IPO Update : Career Point Infosystems

This IPO may not be comparable to the likes of Everonn Edu which has given 400% return since its listing and it may not repeat the euphoria created by Educomp solution since its listing, but Career Point info systems definitely offer a opportunity to participate in a public offering of a new class of business – Education –Tutorials.

At the same time it also presents a potential risk as we do not have a comparable listed entity. The company needs no introduction as neither Kota as a hub for engineering tutorials. It provides tutorial services to high school and post high school students for various competitive entrance examinations including AIEEE,IIT-JEE, PMT and PDT through its 17 company operated and 16 Franchisee centres.

 

Positives

1. Being first issue of its kind of a education tutorial company, the IPO will set precedent for the other companies in this sector who aspire to get listed.

2. The education tutorial has been a highly un-organized industry and the listing of career point will enable people to have shareholding in such companies as education is considered to be a highly lucrative and promising industry.

3. Career point has earned a good brand name in its field. In education sector, reputation matters a lot and the company is poised to reap benefit of the same.

4. Presence across 13 states provides Career point an edge to target the wide consumer base of students preparing for the engineering exams.

5. The company plans to foray aggressively into ECAMS (Education consultancy and management services) and is exploring to extend it to private-public schools as well as government school.

6. The company also runs Global public school and Career point University.

 

Concerns

1. Education industry witness rapid changes and with ever increasing competition it would a challenge for the company to maintain its competitive edge.

2. The company has a history of negative Cash flows from Operating and Investing activities on account of its rapid expansion plans.

3. A search and seizure operation was carried at company premises and premises of the promoters last year by income tax department. One of the promoter had accepted unaccounted income of the company, promoters and relatives of INR 60 Million. There were series of notices served on the company by other departments based on above . The management needs to show more honesty and transparency and better standards of corporate governance as they serve the industry which runs on credibility.

4. The training center at Kota contributes more than 58% of  revenue and hence any disruption of any sort at Kota may lead to significant loss of revenue for the company.

 

Financials & Valuations

Career point reported a Top-line of Rs. 65.8 crore for year ending 31-Mar-2010, up 37% against last year. Net profit stood at 17.8 Crores, up 18.7% against last year. As per a recent interview, the management has shown confidence of a growth rate of 25% .

The EPS for year ending Mar-10 stood at 14.71 and the Return of net worth stood at 14.6%. At the upper price band of 310, the PE works out to be 28 which is aggressive considering Everonn trading at current PE of around 21 and Educomp at a PE of 25. The stock is quoting at a premium of Rs . 90 in Grey market .

I am considering applying for the IPO and if the stocks lists at a good premium, I plan to book listing gains.

Issue Opens : September 16,2010

Issue Closes: September 21,2010

Registrar : Link Intime