CL Educate IPO

CL Educate IPO to raise Rs. 239 crore is slated to open on 20th March 2017. CL Educate operates across segments in the education industry including test preparation, K-12 and vocational training.

Related Post CL Educate IPO: Peer Analysis

CL Educate IPO: Issue Details 
Issue PeriodIssue Opens On*: Monday, March 20, 2017
Issue Closes On  : Wednesday, March 22, 2017
Price BandRs.500 – 502
Bid Lot29 Equity Shares and multiple thereof
Issue Size (No. of Shares)Fresh Issue of 2180119 Equity Shares and
Offer for Sale of 2579881 Equity Shares
Issue Size ( Rs.)Rs. 238.95 Crores
Issue Structure : 
QIB*50% of the Offer ( 2,380,000 Equity Shares) ( Rs. 119.48 crores)
NII15% of the Offer ( 714,000 Equity Shares) ( Rs. 35.84 crores)
Retail35% of the Offer ( 1,666,000 Equity Shares) (Rs. 83.63 crores)
Lead ManagerKotak Mahindra Capital
RegistrarKarvy Computershare Pvt. Ltd.
About CL Educate:

CL Educate Limited has its  operations across 6 business segments, spanning the education value chain:
  • Test preparation and Training services under brand Career Launcher
  • Publishing and Content Development conducted under the brand GK Publications.
  • Integrated business, marketing and sales services for corporates, conducted under our brand Kestone, including event management, marketing support (including digital marketing support), customer engagement, managed manpower and training services.
  • Integrated  solutions to educational institutions and universities, including business advisory and outreach support services, under our brand CL Media, as well as research incubation and support services conducted under the brand Accendere.
  • Vocational Training Programs under Government schemes in various States across India.
  • K-12 schools operated under thr brand Indus World
CL Educate IPO – Objectives of Issue:

Out of the the fresh issue proceeds, about Rs. 53 crore is earmarked for working capital funding, Rs. 19 crore for debt repayment and Rs. 20 crore for strategic initiatives.

CL Educate IPO – Segment-wise Revenue:
Segment (Figs in Rs. crore)HY17 (Rs. crore)% of RevenueFY16% of RevenueFY15% of Revenue
Test Preparation cum  training81.6653.32%128.7645.56%118.3143.25%
Publishing and content evelopment11.047.21%15.995.66%16.756.12%
Integrated business, Marketing and Sales Services for Corporates50.5232.99%87.7631.05%96.135.13%
Vocational Training2.381.55%36.112.77%31.3111.45%
Integrated solutions to educational Institutions4.132.70%5.271.87%3.81.39%
K-12 Schools3.432.24%8.763.10%7.262.65%
Total Operating Revenue153.16 282.64 273.53 

