GST, removing black money will formalise India's job scene: Ashok Reddy

In a chat with ET Now, Ashok Reddy, MD & Co Founder, TeamLease Services says, GST implementation, or aspect of removing the black money will play to the formalisation of the employment scenario.

Your staffing vertical continues to drive growth with the strong associate headcount of about almost 1.17 lakh which areas of temporary staffing according to you are seeing good traction?

We are seeing good movement across industries and clients in the last quarter. We have added over 400 customers and I large element of that growth in associates and from these customers will also come into Q3 and Q4. There is a seasonality element that Q3 and Q4 has and addition of the clients, preparation of the foundation in that sense prepares us for good growth but we are seeing demand coming from across sectors at this point in time.

Your being in staffing business and dealing with corporates, will this entire transition of black money into white money could that have a impact on demand per se, we were speaking to couple of construction companies yesterday and they are worried because that a sub contractor level they still have to give wages in cash?

So our belief is and the staffing companies and a company like TeamLease place to a formal sector. 100% of our associates get their salaries through cheque or a bank transfer. Whether it is a GST implementation, or aspect of removing the black money will play to the formalisation of the employment scenario because the reality in India over 30% of the workforce is outsourced, 98.5% of that is in the informal sector. So our belief is that various initiatives of the government on this front will effectively benefit the formalisation.

Your client base has seen a nice growth of about almost 50% in the last two quarters how much of this has come via acquisitions and which pockets are you now focussing on going forward?

Ashok Reddy: Over the years we have kind of become a proxy for the labour market in India so we do cater to all industry segments, multiple companies I think the concept of temping the formalisation of employment is gaining traction which kind of reflects both in the number of customers coming on board and also the growth in associates. As we go forward obviously we do not have a concentration to any one industry the top 10 customers still account for only about 12% of our volumes but FMCG the ecommerce there are various other sectors in manufacturing and so on who still continue to effectively look at formalisation in a large way.

You have done about Rs 1600 crore in the first half with profit just little more than about Rs 16 odd crore how better could the second half be and what is the growth strategy?

Ashok Reddy: So if you really look at it, we have always sustained 20 to 25% year on year growth on the top line and the economies of scale that we are betting on are really starting to pay off on the bottom line front. So we have had about a 19% half year to half year comparison revenue growth but the profit jump has been more than 50% so the economies of scale have started to contribute, productivity increases have been happening on a quarterly basis so a lot of investments that we made in the earlier period have started to pay off now and going forward our belief is that these economies of scale will continue to support the margin growth. So while we will have an element of a revenue growth in line with our past, our margin improvement can be substantially large given the economies of scale and the flow through to the bottom line.