Veranda Learning Solutions coming with an IPO to raise upto Rs 211 crore

Veranda Learning Solutions

• Veranda Learning Solutions is coming out with a 100% book building; initial public offering (IPO) of 1,53,84,615 shares of Rs 10 each in a price band Rs 130-137 per equity share.
  
• Not less than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
  
• The issue will open for subscription on March 29, 2022 and will close on March 31, 2022.
  
• The shares will be listed on BSE as well as NSE.
  
• The face value of the share is Rs 10 and is priced 13 times of its face value on the lower side and 13.70 times on the higher side.
  
• Book running lead manager to the issue is Systematix Corporate Services.
  
• Compliance Officer for the issue is M. Anantharamakrishnan.
  

Profile of the company

The company is engaged in the business of offering diversified and integrated learning solutions in online, offline hybrid and offline blended formats to students, aspirants, and graduates (collectively Students) professionals and corporate employees (Learners) enrolled with its courses through multitude of career-defining competitive exams, professional courses, exam-oriented courses, short term upskilling and reskilling courses. It provides comprehensive long term and short term preparatory courses in a simple and lucid manner for Students preparing for UPSC Exams, State Public Service Commission, Staff Selection Commission, Banking, Insurance, Railways and Chartered Accountancy. It also provide customised short term skilling courses, long term courses and other corporate courses to its Learners. It also deliver these courses to employees of corporates through its B2B offerings.

It primarily provide its services through online, offline hybrid and offline blended learning models. Its offline hybrid learning model involves classroom teaching supported with online assessments and access to self-paced learning material to enhance recall and retention. Its offline blended model involves a mix of Online content and Offline delivery, wherein the centre delivers LMS Study Materials together with traditional class room experience of personal mentoring from Mentors, with a dedicated Mentor in each class room available for assistance to a Students. Its offline hybrid and offline blended learning models offer traditional class room experience of personal mentoring from experienced Mentors along with highly curated digital content and online assessments. Its tech-infused online learning model allows Students to engage in self-paced inclusive and individualized learning experience without being hindered by the restriction of needing to be present in a physical classroom. Its online learning model comprises recorded videos and online live instructor led learning mode. It also focus on delivering specific courses in regional languages to better reach out to Students of Tier 2 and 3 cities and rural areas.

Proceed is being used for:

• Repayment or pre-payment, in part or full of all or certain of company’s borrowings.
  
• Payment of acquisition consideration of Edureka or repayment of a bridge loan availed specifically for the purpose of discharge of such acquisition consideration of Edureka.
  
• Growth initiatives.
  

Industry overview

Education in India has an ancient tradition dating back to Vedic times. When the Britishers arrived in India, education used to be imparted in India through gurukuls and madrasas. The Britishers introduced the English education system in India, with its focus on science, mathematics, and literature. The University of Calcutta, the University of Bombay, and the University of Madras, were all founded in 1857 based on the model of British universities. At the time of India’s independence in 1947, India had 17 universities and about 636 colleges teaching approximately 238,000 students. However, the British education system had transformed the country into a grossly unequal and elitist system, with an estimated 82% of illiteracy at the time of independence, which meant four out of five people could not read or write. Adult literacy rate is defined as the percentage of people aged 15 and above who can both read and write with understanding a short simple statement about their everyday life. India has made significant improvement since then, and literacy rate has now improved to 77.7%.

The education sector has been growing at a CAGR of 14% over the past decade, due to India’s demographic profile, rapid urbanization, increased educational spend, lack of premium educational institutions, highly competitive market, and low penetration of education. With more than 1.5 million schools and around 300 million students, India has the world’s second- largest school system after China. While government schools dominate in terms of numbers and account for over 70% of the schools in India, students prefer to enroll in Private and aided schools. Private schools are quickly growing in popularity, particularly in the cities. Between FY11 and FY15, enrollments in private schools increased by 16mn, while public school enrollments dropped by 11.1m. As per NSSO survey 2018, over 60% of the students in urban India are enrolled in private schools, whereas the higher numbers in rural India till secondary stage reflects the lack of private schools. This points to the declining state of India’s underfunded public/ government schools and the growing interest in English-medium instruction which is common in private schools.

Pros and strengths

Result oriented method of teaching with 360 degree approach: The company focus on result oriented method of teaching to impart knowledge to the students, which in turn assists the students to achieve success in the relevant courses. It has an in-house and outsourced team of Mentors to constantly monitor progress of the students and identify their special requirements and assist the students to achieve their goals. With the help of its Mentors and Student Advisors, it continuously track progress and conduct constant reviews for self-improvement. In addition to the above and with a view to continue to grow and enhance the quality of its content, it has established an in-house content development team, with domain and subject expertise, supported and complemented by experienced Mentors, and content developers, whom it has engaged as independent content providers on a non-exclusive or part-time basis under contracts of varying terms. It provides sufficient learning units, which are blends of audio, video and physical study material to cover relevant courses. In addition to above, it provides practice programs and mock tests to ensure that the students achieve their goals.

Extensive experience in the education business: The company is managed by a team of experienced personnel. Each Subsidiary is managed by, and comprise of personnel having rich operational and business expertise in the courses offered by the respective Subsidiaries. The experience, expertise and strategic guidance of its management team enable it to continue to take advantage of both current and future market opportunities and address and mitigate various risks inherent in its business. Its management team also has a record of entrepreneurial success and/or professional experience which propels the Company to expand its brand value and attain an edge over other similar players in the market.

