Keerti Knowledge And Skills NSE SME IPO review (May apply)

Keerti Knowledge And Skills Ltd (KKSL) is one of the largest IT training institutes in Mumbai & Thane region that trains youth and students in multiple segments of Information Technology. The widespread network of company’s centers is committed to quality education, training and professional certifications that empower the students to meet the growing challenges of IT industry. It has expanded business through its two subsidiary Companies i.e. Keerti Institute India Private Limited and Keerti Tutorials India Private Limited and KKSL has vide Business Transfer Agreement dated 2nd April, 2015 transferred its business of IT education sector which is on franchise basis to the Keerti Institute India Private Limited (KIIPL) for advancement and to rationalize the future growth of franchise business in IT education sector in future along with authorization of Maharashtra Knowledge Corporate Limited (MKCL)to conduct MKCL’s Courses. Thereafter, KIIPL entered into 90 afresh franchisees Agreements at various locations in Mumbai and Thane. The core activity of KKSL includes Training and Placement, State and Central Government programs and High End Technical programs.

To part finance expansion of company’s own and company operated centers, to develop e-Application and e-Programs, developing an end to end software/portal for recruitment, placement and training as well as general corpus fund needs, the company is coming out with a maiden IPO of 780000 equity share of Rs. 10 each at a fixed price of Rs.52 per share to mobilize Rs. 4.06 crore. Issue opens for subscription on 24.07.17 and will close on 28.07.17. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on NSE SME Emerge. Issue is solely lead managed by Navigant Corporate Advisors Ltd and Link Intime India Pvt Ltd is the registrar to the issue. From incorporation till lMarch 2001 it issued entire equity at par. Thereafter it issued bonus shares in the ratio of 1 for 1 in March 2011, 10 for 1 in March 2012 and 3 for 1 in February 2017. It has issued around 2.5 lakh rights shares at a price of Rs. 12 per share in March 2017. Post issue its current paid up equity capital of Rs. 2.11 crore will stand enhanced to Rs. 2.89 crore. The issue constitutes 27.02% of the post issue paid up capital of the company.

On performance front, the company has (on standalone basis) posted revenue/net profits of Rs. 1.90 cr. / Rs. 0.23 cr. (FY14), Rs. 2.15 cr. / Rs. 0.30 cr. (FY15), Rs. 0.64 cr. / Rs. 0.09 cr. (FY16). For 10 months period ended on 31.01.17 for the fiscal 2016-17 it has reported total revenue of Rs. 1.00 cr. with a net profit of Rs. 0.18 cr. On consolidated basis post alignment of business, the company has reported revenue of Rs. 4.39 crore with a net profit of Rs. 0.41 crore for the period ended 31.01.17. KKSL suffered a setback in FY 16. If we annualize latest consolidated workings and attribute it to fully diluted equity post issue, then asking price is at a P/E of 30 plus and at a P/BV of 4. Industry P/E average is 50% plus. Thus issue appears to have been fully priced.

On merchant banker’s front, this is the 6th mandate from its stable and last five issues, one has yet to be listed, one gave positive return, one opened at par and the rest two opened with losses. Thus track record is not encouraging.

Conclusion: Issue is fully priced; only risk savvy cash surplus investors may consider it for long term.