Wagons Learning BSE SME IPO review (Avoid)

•    The company is engaged in providing corporate training, digital learning, and skill development solutions on a B2B basis.
•    The sudden boost in its top and bottom lines from FY24 onwards raises eyebrows and concern over its sustainability.
•    The company is operating in a highly competitive and fragmented segment.
•    Based on its financial data, the issue appears aggressively priced. 
•    There is no harm in skipping this “High Risk/Low Return” pricey bet.

ABOUT COMPANY:
Wagons Learning Ltd. (WLL) is engaged in providing corporate training, digital learning and skill development solutions. It functions on a B2B model wherein the company provides Training and Certifications, Digital Learning solutions, skill development solutions, trainer outsourcing and payroll management solutions to clients. WLL specializes in corporate training and consulting across a broad range of domains such as sales training, customer service training, soft skills and behavioural training, functional training and knowledge-based, skill-based training solutions to the employees of corporate operating in the industries like Automotive, Banking and financial services, Pharma and healthcare services etc. Its corporate training programs provide holistic solutions and the company is committed to a philosophy of excellence. Its team has a broad network to offer training and organizational development resources.

In addition to certifications and training offerings, WLL provides a comprehensive and advanced digital learning solutions. Its Digital library is compatible with all Learning Management Systems (LMS) and Learning Experience Platforms (LxP). Company’s full suite of software service offerings includes LMS, LxP, digital libraries to corporates, universities, schools and colleges. It is a National Skill Development Corporation (NSDC) certified company for conducting a range of skill development programs under the Skill Sathi program and its term sheet is valid till January 04, 2027. It caters to professional across various industries and domains and offer assistance to organizations in formulating their learning and development strategies. 

WLL’s dedication lies in offering, its clients with the best possible service with trainers available on demand around the clock. It provides skill development and skill upgradation to graduates and post graduates to make them industry and job-ready. As on the date of this Red Herring Prospectus, it has skilled 550,000 professionals through Classroom, Virtual and digital modules and has garnered the expertise on providing training solutions on various subject matter. It provides services to clients across India and has also entered the markets of UAE, by opening a branch office in Dubai at The Meydan Hotel, Grandstand, 6th floor, Meydan Road, Nad Al Sheba, wherein the Company will start providing Education Technology (LMS/LXP), Digital Library, Government Projects, Custom Content Development to the Companies including Government organization in Dubai. 

It is also planning to enter various markets across the globe. WLL’s digital library is getting updated for the school & higher education segment for providing online self-paced vocational education modules focusing on employability skills, soft skills & life skills applicable to age groups of 14 to 26 years. The company is also venturing into B2C model by launching various industry ready certification courses. The Company operates under four different verticals and consequent involved in providing four different services for training and development of customers, which are predominantly employees of corporates operating in the industries like Automotive, Banking and financial services, Pharma and healthcare services as well as beneficiaries / student of skill development or CSR initiative endorsed by Government of India or any other certification programs provided by NSDC. Currently it has 96 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo PO of 4680000 equity shares of Rs. 10 each to mobilize Rs. 38.38 cr. The company has announced a price band of Rs. 78 – Rs. 82 per share. The issue consists of 3080000 fresh equity shares (worth Rs. 25.26 cr. at the upper cap) and an Offer for Sale (OFS) of 1600000 equity shares (worth Rs. 13.12 cr. at the upper cap). The issue opens for subscription on May 02, 2025, and will close on May 06, 2025. The minimum number of shares to be applied is for 1600 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 30% of the post-IPO paid-up capital of the company. From the net proceeds of fresh equity shares issue, the company will utilize Rs. 7.50 cr. for working capital, Rs. 4.50 cr. for repayment/prepayment of certain borrowings, and the rest for general corporate purposes. Total borrowings of Rs. 10.45 cr. as of December 31, 2024, raise alarm and is a cause of major concern.

The company has allocated not more than 11.99% for QIBs, not less than 38.01% for HNIs and not less than 50% for Retail investors.

The IPO is solely lead managed by Khandwala Securities Ltd., and Cameo Corporate Services Ltd. is the registrar to the issue. Rikhav Securities Ltd., is the Market Maker for the company. The issue is underwritten to the tune of 84.99% by Finaax Capital Advisors Pvt. Ltd., and up to 15.01% by Khandwala Securities Ltd.

Having issued initial equity shares at par value, the company issued further equity shares in the price range of Rs. 5077 – Rs. 6400 per share in January 2022, and February 2024. It has also issued bonus shares in the ratio of 625 for 1 in March 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 13.41 per share. 

Post-IPO, company’s current paid-up equity capital of Rs. 12.52 cr. will stand enhanced to Rs. 15.60 cr. Based on the upper price band of the IPO, the company is looking for a market cap of Rs. 127.92 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 9.89 cr. / Rs. 0.09 cr. (FY22), and Rs. 16.17 cr. / Rs. 0.71 cr. (FY23), and Rs. 33.51 cr. / Rs. 5.61 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 5.54 cr. on a total income of Rs. 33.23 cr. The sudden boost in top and bottom lines from FY24 onwards raises eyebrows concern over its sustainability going forward. Trade receivables of Rs. 14.35 cr. as of the same date is also remain a concern. It is operating in a highly competitive and fragmented segment.

For the last three fiscals, the company has reported an average EPS of Rs. 0.89 and an average RoNW of 25.85%. The issue is priced at a P/BV of 5.35 based on its NAV of Rs. 15.34 as of December 31, 2024, but its post-IPO NAV data info is missing. 

If we attribute FY25 annualized super earnings on post-IPO fully diluted equity capital, then the asking price is at a P/E of 17.30. Based on FY24 earnings, the P/E stands at 22.78. The issue relatively appears aggressively priced. 

For the reported periods, the company has posted PAT margins of 0.97% (FY22), 5.35% (FY23), 16.81%, (FY24), 16.77% (9M-FY25), and RoCE margins of 4.69%, 17.74%, 45.27%, 27.33% respectively for the referred periods. 

DIVIDEND POLICY:
The company has not paid any dividends for any financial year. It will adopt a prudent dividend policy, based on its financial performance and future prospects. 

COMPARISION WITH LISTED PEERS:
As per the offer document, the company has shown NIIT Learning System, and Vinsys IT Services, as their listed peers. They are trading at a P/E of 22.3, and 21.6 (as of April 25, 2025). However, they are not truly comparable on an apple-to-apple basis. These peers compare appears to be an eyewash.

MERCHANT BANKER’S TRACK RECORD:
This is the 10th mandate from Khandwala Securities in the last three fiscals (including the ongoing one).  Out of the last 9 listings, 2 opened at discount, 2 at par, and the rest with a premium ranging from 5% to 90% on the date of listing.