Education platform Veranda Learning Solutions to raise Rs 200 crore via its IPO

Veranda Learning Solutions Limited IPO opens for subscription on 29th March. The company is looking to raise up to Rs 200 crore through the public issue. Here are the details:

Veranda Learning Solutions Limited IPO Details: 

Veranda IPO Date: 29 March - 31 March 2022

Veranda IPO Price band: Rs 130 - Rs 137

Veranda IPO Issue Size: Rs 200 crore (Fresh Issue aggregating up to Rs 200 crore)

Reservation: QIB 75%, Retail - 10%, NII 15%

Minimum Investment: Rs 13,700

Post Issue Implied Market cap: Rs 735 crore to Rs 764 crore

Bid lot: 100 shares, and in multiples of 100 shares.

Veranda Learning Solutions IPO: Objects of the Issue

The net proceeds from the IPO will be utilised for the following purposes :

• Growth initiatives
• Repayment or prepayment, in part or full of all or certain of our borrowings
• Payment of acquisition consideration of Edureka or repayment of a bridge loan availed specifically for discharge of such acquisition consideration of Edureka.

About Veranda Learning Solutions 

• The company was incorporated in 2018 and is engaged in the business of offering integrated and diversified learning solutions offline, online, and in a hybrid model to students, graduates, aspirants, etc.
• Veranda offers comprehensive long-term and short-term preparatory courses simply and lucidly for students preparing for UPSC Exams, Staff Selection Commission, State Public Service Commission, Banking, Insurance, Railways, and Chartered Accountancy.
• All the services are offered through its wholly-owned subsidiaries namely Veranda Race, Veranda CA, Veranda IAS, and Edureka.
• It has a total of 42,667 Students and professionals in different courses, out of which 16,793 enrolled for the offline model and 25,874 enrolled for the online model (nine months of FY22).

Source: RHP

Veranda's Different models

Online model - It is a tech-infused online learning model that allows students to engage in a self-paced inclusive and individualised learning experience, without the need to be present in a physical classroom.

Online Live Instructor-led Service Model - Under this model, they offer services or courses online through proprietary learning platforms developed by an integrated in-house technology team for conducting online courses.

Offline Hybrid Model - For specific courses, they offer a typical and traditional way of in-person teaching in the classroom.

Offline Blended Model - The offline blended model of offering services is a mix of online content and offline delivery, wherein the centre delivers LMS Study Materials together with traditional classroom experience with a dedicated Mentor in each classroom available for assistance to a Student.

Campus in Campus Model - Under this model, it collaborates with educational institutions to provide coaching services where the teachers are trained by them and provide coaching services in the classroom of the educational institution. 

Financials

• The company is a loss-making company and for FY19 (5 months) and FY20, the company did not generate any revenue from the operation. 
• For FY21 and for the six month period ended 30 Sep 2021, the company generated revenue of Rs 2.54 crore and Rs 15.46 crore, respectively.
• The EBITDA for FY19, FY20, FY21, and six month period ended 30 Sep 2021 was Rs (0.10) crore, Rs (0.20) crore, Rs (7.63) crore and Rs (15.05) crore.
• The company has reported a loss of Rs 8.29 crore and Rs 18.48 crore in FY21 and six month period that ended 30 Sep 2021.

Listed Peers

There are no listed peers for Veranda as no listed companies in India are engaged in a business similar to them.

USPs

Strong leadership team - The promoters have a collective experience of over 40 years in the education sector and also possess vast experience in other industries such as finance, information technology, and the entertainment industry.

Result-oriented teaching method with a 360-degree approach - They focus on a result-oriented method of teaching to impart knowledge to the students. It assists the students to achieve success in the relevant courses.

Diversified course offerings and delivery channels - They provide a wide range of learning solutions through our courses including competitive exams courses, professional courses, short-term upskilling, and reskilling courses.

Growth Potential

Use opportunistic and strategic acquisitions - To expand and grow its business, the company will continue to look for acquisitions and seek opportunities to acquire brands and businesses to strengthen or establish its presence in the targeted domestic and international markets.

Additional new courses - It plans to provide early-age academic tech-infused courses. Also, expand services to working professionals by providing them with certain new certificate courses including courses under university-affiliated programs. 

Expand focus on B2C and B2B - It plans to expand focus on the B2C and B2B spectrum of the education sector.

Risks

• If there are any changes to the relationship with Preferred Delivery Partners or non-adherence to prescribed service standards, payment defaults or other contractual breaches or irregularities may adversely affect their business.
• The intellectual property developed by them has not been registered under the patent or copyright laws of India.
• The business relies significantly on the company's reputation and the quality and popularity of the services provided by them. If they are not able to retain the present number of students serviced by them and attract new students for loss of reputation, it will impact their financials.

Veranda Learning Solutions: Review

Veranda Learning Solutions has had a relatively short financial history as it began operations in December 2020. The company posted revenue of Rs 2.5 crore in FY21 and a loss of Rs 8.3 crore in the year. In the Apr- Sep 21 period, the company’s topline expanded to 15.5 crore and loss came in at Rs 18.30 crore.

As the company is loss-making it is not possible to value it in terms of PE ratio. At the higher end of the price band, Veranda Learning IPO is expensively priced at a market cap/sales ratio of 25 times FY22 revenue (annualised basis).

Given the company’s limited financial history, expanding losses, low growth, very high competition in the education space and aggressive valuation, analysts remain “Negative” on the long-term prospects of the issue.