The maiden public offer of Veranda Learning Solutions, which offers online and offline coaching services, has seen good response from investors with the issue being subscribed 3.53 times on the final day of bidding on March 31.
Investors have put in bids for 4.15 crore equity shares against an offer size of 1.17 crore units. Retail investors remained ahead with subscribing 10.76 times the portion set aside for them.
Non-institutional investors have bid 3.87 times their allotted quota, while qualified institutional buyers have subscribed shares 2.02 times the total reserved portion.
The learning solutions provider intends to raise Rs 200 crore through the public issue with a price band set at Rs 130-137 per share.
"On FY22 annualized financials, the IPO is at 25x market cap/sales for a loss-making company with a low track which looks expensive. Though Veranda has a diversified course offerings and delivery channels, a professionally qualified human capital and strong brand presence, its business operations with losses raise concerns," says Arafat Saiyed of Reliance Securities.
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He feels the IPO is aggressively priced and hardly leaves anything meaningful on the table for investors in the medium-term perspective.
Veranda Learning Solutions offers online and offline coaching services for careerdefining courses like UPSE, chartered accountancy, banking, government exams and corporate employees.
It has been incurring losses since its incorporation. It recorded a loss of Rs 8.3 crore on a revenue of Rs 2.54 crore in FY21 and in the six months ended September 2021, the loss widened to Rs 18.3 crore on an increased revenue of Rs 15.46 crore. The company has not paid any dividend in the past due to losses.
The market is highly competitive but lack of premium educational institutions is a notable factor, Saiyed said.
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Over the past decade, the education sector clocked a CAGR of 14 percent led by rapid urbanisation and increased educational spend. Urban areas offer better job opportunities and higher wages, while providing better access to quality education.
"An increased urbanisation will also result in higher spending on education. India's growing prosperity and rising disposable income have seen increased spending by households on education. However, all these positives are captured in its valuation and valuation is not favourable for investors," Saiyed said.
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