Veranda Learning IPO review (Avoid)

•    VLSL is engaged in providing various modes of learning solutions.
•    The company has posted losses for all the reported periods. 
•    Its P/E and RoNW could not be ascertained due to losses.
•    There is no harm in skipping this IPO. 

PREFACE:
Well, this company which is claiming to be the most competitive education provider to learners for Central and State Government jobs and has currently marked a milestone of Rs. 10 cr. per month revenue generation is likely to turn green from next fiscal. However, considering its losses in the reported financial data, it's a risky bet for a while. 

Investors are recalling the saga of Everonn Education Ltd. However, well-informed investors have to take a call for parking of their funds in this currently loss-making company. Tutorials Point India, a profitable company tried its luck with its maiden SME IPO in Sept/Oct. 2019, but the issue got withdrawn before opening. 

The list of IPOs that came in the past in this segment is many. They are Tree House, MT Educare, Jointeca Education, Sylph Education, Shanti Educational, Global Education, C L Educate, Siddharth Education, Humming Bird Education and Ascensive Education.

Investors have burnt their pockets on recent investments in tech/unicorn loss-making companies that came with their maiden offers. Hence caution is required while investing in any loss-making company from any segment. 

ABOUT COMPANY:
Veranda Learning Solutions Ltd. (VLSL) is engaged in the business of offering diversified and integrated learning solutions in online, offline hybrid and offline blended formats to students, aspirants, and graduates (collectively "Students") professionals and corporate employees ("Learners") enrolled with its courses through a multitude of career-defining competitive exams, professional courses, exam-oriented courses, short term upskilling and reskilling courses. VLSL provides comprehensive long term and short term preparatory courses in a simple and lucid manner for Students preparing for UPSC Exams, State Public Service Commission, Staff Selection Commission, Banking, Insurance, Railways and Chartered Accountancy. 

The company also provides customized short term skilling courses, long term courses and other corporate courses to Learners. It also delivers these courses to employees of corporates through B2B offerings. VLSL primarily provides services through online, offline hybrid and offline blended learning models. Its offline hybrid learning model involves classroom teaching supported with online assessments and access to self-paced learning material to enhance recall and retention. Company's offline blended model involves a mix of Online content and Offline delivery, wherein the centre delivers LMS Study Materials together with traditional classroom experience of personal mentoring from Mentors, with a dedicated Mentor in each classroom available for assistance to a Student. Its offline hybrid and offline blended learning models offer traditional classroom experience of personal mentoring from experienced Mentors along with highly curated digital content and online assessments.

VLSL's tech-infused online learning model allows students to engage in self-paced inclusive and individualized learning experiences without being hindered by the restriction of needing to be present in a physical classroom. Its Online learning model comprises recorded videos and an online live instructor-led learning mode. It also focuses on delivering specific courses in regional languages to better reach out to Students of Tier 2 and 3 cities and rural areas.

During the nine-month period ending December 31, 2021, a total of 42,667 Students and professionals have enrolled across all its courses, being 16,793 in offline models and 25,874 in online models. During the nine-month period ending December 31, 2021, it had overall employed 8 Student advisors, 166 Mentors and it operated 25 PDCs across 25 cities and towns and 2 states. 

It also provides a training module for teachers to prepare them for in-class support service. This is offered by Veranda Race, Veranda CA and Veranda IAS vertical. Edureka offers its B2B training to corporates entirely through the online mode using its own employed or contracted faculty. As of the date of filing of RHP it had four subsidiaries.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its needs for repayment/prepayment of debt (Rs. 60.00 cr.), Payments for acquisition of Edureka (Rs. 25.19 cr.), Growth initiatives (Rs. 50.00 cr.) and general corporate purpose, VLSL is coming out with a book built IPO worth Rs. 200 cr. The company has fixed a price band of Rs. 130 - Rs. 137 per share having a face value of Rs. 10 per share. At the upper cap, the company will issue around 14598500 equity shares. A bid can be made for a minimum of 100 shares and in multiples thereon, thereafter. The issue opens for subscription on March 29, 2022, and will close on March 31, 2022. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 26.17% of the post issue paid-up equity capital of the company. It has allocated 75% for QIBs, 15% for HNIs and 10% for Retail investors. 

The issue is solely lead managed by Systematix Corporate Services Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity shares at par, VLSL issued further equity in the price range of Rs. 28 to Rs. 150 per share between September 2021 and January 2022. In fact, it did a pre-IPO placement worth Rs. 40.00 cr. in December 2021 and has also converted warrants of Rs. 6.50 cr. at the same price in January 2022. It has also issued bonus shares in the ratio of 3 for 1 in September 2021. 

VLSL's current paid-up equity capital of Rs. 41.18 cr. will stand enhanced to Rs. 55.78 cr. Based on the upper cap of IPO pricing, the company is looking for a market cap of Rs. 764.12 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, for the last three fiscals (starting from November 20, 2018), it has posted a total income/net profit (Loss) of Rs. 0.00 cr. / Rs. - (0.01) cr. (FY19), Rs.  0.00 cr. / Rs. - (0.02) cr. (FY20), Rs. 2.55 cr. / Rs. - (8.23) cr. (FY21). For the first six months of the current fiscal ended on September 30, 2021, it marked a loss of Rs. - (18.27) cr. on a total income of Rs. 15.66 cr. Thus it has been incurring losses for all these reported periods. 

For the last three fiscals starting from November 20, 2018, it has posted an average negative EPS of Rs. - (207.86) and an average negative RoNW (unascertainable). The issue is priced at a P/BV of 22.68 based on its NAV of Rs. 6.04 as of September 30, 2021. 

As per restated consolidated proforma, it has posted a total income/ net profit (Loss) of Rs. 83.03 cr. / Rs. - (51.07 cr.) for FY2021 and Rs. 48.15 cr. / Rs. - (38.23) cr. for the first half of FY22. 

Due to negative earnings, its IPO pricing P/E cannot be ascertained. 

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of offer documents. It will adopt a prudent dividend policy based on its financial performance and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, the company has no listed peers to compare with. 

MERCHANT BANKER'S TRACK RECORD:
The BRLM has not been associated with any offer in the past three years and hence has no track record for listing performances.