Started in 2007, Aakash Educational Services Limited is the largest player in the coaching industry in India as measured by revenue in FY2017, according to CRISIL. They provide comprehensive test preparatory services for students preparing for medical and engineering entrance examinations for Class 11 and Class 12 students, and foundation courses (covering school boards and junior competitive examinations) for students across Class 8 to Class 10. They provide the services through classroom-based coaching and digital and distance learning, which supplement the classroom courses and allow students to engage in self-paced learning. They also offer short-term classroom courses to prepare students for upcoming examinations. The first center under the 'Aakash; brand was started in 1988, offering test preparatory services for medical entrance examinations. As of March 31, 2018, they have 170 classroom centers (the 'Aakash Centers') across 103 cities and 23 states / union territories, of which they operate 67 through Franchisee arrangements. As of March 31,2018, they have a Student Count of 1,93,313 in the long-term classroom courses (comprising two-year courses, one year courses and repeater courses) ('Long-Term Courses') (including at Franchisee Centers), and a Student Count of 16,250 in the digital and distance learning courses. The Student Count (excluding those in short-term or ad-hoc courses) grew at a compound annual growth rate ('CAGR') of 16.78% from FY2016 to FY2018. As of March 31,2018, they employ 1,969 faculty members at the Owned Centers. Aakash delivers and supports the education channels through digital features, including recorded video lectures and integrated test and assessment via Aakash iTutor which includes online assessment and test series via the Aakash Test Management System, and live interactive classes via Aakash Live. These programs expand the geographical reach beyond classrooms by allowing students to learn remotely and yet in an interactive manner. As of March 31, 2018, they have a Student Count of 7,701 in Aakash Live and Aakash iTutor, and from FY2016 to FY2018, the Student Count in these courses grew at a CAGR of 54.94%. Aakash categorize its programs into three brands:(i) Aakash Medical: Started in 1988, they now offer test preparatory courses for students in Class 11 and Class12, and repeater courses for students who have passed Class 12, undertaking entrance examinations for medical undergraduate degree courses, including the National Eligibility Cum Entrance Test (NEET) andAIIMS MBBS entrance examination. (ii) Aakash IIT-JEE: Started in 2007, they now offer test preparatory courses for students in Class 11 and Class12, and repeater courses for students who have passed Class 12, preparing for state engineering CommonEntrance Tests (CETs) and for Joint Entrance Examinations (JEE) conducted at the state and central levels, including the JEE Main and Advanced. (iii) Aakash Foundations: Started in 2009, they now offer test preparatory courses to students in Class 9 to Class10 for subjects, being Science, Mathematics, English and Social Sciences. For Class 8 students, they only offer test preparatory courses via Aakash Live. In addition, they provide training to these students for central and state board examinations, and for junior competitive scholarship tests and merit tests, such as the Olympiads and National Talent Search Examination ('NTSE'). Company had started its first Franchisee Center in 1997 and had 67 Franchisee Centers as of March 31, 2018. Through the Franchisee model, which allows asset-light expansion, they have grown quickly across new regions such as East India. They receive 25% to 36% of the fees, net of any concessions and refunds ('Net Fees'), collected from the students by the Franchisees, depending on the type of courses, stream and location of the Franchisee Centers. As per financial performance, ICFL has posted total income/net profits of Rs. 396.91 cr. / Rs. 112.13 cr. (FY14), Rs. 528.06 cr. / Rs. 149.04 cr. (FY15), Rs. 644.05 cr. / Rs. 191.64 cr. (FY16) and Rs. 719.92 cr. / Rs. 210.80 cr. (FY17). For upto Q3 of FY18, it has reported net profit of Rs. 164.08 cr. on total revenue of Rs. 585.95 cr. So company has posted consistent growth over last couple of years. ICFL has posted an average EPS of Rs. 25.53 and average RoNW of 11.62% for last three fiscals. Issue is priced at a P/BV of 2.17 as per NAV of 263.96 on 31.12.17. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 24. As per RHP, industry average P/E ratio is 28.66 and listed peers comparison shown in above table. So issue looks fully priced. On BRLM's front, five merchant bankers associated with this issue and have handled 58 public issues in the past three years. When we take recent 10 IPOs of each BRLM then out of those 6 issues opened below their offer price and 4 opened at par on listing dates. As per financials, company's growth is consistent and very good, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 24 as per latest earnings. Company is an NBFC with principal lines of business, namely corporate lending, SME lending, vehicle financing and housing financing. Last two business segments (Vehicle Finance & Housing Finance) are started in recent past and it may give further boost to company's growth, but increasing bond yields and FD rates may put pressure on margins. So we give "SUBSCRIBE FOR LONG TERM" rating to this IPO.
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