S Chand & Company Ltd. - IPO Note
Price Band: Rs. 660 – Rs. 670
Issue Date: 26rd – 28th April
S Chand operates as an education content company in India. The company delivers content, solutions and services across the education lifecycle through its K-12, higher education and early learning segments. In K-12 business segment the company largely provides content to the CBSE and ICSE affiliated schools. Its major offerings are S Chand, Vikas, Madhubun, Saraswati, Ignitor and Destination Success as well as the Chhaya and IPP brands added recently as part of its Chhaya Acquisition.
a) Increase in bag share of a K-12 student
b) Diversification of the business
c) Focus on digital
d) Growth in the education industry will lead to growth to the company
Details & Objects of the Issue:
The public issue of S Chand & Co ltd consists of fresh issue of Rs 325 cr and offer for sale of equity shares of Rs 403 cr by the promoter group and selling shareholders (includes Everstone Capital Parteners II LLC). The object of the issue is mainly to repay the debt and for general corporate purposes
a) Repayment of debt of Rs 255cr
b) General Corporate purposes of Rs 70cr
Valuation and Recommendation:
Click here to read the full report
Over, FY12- FY16 the company sales has grown at a CAGR of 32.8% however Ebitda has grown at a CAGR of 48.9% driven by both organic and inorganic growth. Going forward, with the increase in spend by people towards better and higher education people would opt more for CBSE and ICSE board mainly because of its syllabus. S Chand being widely present in the growing segment of the education industry and having a strong brand value accompanied with a shift from unorganized to organized sector will lead to growth for the company. The working capital cycle of the company for FY16 stands at 229 days which blocks the free cash flow of the company. From FY12 to 9MFY17 the FCFF of the company stands at negative Rs 579 cr which is mainly on account of higher working capital requirement & acquisition cost. For FY16, ROE and ROCE of the company stands at 7.8% and 9.6% respectively. On the valuation front, at the given upper price band of issue of Rs 670, as per our rough estimates, S Chand is offered at PE of 18.6x its FY18E EPS of Rs 35.9 and FY18E EV / Ebitda of 10.6x which is lower to its peer. We believe negative FCFF & lower ROE is on account of aggressive acquisition in last 3 year. With Organic operation we feel company can get positive FCFF & ROE can improve. We recommend subscribing to the issue.