Arihant Academy coming with an IPO to raise Rs 14.72 crore

Arihant Academy

• Arihant Academy is coming out with an initial public offering (IPO) of 16,35,200 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 90 per equity share.
  
• The issue will open for subscription on December 16, 2022 and will close on December 21, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 9.00 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Shreni Shares.
  
• Compliance Officer for the issue is Deeksha Tiwari.
  

Profile of the company

The company is engaged in providing coaching services and parallel educational support vertical in the western suburbs of Mumbai, Maharashtra for Class 8, 9 and 10 for both State Board and ICSE Board; Class 11 and 12 for commerce and science section; tutoring students in science field for entrance exams such as JEE (Main), JEE (Advanced) and MHT- CET (State level), NEET (National Level), MHT- CET (State Level, Maharashtra) and preparing students for professional exams such as CS and CA for entry level and second level exam, in the commerce section. It offer hybrid model of teaching services through classroom-based coaching under traditional Chalk & Talk concept and digital and distance learning, which supplement its classroom courses and allow students to engage in self-paced learning. The company operates under the brand name “Arihant Academy”.

Proceed is being used for:

• Funding working capital requirements.
  
• General corporate purposes.
  

Industry overview

India has the largest population in the world in the age bracket of 5-24 years with 580 million people, presenting a huge opportunity in the education sector. India holds an important place in the global education industry. India has one of the largest networks of higher education institutions in the world. However, there is still a lot of potential for further development and improvement in the education system. With increasing awareness, private Indian players are collaborating with international brands to provide an international standard of education. Private investments in the Indian education sector have increased substantially over the past two decades. The demand for specialised degrees is also picking up with more and more students opting for specific industry focused qualifications. Higher education institutes in India are focusing on creating online programmes due to the increasing demand from consumers.

With cutting-edge technologies such as AI, ML, IoT and blockchain, India's education sector will redefine itself in the years to come. It has also embraced the Education 4.0 revolution, which promotes inclusive learning and increased employability. The government has implemented policies like the NEP, which will be fully implemented over the course of this decade starting from 2021-22, and will have a strong focus on high-quality vocational education. The education sector in India was estimated to be worth $ 117 billion in FY20 and is expected to reach $ 225 billion by FY25. India has over 250 million school-going students, more than any other country. India had 38.5 million students enrolled in higher education in 2019-20, with 19.6 million male and 18.9 million female students. According to UNESCO’s ‘State of the Education Report for India 2021’, the Pupil Teacher Ratio (PTR) at senior secondary schools was 47:1, as against 26:1 of the overall school system. Number of colleges in India reached 42,343 in FY20. As of August 23, 2022, the number of universities in India stood at 1,057. In 2022-23, there are 8,902 total AICTE approved institutes in India. Out of these 8,902 institutes, there are 3,577 undergraduate, 4,786 postgraduate and 3,957 diploma institutes.

Pros and strengths

Qualified Pool of Faculty: With around 155 faculty members as on September 03, 2022, the company has access to a large number of qualified and experienced faculty members, who contribute significantly to its success and growth. It also has a concept of Assistant teacher where when the students need one to one interaction with teacher regarding some doubts in any topic in any subject. It has provided 24X7 helpline numbers to students a week before their final exams. The company conducts continuous training programmes including freshers’ guidance programmes for its faculty members throughout the year on teaching subjects also attitude development and soft skills such as presentation and communication skills, leadership skills and time management.

Professional & Organizational Development: The company has on-going in-house faculty training programme which ensures that all its faculty members undergo training on its teaching methodologies and skills and subject matter of relevant courses and to keep them abreast of the changes in competitive entrance examination trends and changing student needs. Its in-house faculty training programmes helps it in attaining and maintaining quality across its faculty team thereby enabling it to maintain a large pool of faculty members which in turn gives it an advantage over other tutorial service providers who rely on one or few renowned teachers.

Result oriented methods of coaching: Over a period of time, the company has developed an effective coaching method and system of imparting conceptual knowledge with it is capable of aiding its students to perform better in examinations. It focuses on training its students by enhancing their conceptual knowledge base, enabling them to improve their accuracy levels and speed. The company aims at achieving holistic development of its student and along with academics, it includes activities for personality developments, time and stress management and improving communication and presentation skills. It conduct regular parents and students counselling session which it helps the students in handling the pressure created by examination. It constantly monitor the progress of the students in order to identify their special requirements and to administer content delivery based on regular feedback from the students. It encourages its teachers to come down to the children’s level and teach them in a manner that ensures comprehension without any compromise on the quality of education. It also takes opinion poll from students about its faculty for the improvement of its faculty and the academics of the student.