CL Educate IPO: Financials:
     Rs.Million
ParticularsHY 20172016201520142013
Revenue from Operations1,531.592,826.412,735.302,186.081,988.67
Other Income75.39140.44115.49110.97232.08
Total Revenue 1,606.982,966.852,850.792,297.052,220.75
Expenditure     
Raw materila & Components40.8764.9762.1693.6578.97
cost of services726.911179.881056.01779.53685.41
Stock in trade, 10.3634.3719.8116.3113.17
WIP, FG Inventorty, traded goods (+)/(-)-3.8618.4423.43-39.91-27.38
Employee Benefits Exp.279.11626.23749.7686.57674.64
Depreciation and Amortisation Exp.36.39077.3954.7155.98
Finance Costs46.72101.5793.5689.69101.06
Other Expenses264.93542.9456.14399.12453.21
Total expenditure 1401.342658.362538.22079.672035.06
Profit bef exceptional items & tax 205.64308.49312.59217.38185.69
Exceptional Items0022.8413.260
Profit before tax 205.64308.49289.75204.12185.69
Tax76.4991.7377.7342.2837.28
Net Profit 129.15216.76212.02161.84148.41
OPM %13.92%12.72%13.46%11.47%5.56%
NPM %8.43%7.67%7.75%7.40%7.46%
Networth2,558.312,422.852,092.871,497.581,340.56
NAV214.26202.92179.72151135.16
RONW % (ann)10.10%8.95%10.13%10.81%11.07%
Equity119.4119.4116.4599.1899.18
FV1010101010
EPS (Ann)21.6318.1518.2116.3214.96
IPO Price502    
PE (Pre Issue Equity)23.2127.66   
Cagr sales 1 yr 3.33%   
Cagr sales  3 yr 12.43%   
Cagr  PAT  1 yr 2.24%   
Cagr  PAT  3 yr 13.46%   
New equity21.8    
Post issue equity141.2    
EPS (Post Issue Eq)18.2915.35   
PE ( Post Issue Eq -ann)27.4532.7   
P/BV 1.07   
Market Cap 708.82 crore  
Market Cap/Sales Ratio 2.51   
Receivables:
Current assetsHY17FY16FY15FY14FY13
Inventories72.0865.3488.74105.7267.66
Trade receivables1,268.961,189.16866647.63536.64
Cash and cash equivalents121.39158.69193.49114.02121.32
Short-term loans and advances806.47739.41630.64561.94487.93
Other current assets382.73218.04205.78172.65136.18

Receivables at 127 crore for the HY ended FY17 on a consolidated revenue of  153 crore appear high. 

Assessment of CL Educate IPO
  • The Indian test prep market is estimated at  Rs. 378 billion, as of 2015-16, having grown at a CAGR of approximately 14% from 2008-09.
  • CL Educate  is executing  vocational training under Govt. schemes which could mean huge working capital gets locked with mounting receivables and delayed collection cycles. In past companies like Everonn Education, and Core Education etc. have been affected badly on account to their exposure to such schemes
  • CL Educate also has huge outstanding trade receivables. Outstanding debtors for HY17 stand at of Rs. 127 crore which is considered high keeping in view its turnover.
  • The company believes that Career Launcher is a well-recognized brand in the education sector, particularly in aptitude-based test prep courses, including for MBA, Banking and SSC and Law test prep. With acquisition of the GK Publications business in November 2011, they entered into the publishing and content development business, publishing niche test prep titles for popular professional and entrance examinations in India.
  • To spread its presence, CL Educate has adopted a scalable, asset-light and less capital-intensive business partnership model to operate test prep centers, in addition to their own test prep centers,It has a network of 146 test prep centers in 86 cities across India, with 49 owned test prep centers and 97 test prep centers operating under a partnership model. Moreover, it typically leases the premises from which it operates the test prep centers.
  • The promoters own 64.72% stake. Rest is held by PE fund Gaja 15.04%, HDFC 4.96% and balance 15.28% by Edelweiss, India Infoline, S P Family Trust etc. While Promoters and PE investor Gaja are making a part exit,few like S P Family, Edelweiss, India Info and some other shareholders are making total exit. 
  • The peer analysis Click Here  indicates that CL Educate is not very favorably placed compared to its Peers and Price to Earning ration being asked is bit higher.
  • CL Educate shelved its IPO plans in April 2015.
  • CL Educate is likely to be listed in T Category.
  • K12 vertical under Indus World Schools has considerable capital deployed but its contribution is quite low.
  • Grey Market is not very active in CL Educate  IPO.
  • Keeping all factors in mind, CL Educate IPO is an IPO that has considerable risk due to poor track record of other players in segment it operates and also the price demanded is not cheap which poses a degree of risk.
  • Stock market’s performance of companies in the education sector has been much below the mark  till now and CL Educate does not have needed positives needed to dispel these concerns. 
  • At this juncture, I think that I may not  subscribe to CL Educate IPO 

 

Standard disclaimer:  I am not a SEBI registered analyst. I may have vested interest in every stock I discuss. Please do your own due diligence as stock market investments have high degree of inherent risk.