Due to margin issues, shares of TeamLease Services fell 18% to a two-year low of Rs 2,331 in intraday trading on the BSE on Thursday.

The stock is currently trading at its lowest level since November 2020. The company’s market price has halved over the past year, while the S&P BSE Sensex has gained 0.24%. The stock hit an all-time high of Rs 5,544 in October 2021. At 1:38 pm, TeamLease shares were down 16% at Rs 2,406, while the S&P BSE Sensex was down 0.85%.

TeamLease Services is a leading HR services company, providing more than 3,500 employers with a range of solutions to address their recruiting, productivity and scale challenges. As a Fortune India 500 company listed on NSE and BSE, TeamLease has employed over 19 lakh people over the past 21 years.

Management stated that headwinds in the IT industry have started to impact professional development and are likely to continue for some time. The company’s HR technology business is gearing up for new sales, product enhancements and digital solutions. Revenue growth and tighter cost control will be key areas of focus in the coming quarters, the company said.

Meanwhile, in the July-September quarter (Q2FY23), TeamLease reported a profit after tax of Rs 32 crore compared to a loss of Rs 49 crore in the same period a year earlier. Its PAT in the previous quarter was Rs 27 crore. EBITDA rose 30 basis points sequentially but fell 60 basis points year over year to 1.6%. Operating income rose 28% YoY and 4% QoQ to Rs 1,955 crore.

According to ICICI Securities, TeamLease’s margins have performed better than expected. Considering the current run rate in the first half of the year, the company guided for a margin like FY22 at 2.2% in FY23.

The brokerage believes that achieving this figure (EBITDA of Rs 170 crore in H2 and Rs 570 crore in H1) will be a tough task and the company may miss it. In addition, the company said in its earnings report that headcount growth has been slowing, pointing to slower growth in the second half of the year.

According to analysts at Kotak Securities, TeamLease has failed to raise the monthly salary per employee (PAPM) despite the rise in the proportion of self-employed. It needs to move into manufacturing to benefit from job growth in the sector but has so far found the same challenges. In an earnings update, the brokerage said an increase in the number of professional staffing units could be tepid due to a slowdown in hiring in the IT industry.

“We have revised our EPS forecasts for FY23-25 ​​by 2-9% due to lower margin forecasts. Coupled with higher WACC, this drives a new SoTP-based FV of Rs 2,900 (previously: Rs 3,215),” it said.