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MT Educare Limited IPO Review (Avoid)

Off late we are seeing some surprised announcements for IPOs. If we recall, in the month of November 2011, we suddenly saw around 9 IPOs hitting the market in the month of October 2011 to mobilize funds in a hurried way.  After which there was a lull in primary market till we saw MCX IPO opening in the Month of February 2012. Well market expected the close of fiscal 2011-12 with the IPO of NBCC, but suddenly we have seen the announcement of MT Educare IPO opening on 27.03.2012. Details of this IPO are as under:

MT Educare is the rechristened "avtar" of Mahesh Tutorials that started its coaching classes business in 1984 and then went full-fledged in tutorials, education related field by 1988. The company provides coaching services to students in the secondary, higher secondary school and pursuing graduation degree in commerce, preparing for various competitive examinations and undertaking chartered accountancy examinations. Ever since then, it expanded its wings in four states i.e. Maharashtra, Gujarat, Karnataka and Tamil Nadu and is currently spreaded at 110 locations with 188 centres having 1400 faculty and staff and has serviced over 58300 students in the year 2010-11.

Mahesh Tutorials offers coaching for Std. IX & X - State Board, ICSE and CBSE Boards, Science coaching for Std. XI, XII, Engineering & Medical Entrance Test - CET, Commerce coaching for Std. XI till TYBCom, along with entrance test preps for CA - CPT, CS , CWA, and for professional CA (IPCC & Final) exams. MT Educare has also diversified into Pre-School and Day Care services through 'Global Champs'.

Now it mulls expansion of its Karnataka operations and constructing a PUC Campus and establishing new coaching centres at 20 locations.  To part finance this it is mobilizing Rs. 35 crore via fresh issue of equity (approx 4375000 shares) and is also providing exit option to existing PE Helix Investment Company which is selling 80 lakh shares . The company is offering equity share of Rs. 10 each within a price band of Rs. 74-80. The issue opens on 27.03.12 and closes on 29.03.12. Post issue, shares will be listed on BSE and NSE. Enam Securiteis Pvt. Ltd. Is the sole BRLM for the issue and Link Intime India Pvt. Ltd. Is the registrar to the issue. CRISIL has assigned IPO Grade 4 to this issue indicating at above average fundamentals of the company. Minimum application is to be made for 80 shares and in multiples thereof thereafter.

As far as BRLM's performance in concerned, it has disclosed details on 10 mandates from 13.10.10 to 08.09.11 out of which 3 IPOs failed to give returns on debut day.

On company's front, it has earned net profit of Rs. 8.25 crore on a total income of Rs. 107.35 crore for 2010-11 and net profit of Rs. 9.75 crore on a total income of Rs. 72.29 crore for first six months of the current fiscal. This translates into annualized EPS of Rs. 5 on enhanced equity. Thus on the higher price band the asking price is at around 16 P/E and at a P/BV of about 5, which appears to be greedy one. The company has utilized free reserves while giving two liberal bonuses in the ratio of 5 for 1 (in 2009) and in the ratio of 32 for 1 (in 2010), thus new investors will have to wait for getting appreciation.

Conclusion / Investment Strategy

High Risk-Low Return - only risks aver investors can park modest fund for long term.

By Dilip Davda on Mar 22, 2012

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

About Dilip Davda

Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.


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