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Review By Dilip Davda on March 13, 2019
• The company is in the business of conducting Olympiads.
• It operates on franchisee arrangements with the third party.
• Financial data is on a minuscule basis. Growth in earnings for H1 of FY19 raises concern.
• The issue is fully priced; Company will take a longer time for migration as it currently has very low equity.
ABOUT COMPANY:
Humming Bird Education Ltd. (HBEL) is engaged in the business of conducting Olympiads, where students are evaluated on a scientifically constructed syllabus and their academic performance is ranged relative to their peer group. HBEL's examinations use a multifaceted approach in judging students on their in-depth knowledge of the subjects as well as on enhance their factual, conceptual, reasoning, logical, analytical and problem solving skills, helping them better understand their strengths and weaknesses further enabling them to convert their Olympiad results into superior scholastic gains and realize their true intellectual potential.
The company has been awarded 'Asia's Greatest Brands of the year 2017-18' by Price Water House Coopers P.L. As on 31.03.18, HBEL operates 17 Humming Bird centres through franchisee arrangements with third parties.
The education sector is a highly competitive business and gets affected by frequent changes in Government policies.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its working capital and general corpus fund needs, HBEL is coming out with a maiden IPO of 163000 equity shares of Rs. 10 each at a fixed price of Rs. 132 per share to mobilize Rs. 2.15 crore. The issue opens for subscription on 15.03.19 and will close on 19.03.19. Minimum application is to be made for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue constitutes 26.59% of post issue paid up capital of the company.
The issue is solely lead managed by Share India Capital Services Ltd. while Bigshare Services Pvt. Ltd. is the registrar to the issue. Share India Securities Ltd. is acting as a market maker for this issue. Having issues all equity at par, the company has also issued bonus shares in the ratio of 1 share for every 2 shares held in September 2018. The average cost of acquisition of shares by the promoters is Rs. 0.63 and Rs. 5.83 per share. Post issue HBEL's current paid-up capital of Rs. 0.415 cr. will stand enhanced to Rs. 0.613 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, HBEL has posted turnover/net profits of Rs. 0.52 cr. / Rs. 0.01 cr. (FY16), Rs. 0.94 cr. / Rs. 0.04 cr. (FY17) and Rs. 1.17 cr. / Rs. 0.11 cr. (FY18). For the first half of the current FY19, it has posted a net profit of Rs. 0.37 cr. on a turnover of Rs. 1.09 cr. HBEL receives all orders in advance that helps it to manage its cash flow well. However, a quantum jump in the bottom line for the first half of FY19 i.e. IPO year raises concern.
For the last three fiscals, HBEL has posted an average EPS of Rs. 4.31 and an average RoNW of 57.73%. The issue is priced at a P/BV of 7.14 on the basis of its NAV of Rs. 18.48 as on 30.09.18. On the basis of post issue NAV of Rs.48.67, the issue is priced at a P/BV of 2.71. If we annualize latest bumper earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 11. issue appears fully priced.
COMPARE WITH LISTED PEERS:
As per the offer documents, it has shown CL Educate, Navneet Education, Siddharth Education and Shanti Educational as its listed peers. However, all of them are strictly not comparable with the model of HBEL. These peers are currently trading at a P/Es of around 21, 14, 11 and NA. (As on 13.03.19)
MERCHANT BANKER'S PERFORMANCE:
On merchant banker's front, this is the 2nd mandate from its stable. The only listing took place recently (i.e. Anmol India) opened at a premium of 1.81% on the day of listing.
This is a very tiny IPO from the education sector that has seen many ups and downs in the recent past. Company's financial data is minuscule and valuation based on the latest super earnings appears fully priced. However, it will take a longer time for migration to the main board considering current paid-up equity. Hence cash surplus risk savvy investors may consider it for the long term at their own risk.
Review By Dilip Davda on March 13, 2019
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. My reviews do not cover GMP market and operators game plans. Readers must consult a qualified financial advisor before making any actual investment decisions, based the on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the recent past, SME IPOs drew the attention of investors across the board and lead to seer madness. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at their own risk. The above information is based on information available as of date coupled with market perceptions. The Author has no plans to invest in this offer.
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
(Dilip Davda -SEBI registered Research Analyst-Mumbai,
Registration no. INH000003127 (Perpetual)
Email id: dilip_davda@rediffmail.com ).
The initial public offer (IPO) of Humming Bird Education Limited offers an early investment opportunity in Humming Bird Education Limited. A stock market investor can buy Humming Bird Education ipo shares by applying in IPO before Humming Bird Education Limited shares get listed at the stock exchanges. An investor could invest in Humming Bird Education ipo for short term listing gain or a long term.
Read the Humming Bird Education ipo recommendations by the leading analyst and leading stock brokers.
Humming Bird Education ipo offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Humming Bird Education ipo Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.
Our recommendation for Humming Bird Education ipo is to subscribe for long term.
As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Humming Bird Education ipo.
The Humming Bird Education ipo allotment status will be available on or around March 25, 2019. The allotted shares will be credited in demat account by March 27, 2019. Visit Humming Bird Education ipo allotment status to check.
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