Mrs. Shany Jalal is a Graduate in Hotel Management from AlAmeen College of Management – Bangalore. Her determination, hard work and sheer business sense are the essential ingredients for a successful business venture is her tag line as a Managing Director, Service care Limited, Shany Jalal has been an entrepreneur since 1997. Soon after bachelor’s academics, not the one to sit by and wait for things to happen, with an infectious energy and passion started Service care, providing soft services to corporates. Self-spear headed the development and growth of the standalone startup Service care and in 13 years incorporated to Service care Private Limited. Mr. Anil Kumar M is Self-motivated professional successful in seizing viable opportunities for expansion and innovation in business. Background in increasing profits, reducing costs and transforming customer service standards. Experienced in leading and supervising operational and sales teams. Passionate about turning innovative ideas into tangible results. Experienced formulating and executing strategic plans, creating new products and services, and developing business opportunities. Mr. Amit Kumar Rakhecha is an MBA (PGD) in Finance and marketing from MDU, Rohtak. He is an accomplished and well-versed Businessman with rounded experience from establishing new business units from ground zero, leading business units, driving revenue and P&L. He has done extensive experience in structuring large and complex deals at CXX level.

A. Balance Sheet

Particular (In Lakhs)	Mar-20	Mar-21	Mar-22	10MFY23
Equity Share Capital	1.00	1.00	1.00	1.25
Reserves	433	457	631	1,133
Borrowings	306	315	341	0
Trade Payables	16	13	12	9
Other Liabilities	1,165	1,234	1,445	2,038
Total Liabilities	1,487	1,562	1,799	2,047
Net Block	22	16	33	22
Other Assets	85	60	82	94
Total NC Assets	108	76	114	116
Receivables	1,545	1,317	1,700	2,792
Cash & Bank	18	298	306	175
Other Assets	251	328	310	99
Face value	10	10	10	10

B. Profit & Loss Statement

Particular (In Lakhs)	Mar-20	Mar-21	Mar-22	Mar-23
Sales	10,807	8,926	11,495	15,850
Raw Material Cost	82	73	127	136
Employee Cost	10,347	8,716	10,996	15,092
Other Expenses	108	76	130	127
Other Income	5	7	6	11
EBITDA	275	69	248	506
EBITDA Margin	2.54%	0.77%	2.15%	3.19%
Depreciation	10	7	4	4
Interest	42	16	11	18
Profit before tax	223	46	233	483
Tax	87	23	59	120
Net profit	136	23	174	363
NPM (%)	1.26%	0.26%	1.51%	2.28%

C. Cash Flow Statement

Particular (In Lakhs)	Mar-20	Mar-21	Mar-22	10MFY23
Cash From Operating Activity
Profit From Operation	287	67	251	425
Receivable	-212	227	-388	-1092
Payable	8	-3	-1	-3
Loans And Advances	-94	-201	40	258
Other WC Items	137	210	176	536
Working Capital Changes	-161	233	-173	-301
Direct Taxes	-91	-13	-68	-102
Net Cash Inflow from Operating Activity	35	287	9	22
Cash from Investing Activity
Fixed assets purchased	-2	-1	-21	-15
Fixed assets sold	6	0	0	17
Other investing items	1	0.7	2	1
Net cash inflow from investing activities	6	0	-19	3
Cash from Financing Activity
Proceeds from shares	0	0	0	200
Proceeds from borrowings	0	9	27	0
Repayment of borrowings	-82	0	0	-341
Intrest paid fin	-35	-15	-10	-15
Net Cash Flow	-76	281	8	-131

 

Name of the Company	Revenue (In Crore)	PAT (In Crore)	EPS ( in Rs)	P/E	CMP	Mcap (In Crore)
Service Care Limited	158	3.6	3.15	21.23	67	77
ITCons E-Solution Limited	28	1.7	3.44	12.6	43.5	22
Integrated Personnel Services Limited	198	5	6.29	14.5	90.9	66
Quess Corp Limited	17,158	223	15.14	35	435	6,449

* All the data is as per FY23.

