Veranda Learning IPO (Initial Public Offering) opened for subscription today and will remain open for bidding till March 31, 2022. The education services player is eyeing to raise Rs 200 crore via its initial public offering (IPO), which is entirely a fresh issue. It will be the last issue of the current financial year as the IPO closes for subscription on Thursday, March 31, 2022. It is the fifth issue of the calendar year 2022 after AGS Transact Technologies, Adani Wilmar, Vedant Fashions and Uma Exports.
Veranda Learning IPO: Price Band
Price band of the book built issue of face value Rs 10 per equity share has been fixed at Rs 130 to Rs 137 per share. The coaching service company plans to raise Rs 200 crore from its public issue.
Veranda Learning IPO: Subscription Status
The initial public offering of Veranda Learning Solutions has been subscribed 17 percent so far on March 29, the first day of bidding, as investors bid for 29.58 lakh shares against the offer size of 1.17 crore shares. The offer size has been reduced from 1.45 to 1.17 crore shares after the company mopped up Rs 46.75 crore from three anchor investors on March 28. Retail investors have bid for 1.84 times of their quota, while non-institutional investors have bid for 1.35 lakh shares. Qualified institutional buyers are yet to participate in the offer.
Veranda Learning IPO: GMP
According to market observers, Veranda Learning IPO GMP (grey market premium) is not available as the stock is yet to make its debut in the grey market.
Veranda IPO: Investment Rationale
Through this funding, the company intends to repay or pre-pay, in part or full of all or certain borrowings up to Rs 60 crore. It will use Rs 25.19 crore towards payment of acquisition of Edureka and about Rs 50 crore towards growth initiatives. There are no listed companies in India that engage in a business similar to that of Veranda Learning Solutions.
In its red herring prospectus report, Veranda highlighted that the education sector has been growing at a CAGR of 14 per cent over the past decade, due to India’s demographic profile, rapid urbanization, increased educational spend, lack of premium educational institutions, highly competitive market, and low penetration of education.
Veranda Learning IPO: Financials
For the financial year 2020-21, the company reported net loss of Rs 8.3 crore with a total revenue of Rs 2.54 crore. The net loss widened to Rs 18.26 crore despite a rise in revenue to Rs 15.66 crore for the period ended September 30, 2021.
On FY22 annualized financials, the IPO is at 25x market cap/sales for a loss-making company with a low track which looks expensive and the market is highly competitive, said Arafat Saiyed, Research Analyst, Reliance Securities.
Veranda Learning IPO: Should You Subscribe?
Analysts are skeptical over the issue following its muted financials, negative bottomline, pricey valuations, tepid growth, and high competition in the education sector.
“The IPO is aggressively priced and hardly leaves anything meaningful on the table for investors in the medium-term perspective,” Saiyed added. “All positives are captured in its valuation and valuation is not favourable for investors.”
“Although the company’s business model is technology-driven, asset-light, and scalable with proven track record of promoters along with a result-oriented method of teaching with 360 degree approach and diversified course offerings and delivery channels, but looking after the financials of the company and its valuations, we recommend ‘Avoid’ on the issue,” said brokerage firm Hem Securities.
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