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Monday, 28 March 2022
CM RATING35/100
 

Veranda Learning Solutions

In the learning phase

The IPO is to fund acquisition of Edureka and reduce debt

Veranda Learning Solutionsis engaged in the business of offering diversified and integrated learning solutions in online, offline hybrid and offline blended formats to students, aspirants, and graduates, professionals and corporate employees enrolled with its courses through multitude of career-defining competitive exams, professional courses, exam-oriented courses, short term upskilling and reskilling courses.

The company provides comprehensive long-term and short-term preparatory courses in a simple and lucid manner for Students preparing for UPSC Exams, State Public Service Commission, Staff Selection Commission, Banking, Insurance, Railways and Chartered Accountancy. The company also provides customised short term skilling courses, long term courses and other corporate courses to its Learners. The company also delivers these courses to employees of corporates through its B2B offerings.

The company primarily provides its services through online, offline hybrid and offline blended learning models. Its offline hybrid learning model involves classroom teaching supported with online assessments and access to self-paced learning material to enhance recall and retention. The company's offline blended model involves a mix of Online content and Offline delivery, wherein the centre delivers Learning Management System Study Materials together with traditional classroom experience of personal mentoring from Mentors, with a dedicated Mentor in each classroom available for assistance to students. The company's offline hybrid and offline blended learning models offer traditional classroom experience of personal mentoring from experienced Mentors along with highly curated digital content and online assessments.

The company's tech-infused online learning model allows Students to engage in self-paced inclusive and individualised learning experience without being hindered by the restriction of needing to be present in a physical classroom.

The company's online learning model comprises recorded videos and online live instructor led learning mode. The company also focuses on delivering specific courses in regional languages to better reach out to Students of Tier 2 and 3 cities and rural areas.

The company offers its services through its wholly owned subsidiaries namely Veranda Race Learning Solutions Private Limited which offers exam oriented courses to Students who propose to appear for competitive exams, such as State Public Service Commission examinations, Staff Selection Commission examination, Railway Recruitment Board examination, Banking examinations and Insurance examination; Veranda XL Learning Solutions Private Limited (Veranda CA) offers exam oriented learning programs for Chartered Accountancy examinations. Veranda CA has developed highly curated learning units for (i) CA-Foundation; (ii) CA-Intermediate and (iii) CA-Final examinations.

Veranda CA has engaged 18 chartered accountants on contract basis who have vast experience in audit practice and teaching, to record the learning units in a video format; Veranda IAS Learning Solutions Private Limited offers coaching services to aspirants appearing for UPSC preliminary and main exams, and personality test, and (ii) State Public Service Commission Group-I exams and Brain4CE Education Solutions Private Limited (Edureka) offers academic learning, professional skilling and corporate training services in trending courses related to technologies, such as AI/ML and Cloud computing to professionals and higher education students through Online Live Instructor led Service Model. Currently, Edureka offers academic learning, professional skilling and corporate training services in trending courses related to technologies in Cloud Computing, Devops, ML/AI, Data Science, Big Data, Block Chain, Cyber Security, Robotic Process Automation, and many other fields through live online classes.

During the nine-month period ending December 31, 2021, a total of 42,667 Students and professionals have enrolled across all the company's courses, being 16,793 in its offline models and 25,874 in its online model.

During the nine-month period ending December 31, 2021, the company had overall employed 8 Student advisors, 166 Mentors and it operated 25 Preferred delivery centres across 25 cities and towns in 2 states (Karnataka and Tamil Nadu).

 

Acquisitions:

Veranda Learning Solutions acquired 100% shareholding in Brain4ce Education Solutions Private limited, more commonly known by its brand name 'Edureka'from the then shareholders of Edureka pursuant to a share purchase agreement dated Aug 30,2021 for a consideration of Rs 193.28 crore along with the interest amounting to Rs 2.62 crore aggregating to Rs 195.91 cr.

With the acquisition of Edureka, VerandaLearning solutions expanded its presence in software education and in global markets, particularly, the USA.Edureka is one of the recognised online education platforms for technology professionals. Edureka commenced operations in December 2011 and in a span of 10 years, it has built a brand with its YouTube videos getting around 3.6 million unique views every month. Edureka provides skills on over 50 technologies.

Edureka offered 318 courses in FY2021, and it had 25,654 students enrolled.Edureka had revenues of Rs 53.05 crore, Rs 70.43 crore and Rs 80.48 cr in FY2019, FY2020 and FY2021 respectively. EBITDA of Edureka stood at Rs -11.48 crore, Rs -21.38 crore and Rs -9.91 crore in FY2019, FY2020 and FY2021, respectively.

