Veranda Learning Solutions' IPO Is Open: Should You Subscribe?

The public issue of Veranda Learning opened on Tuesday for subscription and the same shall close tomorrow i.e. March 31, 2022. The Rs. 200 crore IPO has so far on day 2 of subscription garnered bids for 1.16 times as of 2:08 pm. Here is all about the issue in brief together with brokerages' take on the maiden issue by the education services player.

Issue details

The IPO by Veranda is a complete fresh equity share issuance.

Price band-Rs 130-137 per share. Investors can bid for a minimum of 100 shares and then in the multiples of 100 thereof. At the upper end of the price band, one lot will cost Rs 13,700.

Systematix Corporate Services is the lead manager to the issue, whereas KFin Technologies is the registrar to the issue. The company is likely to get listed on BSE and NSE on April 7, 2022.

Issue objectives: The net proceeds from the issue will be put towards repaying debts, payment of acquisition cost or loans associated with Edureka, and growth efforts, the company said in its DRHP.

About the company: Chennai based company started its operations in 2020 and has been offering offline as well as online coaching services for various professional courses such as banking, UPSC, CA among others.

The company began operations through its 4 fully owned subsidiaries and has no competitor of a similar scale in the company's line of business.

Financials

The financials of the company are not very promising as it is constantly making losses. For the financial year 2020-21, the company clocked net loss of Rs 8.3 crore with a total revenue of Rs 2.54 crore. For the September ended period of Fy22, the company's net loss increased to Rs. 18.26 crore regardless of the increase in revenue to Rs 15.66 crore.

Brokerages take on the issue of Veranda Learning

Not many analysts and brokerages are tracking the issue because of its low size. Nevertheless, most have accorded it an 'Avoid' rating. Here are given viewpoints of some of the renowned brokerages.

Choice Broking

The brokerage has an 'avoid' rating on the issue. "K-12 education is over 40% of the total edtech market in India. This is followed by test preparation and online certification. Veranda Learning has a presence in the test preparation market and intends to have services for the K-12 segment in the future," Choice Broking said in a report.

Reliance Securities

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.

"The IPO is aggressively priced and hardly leaves anything meaningful on the table for investors in the medium term perspective," he added. "All positives are captured in its valuation and valuation is not favourable for investors."