Siddharth Education BSE SME IPO review (May apply)

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Review By Dilip Davda on Sep 27, 2017

Siddharth Education Services Ltd. (SESL) is running Siddharth Academy that is training young talents to attain professional qualifications like Company Secretary, Chartered Accountant and Cost and Management Accountant. Currently SESL has 4 (four) Company operated centres and has a team of 22 faculty members. Its strengths lie in continuously updating and upgrading faculty by virtue of training & development so that they can train to acquire new skills, sharpen existing ones, perform better, increase productivity and be better leaders at their work places. The company offers test series courses which have been systematically designed to provide effective and efficient education to students in simple and lucid manner. A partnership arm of the group is engaged in farming segment which has negligible contribution in revenues but investment made is much higher than education segment.

To part finance its new coaching center establishing, digital marketing and online training, acquisition of human resources training centers, general corpus fund needs, SESL is coming out with a maiden IPO of 3108000 equity share of Rs. 10 each with a book building process with a price band of Rs. 30-35 to mobilize Rs. 9.32 cr. to Rs. 10.88 cr. based on lower and upper price bands. Issue opens for subscription on 29.09.17 and will close on 05.10.17. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Gretex Corporate Services Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. The issue will constitute 26.79% of the post issue paid up equity share capital of the company. From December 2005 to March 2013 it issued equity shares at par. Thereafter from September 2013 to August 2017 it issued further equity in a price range of Rs. 10 to Rs. 30. It has also issued bonus shares in the ratio of 1 for 1 in August 2017. Post issue, SESL’s current paid up equity capital of Rs. 8.49 crore will stand enhanced to Rs. 11.60 crore.

On performance front, SESL has (on a consolidated basis) reported total income/net profits of Rs. 3.69 cr. / Rs. 0.65 cr. (FY16) and Rs. 5.23 cr. / Rs. 1.04 cr., (FY17). It has performance details for last five years on standalone basis, but has only last two fiscal’s data on consolidated basis which is more relevant for its valuation purpose. It has posted an average EPS of Rs. 1.22 and RoNW of 17.62% for last two fiscals on an equity base of Rs. 3.21 crore. Issue is priced at a P/BV of 3.5. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of 39. Thus issue is priced aggressively. Peers in education sector are trading at a P/E of around 25 to 38. Surprisingly this company has also shown Prabhat Dairy/Hatsun as its peers while it has negligible contribution from farming sector and that is not comparable with two peers who are primarily in dairy business.

On merchant banker’s front, this is the 6th mandate from its stable. Out of last 5 listings, one opened with around 4% premium, 1 at par and 3 at discount on the day of listing.

Conclusion: Considering roller-coaster ride for the education sector and aggressive pricing of the issue, cash surplus risk savvy investors may consider investment for long term.

Conclusion / Investment Strategy

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 before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. 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 own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).

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.

Email: dilip_davda@rediffmail.com

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