Mar 20, 2017 07:17 PM IST | Source: CNBC-TV18

People taking education services space seriously now: CL Educate

CL Educate is coming out with an initial public offering (IPO). In an interview to CNBC-TV18, Satya Narayanan R, Chairman & Executive Director of CL Educate says education services is a space that is gaining traction and is here to stay.

CL Educate is coming out with an initial public offering (IPO). In an interview to CNBC-TV18, Satya Narayanan R, Chairman & Executive Director of CL Educate says education services is a space that is gaining traction and is here to stay.

"We think that our product portfolio today is robust enough. The quality of investors, the institutions that have come into the anchors for this initial public offering (IPO) such as DSP Blackrock, Sundaram, HDFC MF, we think that people will begin to look at education services as a much more serious and here to stay kind of a sector," he said.

Below is the verbatim transcript of the interview.

Mangalam: If you look at the revenue trend of the company, in last few years the revenue has grown at a CAGR of just about 10 percent. That is a bit below par or not very impressive. What can we expect going forward for the company, what will lead to this revenue growth and what is a reasonable estimate?

A: This is definitely a momentous day for the company. The way I would perhaps respond to it is that, if you look at a 15 year period and you take it in two blocks of 2001 to 2008 and 2008 to 2015 with tremendous tailwinds that we had. 2001 to 2008 was like 20x growth for the company. 2008 to 2015 saw lot of headwinds that we were facing, in spite of that our growth has been 18-20 percent and we have done a 3x growth in the last 6-7 years. So, we think that, with this new reinvented CL Educate, we are very hopeful about how we will proceed from here.

Ekta: What we have generally seen as a trend is that most education companies tend to have higher receivables, higher working capital. You too I think have seen receivables CAGR of 30 percent between FY13 to FY16. What has resulted in the growth and how are you planning to tackle it?

A: The vocational business that we do in that we went into some government vocational businesses. However that has been calibrated all the way down - if you look at our numbers as shared in the RHP, 2016 government revenues would be about Rs 32-33 crore. So, lot of receivables come from the government vocational business which has been calibrated down. As we look forward there is going to be a lot more focus on the core test preparation businesses, the research services businesses and the corporate services businesses which are all much better in their working capital demands on us.

Mangalam: You have earmarked some money to grow your centres. You had around 151 centres as of September, what exactly is that likely to be - opening of new centres annually? What does that mean for your enrolment and revenue growth?

A: One of the things we are looking for is that in India there have been test preparation companies which have come but the ability to have a broad spectrum of 12-13 product categories and spread over 150 locations, that is where CL is extremely peerless in its education services and coaching kind of businesses.

We think that our product portfolio today is robust enough to be able to go to every district headquarters. This IPO, the quality of investors, the institutions that have come into the anchor including names such as DSP Blackrock, Sundaram, HDFC Mutual Fund, if you look at it we think that people will begin to look at education services as a much more serious and here to stay kind of a evolution of the sector and not just another mom and pop shop play.

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