Firms and Businesses need electricity and roads and the internet to function.
Politicians need humans, especially labour for all kinds of works.
Beginning with filling up large crowds to show influence, creating gangs of goons to beat other politicians gangs until they get access to the police, etc.
Contractors have a very special pricing power. They get to charge for 1 human’s work just for being the middleman.
For example, if you own a factory, you appoint a labour contractor to send you 5 people daily. But the contractor will send you a daily wage bill of 6 people.
The 6th person’s money is the contractor’s commission.
Imagine the returns!
Mutual fund distributors like me get paid 1% for the whole year. These get paid anywhere between 5% to 20% depending on the size of the team they deploy, ON A DAILY BASIS.
And what is the cost? Politician’s blessings and the informal license.
So how do they actually gatekeep this?
Police Verification!
Now we know why we have police stations in India.
As a labour contractor, you need to report every person’s background, criminal information and a lot of other data to the police before you are allowed to permanently supply them to factories where they will sleep.
Once you are the labour contractor at a specific municipal or district level, you keep getting bonuses.
You get the coveted Wine Shop or Liquor Shop license easily.
You get to start hotels where you can sell illegal stuff. Basically prostitution and that other stuff.
Basically you start getting a lot of stuff that is generally not open for the free market participants to engage in.
Now imagine a labour contractor with 500 people supply.
100 units x 5 people each.
He gets to charge for 100 people.
Assuming a nominal 10,000 per month for the 6th person.
10,000 x 100 = 10 lakhs per month purely for doing nothing. (Sucking and Licking excluded)
And 500 people is too small a scale. Even for a tier 3 city like Sangli.
| Number of People Supplied | Earnings Per Month | Earnings Per Year |
| 500 | 10 Lakhs Per Month | 1.2 Crores |
| 1000 | 20 Lakhs Per Month | 2.4 Crores |
| 2000 | 40 Lakhs Per Month | 4.8 Crores |
What TCS and Infosys did in a dignified manner on a significant scale with a largely educated population, these contractors in every district do on a district level with the unskilled labour.
Generally these contractors are from these communities:
- Punjabis
- UP Baniyas
- Bihar Baniyas
- Sikhs
The Gujju / Marwadis keep out of this business because of the reputational and operational challenges and involvement of physical power/violence. And the second order business from these – prostitution and drugs trafficking which are the real money businesses make the business dependent on the whims and fancies of the politician.
The day the politician (or his son/daughter) wakes up and decides that the labour contractor has wronged them, it is generally the end of the luxurious lineage.
A classic Puppet business.
What are the other puppet businesses, you may ask:
- Gutka / Tobacco Business in Maharashtra.
- Liquor Business in Gujarat.
- And now Labour Supply Business in Labour Deficient States.
- and so on…
This brings me to discuss an important public listed business in India:
Team Lease Services Limited!
If you look at the valuation as of today (22nd April 2026):
It is at 2096 crores of Market Cap.
Trading at 15 PE.
If you remove the effect of depreciation, it is trading at 11.5 PE.
If we were look at other glorified labour supply businesses like Urban Company, it is trading at a Valuation of 22,000 crores. And an unknown PE because they are loss making.
That is a 10x valuation for doing proper sales and marketing.
Team Lease is building the Infrastructure on which many competitors for Urban Company can stand, yet it is getting this crazy valuation.
Why?
Because Teamlease is not doing this:
- Manufacturing labour supply
- Household help labour supply.
Neither of these. Nada.
They are doing the commodity work. No margins, No negotiating power. No advantage. No moat.
But I think they can do it once they get a political approval high enough to get into manufacturing labour.
And it will come eventually.
This is what I think, let me know what you think about this specific business in the comments below.