Review and Recommendation of Service Care IPO by IZ team is 4/10

A) Business Model of the Service Care IPO

  1. Workspace Administration: They manage office facilities and business services for other companies, so those businesses can focus on their core work. 2. Workforce Administration: They serve as an outsourced Human Resources department, helping with staffing, recruitment, and payroll management for their clients. 3. Their clients are businesses from various sectors, and they likely earn revenue through contracts or retainer agreements for these services. Their pricing could be based on the type of service, the size of the operation, or the number of employees managed.

B) Strengths in the Business

  1. Established Business: The company has been operational for more than a decade (since 2011), which means it has likely built solid relationships with clients and partners, and has a proven track record of performance. 2. Broad Client Base: The company services clients from various sectors including Manufacturing, Engineering, Infrastructure, IT, Government & Banking, Healthcare, Staffing & Recruitment, Food, Education, and FMCG. This diversity could potentially insulate the business from sector-specific downturns. 3. Strong Leadership: The company was initially promoted by Mrs. Shany Jalal and Mr. Anil Kumar M, who have a vision for the company and have led it successfully from a private company to a public one. 4. Comprehensive Services: The company's services cover both Workspace Administration Services and Workforce Administration Services. This breadth of offerings can make it a one-stop shop for businesses. 5. Impressive Employee Strength: With over 5,800 employees, the company has a strong workforce to meet its operational demands.

C) Weaknesses in the Business

  1. Dependence on Key Personnel: If the company relies heavily on the founders or a few key individuals for its success, it could be at risk should those individuals leave or become unable to fulfill their roles. 2. Scale of Operations: As the company grows in size (employees, clients), managing such a large operation may become challenging, especially if processes and systems aren't scaled effectively. 3. Potential Staff Turnover: Given the nature of the business, there might be a higher turnover rate, especially among contractual employees, leading to recurring training and hiring costs.

D) Risk in the Business

  1. Revenue from Manpower Services Contract Receipts: The company's revenue heavily relies on manpower services contracts. Any loss of business in this segment, due to declining quality standards, competition, or changing demand, could adversely affect revenue and profitability. 2. Intense Competition and Low Barriers to Entry: The industry in which the company operates is highly competitive and fragmented, with low barriers to entry. Competing against existing and new competitors, especially in the unorganized segment, may pose challenges and potentially impact the company's business, operations, and financial condition.

E) Financial Performance

  1. The company's revenue has experienced a modest growth rate of 19% from INR 38 Cr in 2016 to INR 132 Cr in FY23, which is considered low given the small scale of the company's operations. 2.The business operates with narrow EBITDA margins ranging from 1-2%, indicating a need for significant volume in order to drive profitability. 3. The Avg. PAT of FY20, FY21 and FY22 is ~1.1 Crores. However, in the first 10MFY23, the profit rises suddenly to ~3.02 Cr. With this PAT, the EPS is 2.62x and P/E is 26x which looks very high. 4.In the first 10 months of FY23, the company achieved a total PBT of approximately INR 4 Cr. However, the cash generated from operations amounted to only INR 0.22 Cr, indicating a low conversion efficiency of 5%. This suggests that a significant amount of money is tied up in working capital, as the ideal ratio for cash conversion is typically expected to be over 70%. 5. ROE is 10% post IPO.

F) Valuation and Peer Analysis

  1. Asking P/E is 67x based on last 3 years i.e. FY20, FY21 and FY22 average PAT. 2. Asking P/E is 25x based on 10MFY23 numbers. 3. Asking Mcap = 77 Cr. The nearest peer in terms of business and size is Integrated Personnel Services. Integrated is available at P/E of 14 with better Revenue, EBITDA Margins and Profitability Ratios.

Service Care Limited No. 653, 1st Floor, 2nd Main Road Domlur Layout, Bangalore – 560071 Phone: +91-80-25354728 / 2535472 Email: compliance@servicecare.in Website: http://www.servicecare.in/