62.85 0.05 (0.08%)
NSEDec 04, 2020 03:31 PM
Test prep and education company CL Educate had a middling listing in the stock markets today, debuting at a share price of Rs. 402 , 20% lower than the company's issue price of Rs. 502. The stock has recovered somewhat and is hovering at around Rs. 420 as of this writing.
Analysts were not bullish about the CL Educate IPO, pointing out the business risks of its strong focus on the test prep segment, and the growing competition in this industry from startups like Byju.
CL Educate, which owns the Career Launcher brand and whose IPO had completed last week, will make its stock market debut tomorrow. The company’s IPO was subscribed 1.9x times, with qualified institutional buyers (QIBs) category getting oversubscribed 3.65 times and retail investors 1.63 times. However the ‘non-institutional investor’ portion was subscribed only 21%.
Analysts had given the CL Educate IPO mixed ratings, with ICICI Securities for example, issuing an AVOID rating. The company's Career Launcher test preparation business accounts for over 45% of the company's revenues, making its balance sheet highly vulnerable to policy changes in entrance test examinations or a crackdown by the government on the test prep industry.
CL Educate - which owns the brand Career Launcher - launched its IPO issue on March 20, and is available for subscription until tomorrow. The company aims to raise Rs 239 crore from the issue, which is priced at a band of Rs 500-502. Analysts however, are not bullish about this issue.
ICICI Securities for example, has issued an AVOID rating, and noted that the company's Career Launcher test preparation business accounts for over 45% of the company's revenues. Colleges and institute authorities have been trying to clamp down on the test prep business to discourage over-preparation and the large spends students and parents invest in entrance exam classes and training. Any changes in education policy, consequently, would impact the Career Launcher business and open it to new competition.
In addition, the IPO may be too pricey for its segment. CL Educate's IPO price offer discounts the company’s TTM earnings by 25 times, more expensive than MT Educare which trades at about 17 times its TTM earnings.