Chetana Education Limited is a content-based company, specializing in educational book publishing for the CBSE/State Board curriculum catering to the K-12 segment. Additionally, they provide access to educational software for learning videos (for teachers and Students) accessible through QR (Quick Response) codes, backed by a comprehensive sales and distribution network. They currently focus on serving the Maharashtra State Board and Central Board of Secondary Education (CBSE), covering the spectrum of education books from early pre-primary learning to K12 course. During the Fiscal year 2023, they sold over 6 million books, covering students across different standards ranging from pre-primary, primary, secondary, and higher secondary levels. Company has established a portfolio of over 700 titles as of 2023 with 15 distinct brands. Some of the names in the lineup include Master Key, Self-Study, Firefly, Bright Buddies, My Skill Book, Grade Me, QR series etc. Apart from publishing books, they are also involved in developing a range of digital content for enhanced understanding of topics for students and aim to make the content more viable for a better learning experience. They have over the years produced over 30,000 videos that can be accessed via QR codes, which could help transform traditional content into digital formats, facilitating the students for further self-studies post school and tutorials without any additional cost. This has been achieved through a strategic partnership with Allern Enterprises Private Limited, an Edtech company. Chetana's network encompasses numerous schools, coaching classes and booksellers, supported by collaborations with different vendors in printing, paper sourcing, binding, lamination and packaging. Partnerships with over 400 contractual authors contributing to the content creation for the company. While they have strategically opted for partnerships with printers and binders in India, and remain asset-light and absolute focus on content development for the education sector and effective sales and distribution. They have over the years established the presence across 18 states and Union Territories in India. They have developed a supply chain by rationalizing and integrating the procurement, manufacturing and logistic capabilities. The outsourced print facilities and own distribution networks are supported by the logistics network, which comprised of one centrally located warehouse in Bhiwandi, near Mumbai, Maharashtra supported by two C&F facilities catering to North and South India in Delhi and Karnataka respectively with overall area of about 70,000 sq ft to allow coverage across India. The paper purchases are integrated, which helps them to achieve economies of scale and improves the bargaining power with raw material suppliers. The distribution and sales network consists of over 500 distributors and dealers, and they have an in-house sales team working from the branches and marketing offices across India. Along with marketing their content directly to educators and schools to place the products on prescribed and recommended reading lists, they also market the products directly to distributors and dealers. As per financial performance, Chetana Education Limited has posted total income / net profits of Rs 43.12 Cr / Rs 1.68 Cr (FY22), Rs 75.60 Cr / Rs 6.85 Cr (FY23), Rs 93.67 Cr / Rs 12.03 Cr (FY24). So as per previous financials data, company has shown good growth, but sudden rise in net-profit, higher trade receivables (more than 50% of FY24 total income) and high inventory raises doubts. Company has posted an average EPS of Rs 5.72 and average RoNW of 47.67% for last three fiscals. Issue is priced at a P/BV of 5.05 as per NAV of 16.83 as on 31.03.24. If we attribute latest earnings of FY22, FY23 and FY24 on fully diluted equity post issue, then asking price is at a P/E of around 103.18, 25.30 and 14.41 respectively, which looks fully priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, Hem Securities Limited is associated with this SME IPO and handled 46 SME IPOs in last 3 years. From last 10 SME IPOs, all opened Above issue price or at par on the day of listing. As of now from last 10 SME IPOs, all are trading above issue price and remaining above issue price. ( As on 18.07.24 ) As per financials, Chetana Education Limited has shown good growth, RoNW is 47.67% and P/E is respectively 103.18, 25.30 and 14.41 as per FY22, FY23 and FY24 earnings. So, issue looks fully priced, but sudden rise in net-profit, higher trade receivables (more than 50% of FY24 total income) and high inventory raises doubts. Company is engaged in the business of educational book publishing for the CBSE/State Board curriculum catering to the K-12 segment, which is highly fragmented and competitive business segment. Performance of BRLM is good. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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