MT Educare To Bring The IPO At The Higher Price Band

MT Educare, a Mumbai-based coaching service provider which is better known as Mahesh Tutorials, has fixed the issue price of its Rs 99 crore IPO at the higher end of the price band of Rs 74-80 a share. As mentioned in our earlier update, the issue price of the company should be near to its lower end of the price band i.e. Rs 74 which justify the valuation of its PE of 14.2x with the annualized EPS for FY12E at Rs 5.

The IPO in the grey market is trading at a premium of Rs 3-4 which indicates a positive response from the investors. We believe that this kind of response will fetch the IPO a first-day listing of Rs 78-84. Also, as per the new SEBI guidelines, any IPO with below Rs 250 crore issue will have a circuit filter of 5 per cent and therefore the gain will be restricted to 5 per cent on the listing day for MT Educare.

For MT Educare the issue closing date was March 29, 2012. We contacted the lead manager of the issue i.e. Enam Securities and they said that they have not yet decided the date for listing the company. However, they hinted that it could be April 11 or 12.

The company through this issue will raise Rs 35 crore through a fresh lot of 43 lakh equity shares and Rs 64 crore via offer for sale of 80 lakh shares held by Helix Investment Ltd, a private equity company that entered in 2007 though purchase of 28.6 per cent of shareholding. The IPO on the issue’s closing day got oversubscribed by 4.8 times with good participation from both retail and institutional investors. The portion reserved for retail investors has been oversubscribed by 2.7x. The institutional portion was subscribed 6.01x, while the non-institutional portion got a strong response and was subscribed 8x.

Further, out of Rs 99 crore, the company has received a commitment of Rs 12 crore from Anchor Investors. Since the issue is oversubscribed, the allotment of shares will be done on a proportionate basis. As suggested earlier, one may subscribe to the counter for listing day gains. Thereafter, we advise caution as clarity is awaited on the future sustainability of the company’s business model. We shall keep our readers updated on the counter through our post-issue analysis.