Career Point Infosystems Limited (Career Point) is in the business of providing tutorial services is tapping the capital markets with its IPO to raise Rs 115 crs. The issue is currently on and would close on Monday the 20th of September for QIB’s and on Tuesday the 21st of September for HNI’s and retail. The price band is Rs 295 – 310. The company has done an allocation of 6.56 lakh shares to anchor investors at a price of Rs 310 and as of end of Friday the issue is oversubscribed 1.27 times.
| Price Band | Rs 295 – Rs 310 |
| Issue size in Rs | Rs 115 crs |
| Offer size in shares | 38,98,305 Equity shares at Rs 295 and 37,09,677 Equity shares at Rs 310 |
| Employee Reservation | 65,000 Equity Shares |
| QIB’s | 22,99,983 Equity Shares at Rs 295 and 21,86,806 Equity Shares at Rs 310 |
| Non Institutional Investors | 3,83,330 Equity Shares at Rs 295 and 3,64,468 Equity Shares at Rs 310 |
| Retail Investors | 11,49,992 Equity Shares at Rs 295 and 10,93,403 Equity Shares at Rs 310 |
| Marketcap post issue | Rs 540.40 crs to 562.03 crs |
| Book Running Lead Manager | Centrum Capital Limited J M Financial Consultants Private Limited |
| Isssue Opening Date | Thursday 16th September |
| Isssue closing date for QIB’s | Monday 20th September |
| Isssue closing date for Retail and HNI’s | Tuesday 21st September |
| Anchor Investors | 6,56,040 shares alloted at a price of Rs 310 per share |
| IPO Grade | 3/5 by CARE Limited indicating average fundamentals |
| Bidding Lot | 20 shares |
Business
Career Point is in the business of being a tutorial services provider in India. These tutorial services are provided to high school and post high school students for various competitive entrance examinations including All India Engineering Entrance Examination, Indian Institute of Technology – Joint entrance Examination and All India Pre-Medical and Pre-Dental Test.
These tutorial services are provided through our classroom training programmes conducted through a network of Company Operated and Franchised Centres. The company as of 31st July 2010 had 17 company operated training centres and 16 franchised centres. Till 31st July the total number of enrolments has been 28,626. The faculty consists of 231 members and over the years the company has built a content repository of over 10,000 pages of text content and over 200 hours of video content. For students who cannot attend classes in person, there are distance learning programmes comprising of correspondence and test series courses.
The company has recently forayed into Education, consultancy and management services (ECAMS) catering to K -12 and higher education segments.
Objects of the Issue
The objects of the issue are as follows: –
- Construction and development of an integrated campus facility : Rs 68.25 crs
- Expansion of classroom infrastructure and office facility : Rs 16.49 crs
- Acquisitions and other strategic initiatives : Rs 15.00 crs
- General Corporate purposes : Rs xx
Financials
Career Point reported standalone revenue of Rs 49.04 crs for the year ended March 20009 and Rs 67.80 crs for March 2010. The net profit after tax was Rs 16.24 crs in March 2009 and Rs 19.87 crs in0March 2010. The equity capital of the company prior to the IPO consists of 1,44,20,297 shares or 1.44 cr shares and share capital is Rupees 14.42 crs. The EPS on old capital is Rs 11.26 for March 2009 and Rs 13.78 for March 2010.
Competition
Strictly speaking there is no competition among listed peers which can be compared for comparison purposes as there are none which are listed in this space. If one however looks at the education space there are many companies in this segment and some of the prominent names include Everonn Education, Educomp Solutions Ltd, NIIT and a host of companies like Core Projects and others who are in the business of providing computer classrooms and content to government and private schools.
In the unlisted space there are enough people who are offering similar courses in Kota and probably in the next few quarters we should see more such IPO’s coming from there. The business is there and the growth opportunity tremendous. The key risk is in duplicating the Kota model into other entrance exams and Career Point has started the same. The success of the other courses would be keenly watched. Secondly Career Point is now entering into the lucrative formal education space of K-12 where schools would be set up and managed. This is lucrative and becomes the next growth going forward.
Valuations
On a fully diluted basis the stock which is being offered in a price band of Rs 295-310 had an EPS of Rs 10.84 for March 2010 at the lower band and Rs 10.96 at the upper band of Rs 310. The price earnings multiple at the lower end would be 27.19 times and at the upper end 28.28 times.
The company is likely to earn a net profit of Rs 26-27 crs in the current year and Rs 36-38 crs in FY 2011-12. The EPS is likely to be between Rs 19.5 – 20.5 in FY 2011-2012.
Growth Drivers
The opportunity in schools and the University that the company is setting up would provide an opportunity to give education through kindergarten, school, high school, college and then finally post graduation to a student. Considering the population of India this is a huge opportunity that India has and this would provide the company a huge growth driver going forward. Competition will always be there but the hard fact is that there are more students and fewer seats in India. One can safely conclude that as long as one offers decent education there will never be a shortage of takers.
Conclusion
Career Point offers an opportunity to invest in a company which is in the tutorial space and is integrating backwards into the school and forward integration into the college space. The company has a huge opportunity to capitalise on the growing needs and is well poised to reap the benefits. Apply for listing gains and steady appreciation thereafter.
SEBI disclaimer: – I intend to subscribe to the above issue.
