The company provides tutorial services to high school and post-high school students for various competitive entrance examinations; it will have to hold its own against some well-entrenched players
Rajasthan-based tutorial service provider Career Point Infosystems Ltd (CPIL) is entering the primary market with a plan to raise Rs115 crore through a 100% book-building issue of 38,98,305 shares. The issue opens for subscription on 16th September and closes on 21st September.
Rating agency CARE has assigned an 'IPO Grade 3' to the issue indicating 'Average Fundamentals'. The company, located at Kota, has set aside 65,000 shares for its employees. It has set the price band at Rs295-Rs310 per share. At the extreme ends of the price band, CPIL will dilute 20.1% to 20.80% of its stake.
Career Point provides tutorial services to high school and post-high school students for various competitive entrance examinations. These include the All India Engineering Entrance Examination, the Indian Institute of Technology - Joint Entrance Examination and the All India Pre-Medical and Pre-Dental Test. As on 31 July 2010, it had 17 training centres and 16 franchisee centres.
The company posted a net profit of Rs18 crore on total income of Rs66 crore for the year ended 31 March 2010. Its earnings before interest, tax, depreciation and amortisation (EBITDA) stood at Rs28 crore and it had a net cash flow of Rs9.45 crore.
CPIL will utilise the IPO proceeds to meet the costs of construction and development of an integrated campus facility at Kota; to meet the costs of expansion of classroom infrastructure and office facilities and to finance acquisitions and other strategic initiatives.
It earnings per share (EPS) stood at Rs13.17 for the year ended 31 March 2010. Based on the EPS of the last fiscal, its PE works out to 22. The company's three listed competitors are Everonn Education Ltd, Educomp Solutions Ltd and NIIT Ltd.
According to reports, the company is expected to report a profit after tax (PAT) of Rs21 crore in FY11. On a post-issue basis, the EPS for FY11 works out to Rs11.46 and a PE of 26 at the lower end and 27 at the upper end of the price band.
NIIT carries the lowest EPS of Rs0.06 for the first quarter of FY11, followed by Educomp Solutions Ltd at Rs4.64 and Everonn Education Ltd at Rs4.80.
Educomp's PE works out to 30 and Everonn Education's PE stands at 32.85. The highest industry PE is 33.60 while the lowest is 8.10. CPIL raised Rs50 crore through a private equity investment by Franklin Templeton Mutual Fund in July 2009.
According to an IDFC-SSKI report, the spending on education is growing by a compounded annual growth rate (CAGR) of 14% and is expected to touch $80 billion by 2012. Increasing population and constitution of 32.60% of total population in the age group up to 14 is likely to lead to an increase in the number of schools, colleges and universities. These factors have led to an increased demand for educational stocks. Institutes which provide quality coaching will be in a position to cash in on this projected admission boom.
"We plan to utilise Rs68.25 crore for construction and development of an integrated campus, Rs16.48 crore for expansion of classroom infrastructure and office facility and Rs15 crore has been earmarked for acquisitions and other strategic initiatives," Career Point CEO Pramod Maheshwari told reporters on Tuesday.
Centrum Capital Ltd and JM Financial Consultants Pvt Ltd are the lead book running managers to the issue.