CL Educate makes a weak debut on bourses
MUMBAI: Education services provider CL Educate made a weak debut on the bourses on Friday with analysts citing expensive valuation as the key reason.
The stock listed at Rs 398 on the BSE, a 20.7% discount to the issue price of Rs 502, before closing at Rs 417.90, or down 16.7%. The fourth issue to list this year, CL Educate is the only firm after Varun Beverages in November last year to list at a discount.
The Gaja Capital-backed firm's Rs 239-crore IPO was subscribed 1.9 times, with portion reserved for qualified institutional buyers and high net worth individuals being subscribed 3.6 times and 0.2 times, respectively. Retail investors' portion was subscribed 1.6 times. Kotak Mahindra Capital managed the issue.
“The financial track record is not impressive and RoE (return on equity) is low, in single digits, compared to peers like MT Educare, which has an RoE of over 20%," said Amarjeet Maurya, senior equity research analyst-midcaps at Angel Broking.
Valuation at the higher end of IPO price band of Rs 500-502 was also one of the reasons for its weak listing, added Maurya. The stock was available at a price-to-earnings ratio of 27.3 times on FY16 earnings per share basis.
While Angel Broking had given a 'neutral' rating to the issue, other brokerage firms had recommended an 'avoid' on the issue in their pre-IPO notes.
Incorporated in 1996, CL Educate provides test preparation and training services under the Career Launcher brand and operates K-12 schools under Indus World Schools brand.
The IPO comprised of sale of fresh issue of 21.8 lakh shares and an offer-for-sale of up to 25.8 lakh shares. The company plans to use money raised to meet working capital requirements, cut debt and fund acquisitions.
The education services provider reported a consolidated net profit of `13 crore on net sales of `153 crore in the six months ended September 2016.
The stock listed at Rs 398 on the BSE, a 20.7% discount to the issue price of Rs 502, before closing at Rs 417.90, or down 16.7%. The fourth issue to list this year, CL Educate is the only firm after Varun Beverages in November last year to list at a discount.
The Gaja Capital-backed firm's Rs 239-crore IPO was subscribed 1.9 times, with portion reserved for qualified institutional buyers and high net worth individuals being subscribed 3.6 times and 0.2 times, respectively. Retail investors' portion was subscribed 1.6 times. Kotak Mahindra Capital managed the issue.
“The financial track record is not impressive and RoE (return on equity) is low, in single digits, compared to peers like MT Educare, which has an RoE of over 20%," said Amarjeet Maurya, senior equity research analyst-midcaps at Angel Broking.
Valuation at the higher end of IPO price band of Rs 500-502 was also one of the reasons for its weak listing, added Maurya. The stock was available at a price-to-earnings ratio of 27.3 times on FY16 earnings per share basis.
While Angel Broking had given a 'neutral' rating to the issue, other brokerage firms had recommended an 'avoid' on the issue in their pre-IPO notes.
Incorporated in 1996, CL Educate provides test preparation and training services under the Career Launcher brand and operates K-12 schools under Indus World Schools brand.
The IPO comprised of sale of fresh issue of 21.8 lakh shares and an offer-for-sale of up to 25.8 lakh shares. The company plans to use money raised to meet working capital requirements, cut debt and fund acquisitions.
The education services provider reported a consolidated net profit of `13 crore on net sales of `153 crore in the six months ended September 2016.
