Kuberan Global Edu Solutions Limited

Incorporated in 2013, Kuberan Global Edu Solutions Limited (KGES) is a Tamil Nadu based company that offers "TEST PREP" segment services including Banking courses, Accounting & Professional Courses (CA, CS, CMA), Master of Business Administration Entrance exams, Staff Selection Commission (SSC), and Other Competitive Exams. The company follows Kuberan class (virtual learning concept) through the use of IT to offer courses via online teaching and classroom environment. Online web conferencing, video conferencing chat rooms, Voice over IP (Internet Protocol) are used to provide e-learning facilities to clients. It also provides custom courses and offers customized training to the government, corporates, and other educational institutions. The company has training units in Coimbatore, Tuticorin, Surat, Udumalaipet. On the financial performance front, KGES reported turnover/net profits (loss) of Rs. 0.82 cr. / Rs. 0.59 cr. (FY18), Rs. 0.98 Cr. / Rs. 0.94 Cr. (FY19) and Rs. 0.90 Cr. / Rs. 0.01 Cr in FY20. For 7M FY21, company has posted 0.63 Cr total income and 0.08 Cr net profit. So company has shown static sales and decline in profit. But company has shown sudden jump in net profit in 7M of FY21 and it raises questions. For the last three years, company has posted average EPS of Rs. 0.43 and RoNW of 4.40%. The issue is priced at a P/BV of 1.50 based on its NAVs of Rs. 13.32 post issue. As per FY20 earnings, on fully diluted equity post issue, IPO is priced at P/E of around 263. If we annualise latest earnings of FY21 on fully diluted equity, than P/E is around 28. So issue looks aggressively priced. As per RHP, comparison between listed peers is shown in above table. On BRLM's front Fedex Securities Pvt. Ltd. has handled 10 IPOs in last three fiscals. From 10 IPOs, 1 opened below price and remaining above issue price. As of now from 10 IPOs, 3 is trading below issue price and remaining above issue price. ( As on 22.04.2020 ) For KGES, financial data is declining, RoNW is 1.08%, P/E is around 263.32 for FY20 and 28.25 for annualised FY21 earnings. So issue looks aggressively priced and if company may maintain 7M of FY21 profit and margins in future, is very big question. Also current pandemic situation has very bad effect on education sector and situation is still worsening.  Performance of BRLM is good. So we give AVOID rating to this SME IPO.

• 1 CHANDRAMOULEEWARAN KRISHNAN