Ascensive Educare BSE Startup IPO review (Avoid)

•    AEL is in the business of vocational training and skill development.
•    Its financial performance is almost static for the reported years.
•    Based on its latest performance, the issue is priced aggressively.
•    The company is in a highly competitive and fragmented segment.

ABOUT COMPANY:
Ascensive Educare Ltd. (AEL) is engaged in the business of training and skill development offering vocational training, and educational consulting in collaboration with Central Government, State Governments and various Industries and Industry Associations. The Company has been core to delivering high-quality training interventions that range from conducting training workshops to placement. Its course curriculum is NSFQ compliant and experienced trainers, including the ones certified by the Sector Skills Council, take care of all the training programs. 

AEL is an accredited NSDC training partner provider and offers nationally recognized qualifications and skill-sets that comply with industry standards. It provides the platform for the skill developments at the grassroots level to skill and re-skilled the workforce of India so that they can rightfully participate in this phase of growth of the nation. The Company is focused on working in the field of education and skill development and is committed to playing a valuable role in supporting the scaling-up process of rural livelihood. As of the filing of this offer documents, it had 105 employees on its payroll. 

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for working capital (Rs. 1.40 cr.) and general corporate purpose (Rs. 0.46 cr.)  AEL is coming out with a maiden IPO of 868000 equity shares of Rs. 10 each at a fixed price of Rs. 26 per share to mobilize Rs. 2.26 cr. The issue opens for subscription on December 30, 2021, and will close on January 04, 2022. Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on the BSE Startup SME platform. The issue constitutes 27.05% of the post issue paid-up capital of the company. It will spend Rs. 0.40 cr. for this IPO process. This indicates a fully structured process for the proposed IPO. 

The issue is solely lead managed by GYR Capital Advisors Pvt. Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Beeline Broking Ltd. is the market maker for this issue. 

AEL's entire equity is raised at par so far and has also given a bonus in the ratio of 8 for 10 in May 2020. The average cost of acquisition of shares by the promoters is Rs. 4.41 and Rs. 8.08 per share. 

Post issue AEL's current paid-up equity capital of Rs. 2.34 cr. will stand enhanced to Rs. 3.21 cr. Based on the IPO pricing, the company is looking for a market cap of Rs. 8.34 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, AEL has posted turnover/net profits of Rs. 9.18 cr. / Rs. 0.28 cr. (FY19), Rs. 9.61 cr. / Rs. 0.43 cr. (FY20) and Rs. 10.27 cr. / Rs. 0.44 cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 0.11 on a turnover of Rs. 3.21 cr. For all these years it has posted almost static top and bottom lines with marginal growth. 

For the last three fiscals, AEL has posted an average EPS of Rs.1.77 and an average RoNW of 15.74%. The issue is priced at a P/BV of 2.01 based on its NAV of Rs. 12.93 as of June 30, 2021, and at a P/BV of 1.58 based on its post-issue NAV of Rs. 16.47 per share. 

If we annualize FY22 earnings and attribute it to the fully diluted post issue equity capital, then the asking price is at a P/E of 18.98 making it an aggressively priced issue. Based on its post IPO equity base, it will have longer gestation for migration to the mainboard. 

COMPARISON WITH LISTED PEERS:
As per the offer document, AEL has no listed peers to compare with. 
    
DIVIDEND POLICY:
The company has not paid any dividends since incorporation. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
After commencing the operations in this fiscal, this is the 2nd mandate from GYR Capital so far.  The only listing of Naap Book that opened at a premium of 4% and closed at par on the debt day is currently quoting at a discount of around 19% after marking a 52 weeks' low of Rs. 50.40 against the issue price of Rs. 74 per share.