IPO Analysis- Veranda Learning Solutions Ltd

IPO Rating- Avoid 

About the issue- 

Veranda Learning is engaged in online education industry along with its offline educational courses. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises fresh offer of shares worth Rs 200 crore, according to its red herring prospectus. The price band of the issue has been fixed at Rs 130 to Rs 137 per equity share. The IPO opening date is March 29, 2022, while it will be closing on March 31, 2022. The issue will be listed on the exchange on April 7, 2022. The IPO market lot size is 100 shares. A retail-individual investor can apply up to a maximum of 14 lots (1,400 shares or Rs 191,800).    

The objects of the offer are:      

• Repayment or pre-payment, in part or full of all or certain of our 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. 

Veranda Learning IPO Details: 

About the company: 

Incorporated in 2018, Veranda Learning Solutions Limited offers online and offline coaching services for career-defining courses such as UPSE, chartered accountant, banking, and government exams for 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). All the services are offered through its wholly-owned subsidiaries namely Veranda Race Learning Solutions Private Limited (Veranda Race), Veranda XL Learning Solutions Private Limited (Veranda CA), Veranda IAS Learning Solutions Private Limited (Veranda IAS), and Brain4ce Education Solutions Private Limited (Edureka). 

During the nine-month period ending December 31, 2021, a total of 42,667 Students and professionals have enrolled across all courses, out of which 16,793 enrolled for the offline model and 25,874 enrolled for the online model.  

Competitive Strengths: 

Proven track record of the company promoters. 

Result-oriented method of teaching with a 360-degree approach. 

Diversified course offerings and delivery channels. 

Extensive experience in the education business and professionally qualified human capital. 

Strong Brand Presence of our brands. 

Track record of successful acquisition and expansion. 

Efficient infrastructure and resource management with strict quality control standards and affordable courses. 

Technology-driven, asset light and scalable business model. 

Pandemic proof model. 

Company Financials: 

In Fiscal 2021 and for three months period ended June 30, 2021 revenue from export of services outside India accounted for 42.65 per cent and 40.95 per cent, respectively. For the six months period from March to September 2021, it has witnessed 514 per cent growth in revenues, but its net loss too has increased substantially. 

Recommendation: 

Company’s business model leverages on growing technologies and uses up-to-date technology to deliver the digital courses, which enables the students to engage in self-paced learning. It has a large repository of digital content, study materials and test series, which it proposes to scale up rapidly throughout India. Its online and offline blended model allows us to expand our target market without being limited to geographical restrictions in which our centres are located. 

In order to grow and expand its business, it evaluates targets for acquisitions and seek opportunities to acquire brands and businesses which complement its service offerings. It is presently focused on B2C and B2B spectrum of the education sector by offering online, offline hybrid and offline blended formats to the students, corporates and educational institutions.   

However, the industry has intense competition and is highly fragmented. It has both well-funded organized players and numerous unorganized players, such as independent tutors and standalone institutes. The players in the unorganized sector offer their services at highly competitive rates and have a firm base in the local areas. 

Above all, in recent past, investors have witnessed the downfall of loss-making tech-based IPOs. While given the competition level, the company does not have significant market share. Considering all such factors, we recommend to AVOID investing in the IPO.