S Chand and Company Ltd. IPO
Company Profile
Incorporated in 1970, S Chand And Company Limited operates as an education content company in India. The company develops and delivers content, solutions, and services in the education K-12, higher education, and early learning segments.
Company is involved in publishing, printing, sale, purchase, export, and import of various books and other literary work; agency ship and distribution of publishers for books and other literary work; selling of educational toys; and publishing books for children, schools, colleges, and universities, as well as digital content and interactive learning systems to schools and running pre-schools.
The company also provides digital data management services and digital content books to schools and colleges; solutions for higher education in colleges, universities, and technical institutes; and DTP printing, DTP jobs, page making, editing and proof reading, and cover designing services of books, journals, tabloids, magazines, bulletins, brochures, and periodicals in the form of hard copy, compact disks, and e-forms. S Chand And Company Ltd offers 53 consumer brands across knowledge products and services including S.chand, Vikas, Madhubun, Saraswati, Destination Success and Ignitor. The company also exports its printed and digital content to Asia, the Middle East, Africa, and internationally.
Promoters
The promoters of the company are:
1. Mr. Dinesh Kumar Jhunjhnuwala
2. Ms. Neerja Jhunjhnuwala
3. Mr. Himanshu Gupta
Issue Details
Issue Open : 26 Apr'17 - 28 Apr'17
Issue Type : Book Building Issue IPO
Issue Size : 60,23,236 shares
Face Value : Rs. 5/- each
Issue Price : Rs. 660-670 per share
Market Lot : 22 shares
Minimum Order Quantity : 22 shares
Minimum application Amount : Rs. 14,740.00/-
Listing At : NSE, BSE
Tentative timetable in respect of the Offer:
Bid/Offer Opens On: Apr 26, 2017
Bid/Offer Closes On: Apr 28, 2017
Finalisation of Basis of Allotment: On or about May 4, 2017
Initiation of refunds: On or about May 5, 2017
Credit of Equity Shares to demat accounts: On or about May 8, 2017
Commencement of trading of the Equity Shares on the Stock Exchanges: On or about May 9, 2017
The company plans to repay term loans availed earlier by it and one of its subsidiaries, EPHL, which was utilised to fund Chhaya acquisition. A total of Rs 152 crore of the fresh issue will be utilised for this. Besides, Rs 88 crore with be spent on repayment or prepayment, in full or in part, of certain loans availed of by the company and two of its subsidiaries, VPHPL and NSHPL.
How has the company performed all this while:
The company has reported a 33.48 per cent compounded annual growth rate (CAGR) in consolidated profit after tax and before minority interest at Rs. 46.64 crore in FY16 compared with Rs 14.69 crore in FY12. Consolidated revenues for the firm has grown at a CAGR of 32.64 per cent during the same period to Rs 540.62 crore in FY16 from Rs 174.64 crore in FY12. Ebitda for the five-year period grew 47.47 per cent to Rs. 128.21 crore.
What to expect from this IPO?
Since the company’s business model is well-established, an investment decision in S Chand IPO has to be strictly based on valuations. Also, it is not the first of its kind business to list on Indian exchanges which means, there is no case of premium valuations. Although Navneet Education gets slightly above 45% of its revenues from stationary, publishing is simply the largest business line. For S Chand, Earnings Per Share (EPS) of INR17.09 means the IPO is priced at a P/E multiple of 39.2. Going by the past growth rates, the company may post higher profits for FY2017 but in absence of full year data, we would restrict ourselves to FY2016. We find this ratio quite high even for a fast growing business. In comparison, Navneet is available at a P/E ratio of 31.6 which is not cheap by any stretch but looks better than S Chand. Unlike S Chand, Navneet isn’t a pure publishing play but it still serves the purpose of putting things in perspective. We also find Navneet a better play as it had higher net profit margin of 13.7% in FY2016 and is pretty much debt-free in terms of long term loans. Navneet also has a higher Return on Net Worth (RONW) of 20.3% in FY2016 as compared to S Chand’s 7.8%.
Key Risks
In recent past, CBSE issued two circulars advising CBSE schools to use only NCERT printed content for all classes. Such circulars may reduce demand for the company’s educational content among CBSE-affiliated schools, as they also recommended that such schools should avoid insisting that students purchase additional print content from private content providers.
Also, out of the 88 premises used by the company, 85 are leased from group companies and third parties with whom the company has lease or licence arrangements.
Unconsolidated Cash Flow from Operations for the last Financial Year i.e. 15-16 was a huge negative of 282.42 millions. Consolidated Cash Flow from Operations were negative for the Financial years ending 31-Mar-2015, 2013 and 2012, being 175.24 millions, 674.15 millions and 310.12 millions. If the company continues to perform with negative Operational Cash flows, then it will be a very risky investment to make.
CL Educate, a recent listing of education sector, had an issue price of Rs. 502 per share and opened at Rs. 402 (NSE), currently trading at 430 levels. Education Sector has not shown a great return in past. However, S Chand being one of its kind should not be compared with others.
Nothing can be said for sure, but overall it looks like a risky investment. Keeping current scenario of Indian Stock Market in mind the issue might be over subscribed but we cannot expect huge returns from it. Also, French elections could have their own impact on current Openings.
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