Published on 20/03/2017 3:51:10 PM | Source: Motilal Oswal Securities Ltd

IPO NOTE - CL Educate Limited - Motilal Oswal

Introduction :

Incorporated in 1996, CL Educate Ltd is engaged in providing various educational products and services. They operate through two segments i.e. Education & Training Programme (including sales of Study Material) and Vocational Training. The Company's Education & Training Program (including sales of Study Material) segment includes coaching for higher education entrances. The Company's Vocational training segment includes specific projects undertaken by the company (including government projects). CL Educate offers test preparation courses and services under the Career Launcher brand, publishing and content development services under the brand GK Publications and event management, marketing support, customer engagement, and managed manpower and training services under the Kestone brand name.They also provide integrated solutions to educational institutions and universities, including business advisory and outreach support services under the CL Media brand, as well as research incubation and support services under the brand Accendere. In addition, the company operates K-12 schools under the Indus World School brand name. As on September 30, 2016, they had 151 testprep centers spread over 87 cities in India, 8 K-12 schools spread across 6 cities & 28 vocational training centers and offices.


Object of issue:

The company is raising ~INR1,094mm through a fresh issue of equity shares in the price band of INR500-502. The fresh issue will constitute ~15% of the post-issue paid-up equity share capital of the company, assuming the issue is subscribed at the upper end of the price band. The company is offering ~2.6mm shares that are being sold by the promoter group and other shareholders

* Company will deploy fund of ~INR530mm towards Working Capital requirement

* Part pre-payment of outstanding debt 3 Company to allocate ~INR 200mm towards acquisitions and other strategic initiatives

* General corporate purpose



At the upper end of the price band of INR502, the company is available at 27.7x PE @ FY16 earnings. The return ratios (ROE, ROCE) of the company for FY16 are subpar at ~10% as compared to closest peer MT Educare with ROE of ~22% and ROCE of ~30%. The company's business is working capital intensive (FY16 WC: ~130 days). CLEL reported total operating income of INR ~INR1,532mm and PAT of ~ INR129mm for H1FY17.


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