Strong brand presence: The company has established a strong presence in the competitive exam-oriented courses, particularly in Banking, SPSC, Insurance, RRB and SSC. With acquisition of Edureka, it has entered into the market to provide instructor led learning in the niche information technology area related courses. Edureka has over 3 million subscribers on its YouTube channel, which is one of the highest subscriber base in the world in the IT education sector. Edureka has customers based overseas, including many customers from the United States and United Kingdom. With the acquisition of Edureka, the company has access to these international markets and will continue to expand its overseas customer base.

Track record of successful acquisition and expansion: With the continuing involvement of the Promoters and core members of the company’s management team, it continue to tap growth opportunities across the education sector. It has been successful in selectively identifying strategic acquisitions, investment opportunities and collaboration targets in diversified portfolio of courses and services across the globe and aim to continue this trend across various geographies to expand the presence of the company in other areas related to the education sector. Its dedication and future expansion provide it with a strategic advantage over its competitors who are focused on individual segments or geographies.

Risks and concerns

Business is cyclical in nature: Most of the students aspiring for preparation of competitive examinations and training courses enroll themselves with it in the first quarter i.e. from April to June of a Financial Year, thereby leading to an increase in the number of enrolment of students and consequently increase in the revenue as compared to other three quarters of the year. Its business and revenues fluctuates based on the academic cycle of its courses and timelines of the entrance & competitive exams, which are cyclical and instantaneous in nature and dependent on the dates of the examinations as well as release of the examination results by respective authorities empowered to conduct such exam. Depending on the entrance / recruitment exams, it may recognize lower revenues in certain months or quarters of the year. In terms of its expenses, many of them are fixed in nature and it incur them throughout the year, though some expenses may increase during beginning of new batches, such as increments for Mentors and advertising and publicity expenses to recruit students for courses. Since its revenues and expenses fluctuate quarter-to-quarter, it may result in fluctuation of profitability of the company in some quarters.

Coaching and training sector not specifically regulated: The company’s business presently is not specifically regulated either by any national or state legislations. The central or state governments may, however, change the existing laws or introduce new laws to regulate the education sector or, more specifically, the coaching and training sector in relation to its operations, expansions, fees and other charges. The impact of such regulations on the business cannot be currently ascertained. Such regulations may curtail or impose additional and onerous obligations on its operations and may adversely impact its business. Further, the laws applicable to the education sector may vary in each state which could restrict its operations to specific states and prevent or slow down its expansion in certain jurisdictions. These factors may result in an increase in operational costs to comply with such legislation and failure to comply may cause adverse impact to its business.

Cyber-security breach could adversely affect operations: The company is subject to data privacy laws, rules and regulations that regulate the use of customer data. Compliance with these laws, rules and regulations may restrict its business activities, requires it to incur increased expense and devote considerable time to compliance efforts. The existing and emerging data privacy regulations limit the extent to which it can use personal identifiable information and limit its ability to use third-party firms in connection with students’ data and may hinder in student acquisition. A number of these laws, rules and regulations are relatively new and their interpretation and application remain uncertain and are also subject to change and may become more restrictive in the future.

Geographic concentration: Most of the company’s businesses are operated in and from the state of Tamil Nadu and Karnataka. In the event of a natural calamity, economic slowdown or any disruption in Tamil Nadu and Karnataka may hinder it from conducting its business operations in Tamil Nadu and Karnataka, economically and otherwise. Due to such factors, it may experience pronounced effects on its results of operations, financial condition and cash flows than if it were further diversified across different geographical locations. Though, it has its online presence, which is not restricted to a particular geography, it is still largely dependent on the prevailing conditions in Tamil Nadu and Karnataka.

Outlook

Incorporated in 2018, Veranda Learning Solutions offers online and offline coaching services for career-defining courses such as UPSE, Chartered Accountant, Banking, and Government Exams to students, graduates, professionals, and corporate employees. The company offers coaching services for Railways Recruitment Board exams, Banking, and Insurance exams, State Public Service Commission, Staff Selection Commission exams, CA Foundation, CA Intermediate, and CA Final exams, Union Public Service Commission-prelims, and main exam, and personality tests, and State Public Service Commission Group-I exams, Short term skilling courses, Long term courses (university partnership courses) and Corporate learning courses (B2B). The company is managed by a team of experienced personnel. Each Subsidiary is managed by, and comprise of personnel having rich operational and business expertise in the courses offered by the respective Subsidiaries. With acquisition of Edureka, it has entered into the market to provide instructor led learning in the niche information technology area related courses. On the concern side, the company has not obtained copyright registrations for any of its content or Study Materials. In the event of a dispute on its copyright in any of its products or materials, it may not be able to adequately protect its intellectual property rights. Besides, the business of providing exam oriented courses in an extremely competitive market has low barriers of entry and new competitors may easily enter and compete in this market. 

The issue has been offered in a price band of Rs 130-137 per equity share. The aggregate size of the offer is around Rs 200 crore to Rs 210.77 crore based on lower and upper price band respectively. On the performance front, the company’s total revenue for the six month period ended September 30, 2021 was Rs 15.66 crore. The company’s loss after tax was Rs 18.27 crore for the six month period ended September 30, 2021, which was 116.65% of its total revenue for the six month period ended September 30, 2021.  The company intends to expand its presence in its existing and new markets, by increasing the number of its PDCs primarily through arrangements, wherein it enters into agreements with PDCs to conduct and operate online blended and offline blended model of learning under revenue sharing arrangements. It plans to leverage its brand recognition and experience in the markets to service the increasing demand for its learning courses. It intends to increase its customer base through greater marketing efforts and introduction of more courses.