Arihant Institute BSE SME IPO review (Avoid)

 Arihant Institute Ltd. (AIL) is engaged in providing coaching & educational guidance for students appearing for professional course – Chartered Accountant, Company Secretary and CMA. It provides the coaching and guidance from Entry level test exam till final exam and covers all the subjects in depth with test series to improve their confidence and overall result. AIL operates the educational program and coaching under the Brand Name ?Arihant Institute? since inception. With dedicated professors and trained staff, it has given education to more than 10000 students appeared for professional & Graduates exam. Company’s  student strength has improved and with dedicated efforts, there were 205 National Rankers in CA Inters and Final Courses, 2000+ Chartered Accountant and 175+ Company Secretary.

AIL premises spread over 9,500 sq. feet which includes 8 air conditioned class room, well equipped library, canteen, staff room, 2 studios, back-up lab, conference room and large administrative blocks. The company establishes a good relationship with their students by providing good quality education, which will surely go a long way and benefit the company. The company is backed by a team of highly educated and experienced professionals who have an affinity for providing better education to the students. AIL is considered as preferred choice for the best professional coaching institute among the students based in, Gujarat & Rajashthan, in the field of Professional Exams like Chartered Accountancy, Company Secretary and other Professional and Foreign Courses.

To part finance training center expansion, technical infrastructure-servers, studio and content, corporate office furniture and equipments, branding and marketing as well as general corpus fund needs, AIL is coming out with a maiden IPO of 2500000 equity shares of Rs. 10 each with a fixed price of Rs. 30 per share to mobilize Rs. 7.5 crore. Issue opens for subscription on 23.05.18 and will close on 28.05.18. Minimum application is to be done for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. Issue is solely lead managed by Monarch Networth Capital Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the issue. Issue constitutes 26.58% of the post issue paid up capital of the company. Having raised initial equity at par, it raised further equity in the price range of Rs. 22.50 to Rs. 30.00 per share. Average cost of acquisition of shares by the promoters it Rs. 7.81, Rs. 8.68, Rs. 10.00 and Rs. 10.37 per share. Post issue, its current paid up equity capital of Rs. 6.91 cr. will stand enhanced to Rs. 9.41 crore. Its debt ratio as on 31.01.18 is 4.10.

 On performance front, for last four fiscals, AIL has posted total revenue/net profits of Rs. 6.10 cr. / Rs. – (1.46) cr. (FY14), Rs. 3.86 cr. / Rs. 0.04 cr. (FY15), Rs. 1.67 cr. / Rs. –(1.45) cr. (FY16) and Rs. 1.69 cr. / Rs. 0.11 cr. (FY17). Thus it has witnessed setback in top lines and inconsistency in bottom line with two fiscal i.e. FY14 and FY16 marking mega losses. For first 10 months ended on 31.01.18 of FY18 it has earned net profit of Rs. 0.12 cr. on total revenue of Rs. 1.12 cr. For last three fiscals, it has posted an average negative EPS as well as negative average RONW. Issue is priced at a P/BV of 3.59 on the basis of its NAV of Rs. 8.35 as on 31.01.18. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 200 against industry average of 26. As per offer documents it has shown Career Point, CL Educate, MT Educare, Siddharth Edu as its listed peers and they are trading at a P/E of around  9, 23, 0 and 33 respectively. (as on 18.05.18). Thus issue is exorbitantly priced.
 
On merchant banker’s front, this is 5th mandate from its stable in last three fiscals. Out of last 4 listings 1 opened at discount, 2 at par and one with a premium of 1.43% on the day of listing.