Kuberan Global BSE Startup IPO review (Avoid)

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Review By Dilip Davda on April 10, 2021

•    KGESL is engaged in TEST PREP online training segment.
•    While it posted inconsistency in top lines, the bottom line marked declining trends.
•    Higher profit for 7M-FY21 appears pre-IPO cooked up performance.
•    The issue is aggressively priced; one may ignore it.

ABOUT COMPANY:
Kuberan Global Edu Solutions Ltd. (KGESL) is engaged in TEST PREP segment including Banking courses, Master of Business Administration Entrance Exams, Staff Selection Commission (SSC), Life Insurance Corporation of India (LIC), Accounting and Professional Courses like Chartered Accountant (CA), Certified Management Accountant (CMA), Company Secretary (CS) and it is expanding to include various other TEST PREP courses under its belt. The company also provides custom Courses and has capabilities to provide customized training to the corporates, government and educational organizations. The company markets and Train students on various courses and has unique courses on wealth management and capital markets to the Investing community.

The Company provides services through online teaching and classroom which allows a student to engage in self-paced learning. It also offers short term courses and tests series-based courses which have been designed specifically to provide education in a simple and lucid manner.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for digitalizing banking course through online mode by using IT (Rs. 0.66 cr.) and general corpus fund needs (Rs. 0.25 cr.), KGESL is coming out with a maiden IPO of 558000 equity shares of Rs. 10 each at a fixed price of Rs. 20 per share to mobilize Rs. 1.12 cr. The issue opens for subscription on April 20, 2021, and will close on April 27, 2021. Minimum application is to be made for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the BSE Startup platform. The issue constitutes 26.49% of the post issue paid-up capital of the company. The company did the pre-IPO placement of 40000 shares at Rs. 20 each in the month of September 2020. KGESL is spending Rs. 0.21 cr. for this IPO process.

The issue is solely lead managed by Fedex Securities Pvt. Ltd., Bigshare Services Pvt. Ltd. is the registrar to the issue and Rikhav Securities Ltd. is the market maker for this IPO.

Having issued/converted initial equity at par value, it has converted/issued further equity in the price range of Rs. 14.77 to Rs. 20 per share between January 2019 and September 2020. It has also issued bonus shares in the ratio of 0.474 for every 1 share held in January 2019. The average cost of acquisition of shares by the promoters is Rs. 9.50 per share.

Post issue, KGESL's current paid-up capital of Rs. 1.55 cr., will stand enhanced to Rs. 2.11 cr. At the IPO price, the company is looking for a market cap of Rs. 4.21 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, the company has posted a total income/net profit of Rs. 0.83 cr. / Rs. 0.18 cr. (FY18), Rs. 0.99 cr. / Rs. 0.03 cr. (FY19), Rs. 0.91 cr. / Rs. 0.02 cr. (FY20). For the first seven months ended on October 31, 2020, it has posted a net profit of Rs. 0.09 cr. on total income of Rs. 0.63 cr. The company posted inconsistency in top-line while declining trends for the bottom line for the last three fiscals, However, it has posted higher net for first seven months of FY21 that raises eyebrows.

For the last three fiscals, KGESL has posted an average EPS of Rs. 0.43 and an average RoNW of 4.40%. The issue is priced at a P/BV of 1.83 based on its NAV of Rs. 10.91 per share as of October 31, 2020, and at a P/BV of 1.50 based on its post-issue NAV of Rs. 13.32 per share.

If we annualize the latest earnings and attribute it to fully diluted post issue equity, then the asking price is at a P/E of 28. Thus it is priced aggressively.

DIVIDEND POLICY:
The company has not paid any dividend since its inception. It will follow prudent dividend policy post listing based on performance and future prospects of the company.

COMPARISION WITH LISTED PEERS:
As per offer documents, KGESL has shown Career Point and CL Educate as its listed peers which are currently trading at a P/E of around 16.63 and 00 (as of April 09, 2021). Though they are not truly comparable on an apple to apple basis.

MERCHANT BANKER'S TRACK RECORDS:
This is the 12th mandate from its stable in the last four fiscals (including the ongoing one). Out of the last 9 listings, 1 opened at discount, 2 issues opened at par and the rest with a premium ranging from 0.16% to 56.52%. Thus it has an average track record.

Kuberan Global Edu Solutions IPO FAQs