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Service Care

• Service Care is coming out with a 100% book building; initial public offering (IPO) of 30,86,000 shares of Rs 10 each in a price band Rs 63 -67 per equity share.
• The issue will open for subscription on July 14, 2023 and will close on July 18, 2023.
• The shares will be listed on NSE Emerge.
• The face value of the share is Rs 10 and is priced 6.30 times of its face value on the lower side and 6.70 times on the higher side.
• Book running lead manager to the issue is Swastika Investmart.
• Compliance Officer for the issue is Sharvari Sham Kulkarni.

Profile of the company

Service Care Limited was founded in the year 1999 and officially incorporated in 2011. As a company, it has developed a specialization in catering to diverse industries across all domains. Based in Bangalore, it is currently expanding its presence both in India and globally. The company provides a wide range of staffing and outsourcing services for various industries such as Infrastructure, Manufacturing, Banking, Sales, Information Technologies, KPO/BPO, Services industries, Healthcare, Facility Management, F&B, Property Managements and more.

The company was incorporated with the objective to providing services as Work Space Administration Services & Work Force Administration Services across all the business domains. With the overall experience and Market presence of many years of the promoters, company have establish its creditability with its customers and partners across the country. Primarily Workspace Administration services covers all the Integrated Facility Management and Business Services, on the other hand Workforce Administration services covers all kind staffing solutions, outsourced recruitment processes and payroll management. The company currently many associate team (including contractual employees). Company currently service clients from the Manufacturing, Engineering, Infrastructure, Information Technology, Government & Banking, healthcare, Staffing & Recruitment, Food, Education, FMCG verticals.

Proceed is being used for:

• Meeting incremental working capital requirements
• General corporate purpose
• Meeting public issue expenses

Industry overview

The India facility management market stood at $46.27 billion in 2022 and is forecast to grow at a CAGR of 14.84% by 2028. The growing number of organizations seeking to strengthen their positions in the India facility management market and increasing shift towards energy efficient buildings is anticipated to boost the India facility management market. 

The staffing industry includes organizations whose purpose is to locate and/or supply workers for other organizations. The predicted revenue for the global staffing industry in 2022 was estimated at over 650 billion U.S dollars, following two years of continuous growth. The industry took a big hit during the peak of the coronavirus pandemic in 2020, however revenue has bounced back to surpass pre-pandemic figures. The largest revenue segment of this industry is agency work, comprising approximately 75 percent of the market in 2020. Recruitment services constitute the remainder.

Staffing industry added new employment at a sharp 21.9% YoY 2021 22, compared to a 3.6% new employment generated in the previous year. With robust employment demand seen from across sectors, more than 100 members of Indian Staffing Federation employ 1.26 mn flexi workforce (March 2022). The new employment generated was at a much sharper growth rate than even pre pandemic years. Staffing members at ISF added 2.27 lakh new formal workforce in 2022. General Staffing Industry nett new employment grew at 21%, adding 1.57 lakh new formal workforce, from the year before at 18.1%. General Staffing Industry was primarily driven by demands from FMCG, E-commerce, Manufacturing, Healthcare, Retail, Logistics, Banking, Energy etc. IT Staffing Industry witnessed a sharp jump with 30.7% growth adding further new employment, than the year before at 14.1%. 

Pros and strengths

Enduring Values of the company & Management Team: Strong and Conventional values are the fundamental beliefs and principles that guide a company's behavior and decision-making processes. They are the bedrock of a company's culture and are often deeply ingrained in its history and identity. Similarly, the management team of a company plays a critical role in shaping the company's values and ensuring that they are upheld.

Customer Focus: The company places a high value on understanding and meeting the needs of its customers. With a more than 90% of customer retention ratio on an average. 

Strong Statutory compliance policies: Statutory compliance implies to adhering to laws, regulations and guidelines set by various government bodies. Strong statutory compliance policies help companies operate within legal boundaries, avoid penalties and fines and maintain a positive reputation. All check, controls and audits are in place to address customer concerns and compliance. Customer would have trouble free alliance and Compliance fallbacks. Few attributes to successful manage full compliance.

Risks and concerns

Operate in highly competitive industry:  It operates in an industry which is highly competitive and fragmented and it competes with a range of organized and unorganized players, both on the national and regional level. Further, while it has an expanding portfolio of services requiring it to allocate resources across these verticals, its competitors may have the advantage of focusing on concentrated product verticals. Further, it competes against established players also, which may have greater access to financial, technical and marketing resources and expertise available to them than it in the products and services that compete against them. 

Require high working capital: Its business demands substantial funds towards working capital requirements. In case there are insufficient cash flows to meet its working capital requirement or it is unable to arrange the same from other sources or there are delays in disbursement of arranged funds, or it is unable to procure funds on favorable terms, at a future date, it may result into its inability to finance its working capital needs on a timely basis which may have an adverse effect on its operations, profitability and growth prospects.

Depends on top 10 clients: Its Top 10 client contributes 93.76%, 92.30%, 93.31% and 94.56% of the Total Revenue for the period ended January 31, 2023 and for the financial year ended March 31, 2022, 2021 and 2020 respectively, among which 74.89%, 73.88%, 73.29% and 80.43% of the Total Revenue for the period ended January 31, 2023 and for the financial year ended March 31, 2022, 2021 and 2020 respectively are from one client i.e. Larsen & Toubro. It also has other well-known and reputed clients, which include MNCs. Although, it generally enter into long-term supply contracts with its customers, but its business is dependent on developing and maintaining a continuing relationship with its key clients and customers. In the event of a significant decline in the demand for its services by its key clients, its business, results of operations and financial condition may be materially and adversely affected. There can be no assurance that it will be able to maintain the historic levels of business from these clients and customers or that it will be able to replace these clients in case it loses any of them.

Outlook

The company was incorporated with the objective to providing services as Work Space Administration Services & Work Force Administration Services across all the business domains. The company is engaged, mainly in the business of housekeeping facility management service and payroll service. On the concern side, it operates in an industry which is highly competitive and fragmented and it competes with a range of organized and unorganized players, both on the national and regional level.

The issue has been offered in a price band of Rs 63-67 per equity share. The aggregate size of the offer is Rs 19.44 crore to Rs 20.68 crore based on lower and upper price band respectively. On performance front, during FY 2021-22 the revenue from operation and other income of the company has been increased to Rs 1,1501.64 lakh as against Rs 8,933.38 lakh in FY 2020-21. This increase was mainly due to its association with new clients with increased revenue from existing clients. The restated profit after tax for FY 2021-22 has been increased to Rs 174.48 lakh as against Rs 23.46 lakh in the FY 2020-21. Going forward, it considers that its employees are key contributors to its business success. It focuses on attracting and retaining the best possible talent. The company looks for specific skill-sets, interests and background that would be an asset for its business as well as for its clients.