Risks and concerns

Geographic concentration: The company’s business is dependent on the performance of its Centers in Mumbai, where it has an aggregate of 14 Centers, its business, results of operations and financial condition has been and will continue to be dependent on the prevailing conditions in Maharashtra. In the event of a natural calamity, economic slowdown or any disruption in Maharashtra, or any developments that makes it difficult for it to operate these Centers, economically and otherwise, it may experience more pronounced effects on its results of operations or financial condition, than if it were further diversified across different geographical locations. Its strategic objectives include geographical expansion as well as increasing its penetration across India. A significant drop in Student Count from the regions of India or any factors requiring it to close existing centers or otherwise scale down operations in these regions, may adversely affect its business, results of operations and prospects.

Business and revenue fluctuate based on the academic cycle: The company’s business and revenues fluctuate based on the academic cycle of its courses and timelines of the entrance examinations, which are cyclical in nature and dependent on the dates of the board/entrance examinations as well as the release of the examination results. Depending on the timing of examinations and examination results, its Long-Term Courses generally commence in phases starting in April, with repeater courses (which represent a significant portion of its revenue) commencing in phases starting in May. Similarly, its courses generally end in phases in the fourth quarter, depending on the timing of examinations. In terms of its expenses, many of them are fixed in nature and it incur them throughout the year, though some are concentrated or increase in the first quarter, including salary increments for faculty, advertising and publicity expenses to recruit students for courses in the new academic year, and expenses for new centers that have opened but that are not yet conducting courses.

Strong competition in the coaching sector: The coaching sector is highly fragmented and competitive. The company not only competes with organized players but also a high percentage of unorganized entities such as individual tutors and small-scale institutes. Some of them may pay better attention to the individual needs of the students and may be capable of providing more personalized services to each student due to the smaller number of students catered to by them. Further, these unorganized entities issue their services at highly competitive prices having well established presence in their local markets. In addition, there are minimal entry barriers in the coaching sector and hence it may also face competition from new entrants. Some of its faculty members, who disassociate themselves from it, may also compete with the company.

Outlook

Arihant Academy is engaged in providing coaching services and parallel educational support verticals. The company offers services in the western suburbs of Mumbai, Maharashtra for Class 8, 9 and 10 for both State Board and ICSE Board; Class 11 and 12 for the commerce and science section; tutoring students in the science field for entrance exams such as JEE (Main), JEE (Advanced) and MHT- CET (State level), NEET (National Level), MHT- CET (State Level, Maharashtra) and preparing students for professional exams such as CS and CA for the entry-level and second level exam, in the commerce section. The company operates under the brand name 'Arihant Academy'. Its senior management team, and senior personnel such as Zonal Heads, Centre Heads, Branch Principals & Branch Vice Principals have a collective experience of over 100 years and over 15 years of average experience in education field. The company uses technology for supplement coaching. It has its own application named as Arihant Edge. Arihant Edge App is a 24×7 Educational Companion for students and parents. On the concern side, the company may fail to identify, recruit or retain adequate qualified faculty members. Any failure to meet such human resource requirements may materially adversely affect its growth plans or negatively impact its quality and consistency of its services. Besides, it may incur substantial costs in expanding its course and product offerings and market reach, including in relation to due diligence, infrastructure costs, difficulty in recruiting and training faculty and other personnel.

The company is coming out with an IPO of 16,35,200  equity shares of face value of Rs 10 each for cash at a fixed price of Rs 90 per equity share to mobilize Rs 14.72 crore. On performance front, the company’s total revenue increased by 8.67% to Rs 1,531.97 lakh for the FY 2022 from Rs 1,409.77 lakh for the FY 2021. The company’s Profit after Tax increased by 79.34% to Rs 201.86 lakh in FY 2022 from Rs 112.56 lakh in FY 2021. Meanwhile, the company intends to enter new geographic market and increase course offering which will increase its diversification and potential for future growth expansion. Its growth is to strength its role as a leading coaching institute in diversified coaching services. Its aim is to strengthen its position as an organised and diversified education support and strength its brand recognition. It intends to expand its presence in the existing market, Maharashtra by increasing the number of its coaching centres.