Addictive Learning (LawSikho) NSE SME IPO review (Apply)

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Review By Dilip Davda on January 16, 2024

•    The company started with law and now diversifying in other carrier lines.
•    ALTL is engaged in providing online courses/training/placements.
•    It has become a global player with novel technology and upskilling. 
•    The company has fared well since FY22 indicating its future prospects. 
•    Based on its latest financial data, the issue is fully priced. 
•    Considering current trends, investors may park funds for the medium to long term rewards.

ABOUT COMPANY:
Addictive Learning Technology Ltd. (ALTL) having a tag of LawSikho which was its prime activities, but now the also provides international bar exam courses such as: CANADA BAR EXAM: Canadian Barrister & Solicitor Exam & NCA exam for Indian lawyers who want to practice in Canada, UK SOLICITOR QUALIFICATION EXAM: Training for Indian lawyers to crack the solicitors Qualifying Exam (SQE) and qualify as a solicitor in England and wales, CALIFORNIA BAR EXAM: How to crack the California Bar Exam and start your own legal practice in the US.

These courses are meticulously designed to cater to learners who are looking to enhance their career growth by getting into new practice areas or enter new markets. It provides practical and industry-oriented courses designed to bridge the gap between theoretical education and practical application.

Some unique points about ALTL's courses are a) Its courses consist of recorded videos or textual documents followed by automated quizzes like most other edtech & upskilling courses. b)  The courses involve cohort based live classes, weekly assignments, simulation exercises, real life situation-based coaching over live calls & one-on-one personalized feedback apart from certification. c) It also provides placement & career support to learners right from the time when they start learning. Career support is embedded throughout its programs rather than at the end of a course. d) ALTL's team helps learners hands on to identify and to create opportunities, provide guidance & support to develop their professional track record & develop an outreach strategy for them which can help them to take career benefits from newly developed skills.

Its courses are designed by in-house team of curated professionals and experts with extensive experience in their respective fields. The company creates courses based on industry research and extensive consultation with different stakeholders. As a result, all its programs are customized to the industry's requirements and needs, ensuring that it address major gaps in talent demand and supply. It offers courses that focus on high demand practical skills required by professionals and the majority of learners have international aspirations.

LawSikho has witnessed significant growth, serving students and professionals. The platform has partnerships with industry experts, law firms, and universities to develop a comprehensive curriculum catering to the evolving demands of the legal sector.

While initially ALTL started out by catering to law students and law graduates, it soon understood that a much bigger market need exists in upskilling in law to other adjacent professions such as accounting, finance, compliance, human resources and business consulting. Its portfolio consists of three (3) brands that we own, i.e. Law Sikho, Skill Arbitrages and DataisGood. 

Its mission is to enable India to rise to be the leading exporter of services in domains like law, finance, HR, consulting and more, and to enable this through online programs, tech tools and services.

As on date of this Red Herring Prospectus, the company had 145 employees on its payroll. It has additionally engaged 444 full time consultants/ professionals, who are involved in the day-to-day business operations, administrative, legal and accounting functions in accordance with their respective designated duties.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with a maiden combo book building route IPO of 4297000 equity shares of Rs. 10 each and mulls mobilizing Rs. 60.16 cr. at the upper cap. The IPO consists of 4137000 fresh equity shares (worth Rs. 57.92 cr. at the upper cap), and an offer for sale (OFS) of 160000 shares (worth Rs. 2.24 cr. at the upper cap). It has announced a price band of Rs. 133 - Rs. 140 per share. The issue opens for subscription on January 19, 2024, and will close on January 23, 2024. The minimum application to be made is for 1000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 27.01% of the post-IPO paid-up capital of the company. From the net proceeds, it will utilize Rs. 5.00 cr. for unidentified acquisition in India and Abroad, Rs. 3.00 cr. for identified acquisitions, Rs. 8.00 cr. investment in technology, Rs. 5.00 cr. for development of new courses, Rs. 10.00 cr. for branding and marketing, Rs. 8.00 cr. for working capital, and the rest for general corporate purposes.  

The issue is solely lead managed by Narnolia Financial Services Ltd. and Maashitla Securities Pvt. Ltd. is the registrar of the issue. SS Corporate Securities Ltd. and Prabhat Financial Services Ltd. are the two market makers for the company. The issue is underwritten 84.99% by Kantilal Chhaganlal Securities Pvt. Ltd. and 15.01% by Narnolia Financial Services Ltd. 

Having issued initial equity shares at par value, the company issued/converted/adjusted further equity shares in the price range of Rs. 126 - Rs. 160 in the month of October 2023. It has also issued bonus shares in the ratio of 5000 for 1 in September 2023, and 1.10 for 1 in October 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, and Rs. 0.94 per share. 

Post-IPO, company's current paid-up equity capital of Rs. 11.77 cr. will stand enhanced to Rs.15.91 cr. Based on the upper cap of IPO price band, the company is looking for a market cap of Rs. 222.74 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company posted a total income/net profit/ - (loss) of Rs. 6.78 cr. / Rs. - (0.01) cr. (FY21), Rs. 18.59 cr. / Rs. - (0.49) cr. (FY22), and Rs. 33.55 cr. / Rs. 2.47 cr. (FY23).  For the first five months' period of FY24 ended on August 31, 2023, it earned a net profit of Rs. 3.16 cr. on a total income of Rs. 24.82 cr. 

For the last three fiscals, the company reported an average EPS of Rs. 2.14 and an average RoNW of 14.63%. The issue is priced at a P/BV of 0.30 based on its NAV of Rs. 474.79 as of August 31, 2023, and at a P/BV of 2.98 based on its post-IPO NAV of Rs. 47.02 per share (at the upper cap). (The figure differs for NAV as of August 31, 2023 in the offer document and the IPO price band advertisement).

If we attribute FY24 annualized super earnings to the post-IPO fully diluted paid-up equity capital of the company, then the asking price is at a P/E of 29.35. Based on FY23 earnings the P/E stands at 90.32. Thus the issue appears fully priced. 

For the reported periods, the company has posted RoCE margins of - (2.00) % (FY21), 121.74% (FY22), 157.53% (FY23), 83.94% (5M-FY24), and PAT margins of - (0.08) %, - (2.64) %, 7.37%, 12.73% respectively for the referred periods.  

DIVIDEND POLICY:
The company has not declared any dividends for any financial years. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown CL Educate and Career Point as their listed peers. They are trading at a P/E of 32.3 and 14.86 (as of January 16, 2024). However, they are not comparable on an apple-to-apple basis. 

MERCHANT BANKER'S TRACK RECORD:
This is the 8th mandate from Narnolia Financial in the current fiscal. Out of the last 7 listings, aa listed with premiums ranging from 4.35% to 57.08% on the listing date. 

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