Published on 20/03/2017 2:52:42 PM | Source: GEPLCapital Ltd

IPO Note - CL Educate Ltd - GEPL

Posted in IPO Reports | #GEPLCapital Ltd #IPO #Education Sector #CL Educate Ltd


Company Background

CL Educate Ltd. (CEL), The company is incorporated in 1996 and engaged in providing various educational products and services. They operate through two segments Education and training programs (including sale of study material) and vocational training. The Company's Education and training program (including sale of study material) segment includes coaching for higher education entrances. The Company's Vocational training segment includes specific projects undertaken (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. 

 

Diversified and integrated education products, services, content and infrastructure provider, with pan-India presence and a focus on knowledge-creation

 The company has diversified operations across six business segments spanning the education value chain, across age groups: test prep conducted under well-recognized brand Career Launcher, with a network of 146 test prep centers in 86 cities across India as on September 30, 2015, providing a comprehensive array of product offerings including MBA, Banking and SSC and Law courses, as well as Civil Services, Engineering, Medical and other courses; publishing and content development conducted under the brand GK Publications, through which they provide test prep titles for professional and entrance examinations in India, including Engineering, GATE, Civil Services and Banking and SSC entrances; integrated business, marketing and sales services for corporate, under brand Kestone, including event management, marketing support (including digital marketing support),customer engagement, managed manpower and training services; vocational training programs of varying terms implemented by us under Government schemes in various States across India, including Gujarat, Jharkhand, Chhattisgarh, Madhya Pradesh and Uttar Pradesh; integrated solutions to educational institutions and universities across India, including business advisory and outreach support services under brand CL Media, as well as research incubation and support services under the brand Accendere; and K-12 schools under brand Indus World School, currently with eight English-medium schools in India, across the States of Punjab, Delhi NCR, Madhya Pradesh, Chhattisgarh, Maharashtra, and Haryana. 

 

Asset-light, technology-enabled business model.

In order to ensure pan-India presence in their test prep business, they have adopted what they believe to be a scalable, asset-light and less capital-intensive business partnership model to operate test prep centers, in addition to their own test prep centers. As on September 30, 2015, they had a network of 146 test prep centers in 86 cities across India, with 49 owned test prep centers and 97 test prep centers operating under a partnership model. Moreover, they typically lease the premises from which we operate their owned test prep centers. They now offer all testing modules online as well as in the form of free-access and paid-access mobile and tablet applications, which provides them with a cost-effective and flexible means of extending visibility and market reach beyond physical test prep center network, and technology support services also facilitate students in interacting with, and receiving instructions from, test prep faculty through the Internet and mobile platforms. primary mobile and tablet application is the CL Exam Guide, which has channels for each type of examination or career, including Bank PO, CAT, CLAT and CBSE (Grades VIII to XII).

 

Strong brand equity.

The company believes that Career Launcher is a well-recognized brand in the education sector, particularly in aptitude-based test prep courses, including for MBA, Banking and SSC and Law test prep. With acquisition of the GK Publications business in November 2011, they entered into the publishing and content development business, publishing niche test prep titles for popular professional and entrance examinations in India, including titles for Engineering, GATE, Civil Services and Bank entrances, under the brand GK Publications. Under brand Kestone, they enjoy strong relationships with corporate to which they provide integrated business, marketing and sales services. Similarly, their brands CL Media and Accendere, enable them to establish and develop relationships with educational institutions and universities to which they provide integrated solutions, including business advisory and outreach support services, as well as research incubation and support services, respectively. Their brand image and reputation, driven by corporate philosophy, business ethos, quality courses and results oriented, innovative and differentiated pedagogy, represent commitment towards academic excellence. Their brand image and reputation enable them to better position and market their products and services to students and parents, as well as corporate and educational institution clients. Moreover, growing brand equity serves to strengthen the relationships that they have cultivated across the education value chain over the years, with their students and alumni, parents, faculty and trainers, corporate and institutional customers, Governments and Government agencies, and other industry players across India. Therefore, they are well-positioned to capitalize on brand equity to expand their distribution network and product and service offerings across the education value chain. Minimize product shortage and the occurrence of out-of-stock situations and pilferage; they are able to operate efficiently and productively with minimal disruptions to day to day operations. Inventory Turnover Ratio (computed by dividing revenue from operations by average inventory, which is an average of opening inventory and closing inventory) was 14.32, 14.03 and 14.18, respectively in Fiscal 2014, 2015 and 2016. 

 

Valuation & Recommendation

CL Educate Limited (CEL) stands to gain from operating leverage. At a P/E of 27.3xs of FY16 EPS. We believe that CEL. Demands a discount to its domestic peers.

 

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