as of Feb 2016, about 12,500 Associate Employees were deployed with e-commerce clients. The company continue to move away from “personnel and material” contracts to SLA based contracts, in particular providing last mile delivery services under the Dependo brand. As of March 2016 they operated last mile delivery services across seven cities.

Risks:

QCL had negative operating cash flows in the past. Any negative cash flows in the future would adversely affect cash flow requirements.

QCL operate in a highly competitive and fragmented industry with low barriers to entry. Inability to compete successfully may dent market share.

QCL face significant employee related regulatory risks and any significant disputes with employees and/or concerned regulators may adversely affect business.

Outlook & Valuation: The top-line of QCL has grown at a CAGR of ~52% from FY12 to FY16 to Rs 3,442 Cr. EBITDA margins remained near 5% during the period. With improvement in PATM from 1% in FY12 to 2.6% in FY16, PAT has grown at a CAGR of 94%. We expect QCL to maintain its trajectory of inorganic growth in the near future. With its “String of Pearls” strategy, the business services super-mart should see a shift of service portfolio towards higher margin businesses. Therefore, we recommend a “Subscribe” with a long term perspective.

Wealth Management

Service Sector Growth, Global, 2001-13 GDP Growth by Sector, India, 2012-13 – 2017-18

Source: Source: Economic Survey 2014-15 - F&S Report 2016, RHP Source: Ministry of Statistics and Programme Implementation, World Bank - F&S

Report 2016, RHP

Country Break-down of Staffing Market, World, 2012 Least Penetrated Markets, World, 2013

Source: F&S Research & Analysis, RHP

Temporary General Staffing Market – Payroll and Compliance Market – Professional IT Staffing Market – Revenue Forecasts, India, 2014-2019 Revenue Forecasts, India, 2014-2019 Revenue Forecasts, India, 2014-2019

Source: F&S Research & Analysis, RHP

Forecast for Hard and Soft Service Market FM Market Revenue Forecast, 2014-19, India Forecast of the Industrial Revenues in India, 2010 – 2014 Asset Management Market, India, 2014-19

Source: F&S Research & Analysis, RHP

Quess Corp Ltd – IPO Note

Rank Country Penetration Rate

1 Latvia 0.03%

2 India 0.10%

3 Russia 0.10%

4 Turkey 0.10%

5 Greece 0.20%

6 Lithuania 0.20%

7 Romania 0.20%

8 Bulgaria 0.30%

9 Mexico 0.30%

10 New Zealand 0.40%

Service and Product offerings: Source: RHP Breakdown of CNG filling stations: Source: RHP

Key Matrix:

Segment (Rs in Cr, except %, number of ratios) Fiscal 2012

(12M) Fiscal 2013

(12M) Fiscal 2014

(9M) Fiscal 2015

(15M) Fiscal 2016

(12M)

Global Technology Solutions

GTS Total Income 204.95 268.72 262.26 737.24 921.69

As % to Total Income 32.05% 26.76% 26.01% 28.66% 26.77%

GTS EBITDA 13.46 18.07 20.65 64.42 65.81

Associate Employees 5,063 7,328 7,296 8,748 8,077

Core Employees 658 574 613 668 723

People and Services

P&S Total Income 362.56 622.05 618.8 1,403.61 1949.86

As % to Total Income 56.70% 61.94% 61.38% 54.56% 56.64%

P&S EBITDA 13.3 29.6 15.74 40.56 68.78

Associate Employees 31,128 44,146 46,652 63,141 82,170

Core Employees 204 227 276 365 405

Integrated Facility Management

IFM Total Income 71.35 112.33 125.76 302.11 372.42

As % to Total Income 11.16% 11.18% 12.47% 11.74% 10.82%

IFM EBITDA 4.55 7.46 16.3 19.87 22.76

Associate Employees 6,871 9,040 12,312 17,619 20,012

Core Employees 132 198 233 241 343

Industrial Asset Management

IAM Total Income - - - 127.38 193.21

As % to Total Income - - - 4.95% 5.61%

IAM EBITDA - - - 18.18 22.24

Source: RHP

Brief Financials : Quess Corp Limited

Year Price (Rs.)

Mcap (Rs. Cr.)

Net Sales (Rs. Cr.)

EBITDA Margin (%)

PAT (Rs. Cr.)

PAT Margin

(%)

EPS (Rs.)

P/E (x)

ROE (%)

P/BV (x)

FY16 310 3,913 3442.4 5.0% 88.5 2.6% 7.0 44.1 25.6% 11.3

317 3993 3,442.4 5.0% 88.5 2.6% 7.0 45.2 25.6% 11.6

FY15 (15M) - - 2572.8 5.3% 67.2 2.6% 7.0 - 26.7% -

FY14 (9M) - - 1008.1 3.3% 17.9 1.8% 1.6 - 9.7% -

FY13 - - 1004.4 4.6% 12.1 1.2% 1.4 - 17.7% -

FY12 - - 639.4 4.6% 6.2 1.0% 0.8 - 11.7% -

Quess Corp Ltd – IPO Note

Peer Comparison:

Companies Price (Rs.)

Mcap (Rs.Cr.)

FY16 Revenue

FY16 EBITDM

(%)

FY16 PAT

(Rs.Cr.)

FY16 PATM

(%)

EPS P/E (x)

ROE (%)

P/BV (x)

(Rs.Cr.) (Rs.)

Quess Corp 310 3,913 3,442.4 5.0% 88.5 2.6% 7.0 44.2 25.6% 11.3

317 3,993 3,442.4 5.0% 88.5 2.6% 7.0 45.2 25.6% 11.6

Teamlease Services

922 1,577 2,520.4 1.6% 24.8 1.0% 14.5 63.6 8.0% 5.1

CMP as on June 24, 2016

Overall competitive landscape:

P & L Cost Items Quess Corp Competition Global Peers Offering Integrated Business Services

Staffing

Direct Labor • Randstad • Adecco • Teamlease

• Interserve • ISS World • Sodexo • Compass Group • Serco

Marketing Services • Adecco • Teamlease

IT Services and Maintenance

• Manpower • SourceOne

Training & Skill Development

• ILFS Skills • Datapro Computers

Payroll and Compliance

Salaries • ADP

Compliance • Aparajitha

Employee welfare • Sodexo • ISS

Operations and Maintenance • Energo • McNally Bharat • Power Mech Projects

Facilities Management • Dusters Total Solutions Services (DTSS) • BVG India Ltd

Source: RHP

Quess Corp Ltd – IPO Note

DISCLOSURES/ APPENDIX

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