IPO Update : Everonn Systems India

Everonn - Technifying India's future, Apply for listing gains

Everonn Systems has entered the capital markets with a public offer of Rs. 50 crore worth of shares at a price band of Rs.125 -140. Investment Guru is of the view that Indian IT Training business segment has huge potential given the young demography advantage of India and hence company's imparting IT training have good potential. Everonn Systems is a play on both the IT training as well as the niche segment of "Vitels" which is a virtual and Technology enabled learning solutions. However, company is heavily dependant on government initiatives and has high debt outstandings which can impact future cash flows given company's huge capex oriented plans. However, since the issue is compared to peers like Educomp and NIIT which are quoting at fancy premiums, it may generate listing gains for Investors.

Let's look at some of the highlights of the issue

About Everonn Systems

• India is currently one of the largest markets for School Education in the World. India currently has over 1 million schools providing education to over 200 million students. There are over 5 million teachers across ndia who needs support in training in IT and delivery of Education.


• The Government of India has spent over Rs. 10,000 crores on Elementary Education in the country during 2005-06 through its various schemes. Besides this the Government has an outlay of Rs 2563 crores on Higher/Secondary Education during 2005-06. Education in the country is funded through a 2% Education Cess and other Budgetary Allocations.


• Everonn system a fully integrated Knowledge Management, Education and Training Company offering a range of services that include Creating Educational and Training Content, Designing and executing large learning initiatives and Setting up the needed infrastructure for learning and training.


• It is a leading players in setting up Virtual and Interactive Learning classroom networks across India to deliver quality and affordable education. It is developing and integrating content for Indian and global audience in schools, colleges, corporates and retail space.


• The company has presence in eight states, over 1,300 computer labs and 1,900 schools, and trained 1.2 million students.


• The issue proceeds would be used to fund setting up of institutional education and infrastructure services, Vitel Solutions, Brand Building and forM&A's.

Positives for the company

• The company currently caters to over 1900 schools. It plan to add almost 1000 schools every year.


• The company has been selected by the School Education Department, Government of West Bengal to impart computer education to students of Government schools.


• It has also received the contract for providing certain equipments and services such as Computer hardware, software and connected accessories as per the Karnataka Govt's tender and providing computer education services and Annual Maintenance in 216 Government High Schools under the ICT Project.


• Everonn is one of the pioneers in this space with a successful and impressive track record. ESIL’s Education Centric technology, content and support infrastructure provision to the last mile (schools) has enabled it to successfully create a niche in this sunrise segment.

Concern Areas

• The company has very high level of Sundry Debtors of 7.8 months as on March 31, 2007. This pose risk to cash flow of the company and may impact working capital requirements.


• The company works on BOOT model which involves huge capex outlays at initial stages.


• The company's business is seasonal in nature.

Valuations

• Company's Topline has grown from 16.2 crores in FY04 to 43 Crores in FY07 generating a CAGR of around 35.5 % . Profits also grew from 60 lacs in Fy04 to 4.86 Crores in FY07.


• For the year ended 31st March,2007 company EPS stood at Rs. 5.63 which gives a P/E of 24.87 at the higher end of the price band.


• Industry composite PE is 55


• Weighted Average Return on Networth is 17.79%


• Net Asset value is Rs. 62.52


• Peer Group company Educomp Solutions which has a compartively large scale is quoting at PE multiples of 127 while NIIT is qouting at PE multiple of 67

Issue Opens :05-07-2007

Issue Closes:11-07-2007

Registrar :Cameo Corporate Services

Company Website :Everonn Systems

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