CL Educate IPO

About The Company

The company started as a MBA test preparation training institute in 1996 and then diversified into various educational services like publishing educational content, K12 (also known as school till secondary high school) as well as in business consulting.  

Presently, it operates in two major segments, viz. education and training programme, which also includes sale of study materials and vocational training.

From 1996-2016, the company has been engaged in various strategic acquisitions to foray into the educational industry. Its recent two major acquisitions were GK Publication and an education start-up Accendere Knowledge Management Services Pvt. Ltd (AKMSPL). Through AKMSPL, the company is providing research incubation and support services.

The company provides coaching for higher education entrance examinations such as GATE,GMAT, CAT, CET, etc. under the education training segment. The vocational training segment includes specific projects taken including government’s projects. It also offers test preparation courses and services under the Career Launcher brand, publishing and content development is done under the brand of GK Publication and research incubation and support services are provided under the Accendere brand. The company also operates in K-12 schools under the brand name of Indus World School. The company had 151 test prep centres spread over 87 cities in India in September 2016 and eight 12-K schools spread across six cities. Along with all these services, the company is also engaged in business advisory and outreach support services under CL Media brand.

About the Issue

The company is issuing 4,760,000 equity shares of Rs 10 valued at approximately Rs 238.95 crore. The issue is expected to open in the price band of Rs 500-502 per equity share. Investor has to purchase at least 29 shares. The issue will remain open for subscription from March 20 to March 22, 2017 and will be listed on both NSE and BSE.

Objects of the Issue

The company proposes to utilise the proceeds of the issue for three major purposes:

1) To meet working capital requirements.

2) For acquisitions and strategic initiatives.

3) Prepay outstanding debt and general corporate purposes.

Coaching Class Industry Analysis

The most important factor of the growth of this industry is introduction of new international courses in India and increasing trend of students attempting these exams. Huge number of students attempt international entrance examinations for higher studies as well as the for entrance into IITs and IIMs.

Currently, the test preparation industry is valued at Rs 378 billion and it is growing at CAGR of 14 per cent since 2008-09

The publishing industry is valued at Rs 244 billion as of 2015-16 with academic segment accounting for the highest share of Rs 202 billion (approximately 83 per cent) and remaining for non-academic segment.

The digital education industry has grown substantially. In the last few years, the industry's revenues tripled from Rs 304 billion in 2011-12 to an estimated Rs 849 billion in 2014-15, growing at a CAGR of 40 per cent.

Overall, the private coaching sector is expected to grow at over 15 per cent each year. The company is positioned well in the current scenario.

Financial Performance

On the financial front, the company's revenues have shown positive growth of 14 per cent CAGR over FY13-16. However, its EBITDA margins have declined by 200 bps in FY16, as well as PAT levels have decreased 35 per cent as compared to FY15. However, in the last six months, the company has successfully increased its operational efficiency by decreasing overall costs by around 7-8 per cent. Its net worth has also increased which is good sign for the company. We expect that company will continue to  improve its operational efficiency, which will positively impact EBITDA and PAT margins. We expect increase in net worth in the next few years as well, which will result in increased ROE.