Six things you need to know of S Chand IPO

The education content company S Chand will come out next week with an IPO worth Rs 728 crore priced in the range between Rs 660-670. The IPO would include a fresh issue of shares worth Rs 325 crore and the existing shareholders will sell off 6,023,236 shares in an offer for sale.

Following are the six things you need to know about S Chand IPO before investing in it:

What is the business of the company?

The company has a noticeable presence in CBSE/ICSE affiliated schools. It has 53 consumer brands across knowledge products and services, including S Chand, Vikas, Saraswati, Madhubun, Ignitor and Destination Success. The company’s sales team include 697 professionals, who work in 58 branches and marketing offices across India. The company has contractual relationships with various authors. It earns approximately 73% of its revenue from K-12 education content company.

Utilisation of IPO proceeds

The company plans to utilise Rs 152 crore to repay the term loans availed by it and one of its subsidiary EPHL and Rs 88 crore for repayment of loans availed by it and two of its subsidiaries, VPHPL and NSHPL.

Company’s financial performance

The company has reported a 33.48% compounded annual growth rate (CAGR) in consolidated profit after tax and before minority interest at Rs 46.64 crore in FY16. The consolidated revenues of the company stood at Rs 540.62 crore in FY16, a CAGR of 32.64%.

Closest peers

Navneet Education is the closest listed peer of the company. The stock has soared 94% in the past one year and 185% in the past three years.

Risk factors

A majority of the premises used by the company are taken on lease from group companies or third parties, which results in more cash outflows for paying lease rentals.

CBSE has issued two circulars in the past recommending the use of only NCERT printed content for all classes under CBSE schools, which may adversely affect company’s sales.

Management plans

The IPO proceeds would enable the company to reduce debt by 75-80%, according to the management. The existing shareholder Everstone holds around 32% stake in the company, which after IPO would come down to 14%. Consequently, the promoter holding would come down to around 47-48%, as per a national news portal.