Prior to acquisition of Edureka, the company through its wholly owned subsidiary Veranda Race, acquired the content, brand and education materials from Chennai Race Coaching Institute Private Limited in Dec 2020. Further, in March 2021, the Company entered an arrangement where it designated Chennai Race as a Preferred Delivery Partners of Veranda Race and eventually all centres managed and run under Chennai Race also became Preferred Delivery Centres of Veranda Race. Chennai Race was founded by Mr. Bharath Seeman, who is presently employed by Veranda Race.

 

The company is promoted by MrKalpathi S Aghoram, Mr Kalpathi S Ganesh and Mr Kalpathi S Suresh.

 

Objects of the offer

The offer comprises a fresh issue of 14598540 equity shares at upper price band of Rs 137 and 15384615 equity shares at lower price band of Rs 130 aggregating up to Rs 200 crore by the company.

 

Up to 75.0% of the total offer is reserved for qualified institutional buyers, 15.0% for non-institutional bidders, and the remaining 10.0% for retail investors.

 

The company proposes to utilize the net proceeds of the fresh issue towards repayment of its borrowings amounting to Rs 60 crore, payment of acquisition consideration of Edureka or repayment of a bridge loan availed specifically for the purpose of discharge of such acquisition consideration of Edureka amounting to Rs 25.19 crore, towards growth initiatives amounting to Rs 50 crore and the balance for general corporate purposes.

 

Strengths:

The company focuses on result-oriented method of teaching to impart knowledge to the students, which in turn assists the students to achieve success in the relevant courses. The company has an in-house and outsourced team of Mentors to constantly monitor progress of the students and identify their special requirements and assist the students to achieve their goals.

The company provides a wide range of learning solutions through its courses including competitive exams courses, professional courses, short term upskilling and reskilling courses to Students and professionals through its online, offline hybrid, offline blended, campus in campus and online live instructor led learning model in various languages.

The Company is managed by a team of experienced personnel. Each Subsidiary is managed by and comprises personnel having rich operational and business expertise in the courses offered by the respective Subsidiaries.

The company has established a strong presence in the competitive exam-oriented courses, particularly in Banking, State Public Service Commission, Insurance, Railway Recruitment Board and Staff Selection Commission. Further with acquisition of Edureka, the company has entered the market to provide instructor led learning in the niche information technology area related courses. Edureka has over 3 million subscribers on its YouTube channel, which is one of the highest subscriber bases in the world in the IT education sector. Edureka has customers based overseas, including many customers from the United States and United Kingdom. With the acquisition of Edureka, the company has access to these international markets and will continue to expand its overseas customer base.

The Company has an efficient infrastructure andresource management system in place and has strict quality control standards and offers courses at affordable prices.

The company's business model is technology driven, Asset Light & Scalable.The company's online and offline blended model allows it to expand its target market without being limited to geographical restrictions in which its centres are located. The courses may also be used as an independent learning through the internet, which offers greater flexibility and convenience to its students, who can access its content anywhere and at any time of the day. Its recorded video lectures with integrated self-assessment program complements its classroom courses by providing its students with an alternative channel for self-assessment

The Company's substantial investments are in content, courseware and technology, with minimum investments in tangible assets. The company is expanding its offline presence by engaging with Preferred delivery partners, where they will develop and manage Preferred delivery centres. This will enable the company to swiftly expand its network with minimum investments.

The company has evolved to shift to a COVID-19 or similar epidemic proof business model and the company believes that it has taken all possible steps to align its services to be pandemic proof. The Company's offline blended model mitigates the risk of lockdown by shifting completely to the online model which can be accessed by the student from anywhere in the world.

 

Weaknesses

 

The company was incorporated in November 2018 and commenced operations in Dec 2020 as such the operations of the company are yet to stabilize.

 

The company is incurring losses at both operational and net levels. The company incurred operating loss of Rs 7.63 crore and Rs 15.25 crore in FY2021 and first six months of FY2022,respectively,and net loss of Rs 8.28 crore and Rs 18.27 crore in FY2021 and the first six months of FY2022, respectively.

 

 

The company's growth strategy includes evaluating opportunities for strategic alliances, partnerships, investments, acquisitions, and rebranding of acquired business. If the company is unable to successfully identify and integrate acquisitions, its growth will be impacted.

 

Any changes in the company's relationships with its Preferred Delivery Partners or non-adherence to prescribed service standards, payment defaults or other contractual breaches or irregularities may adversely affect the company's business.

 

Strong competition in the business of providing competitive exam-oriented courses could also decrease the company's market share and compel it to reduce course fees or provide higher discounts on its course fees. This may have a material adverse impact on the number of students enrolled with the company and impact the revenues and profitability.

 

Most of the company's businesses are operated in and from the state of Tamil Nadu and Karnataka. Due to this geographic concentration of the company's business operations, its results of operations and growth might be restricted to the economic and demographic conditions of Tamil Nadu and Karnataka.

 

The company has not obtained copyright registrations for any of its content or Study Materials. In the event of a dispute on its copyright in any of its products or materials, the company may not be able to adequately protect its intellectual property rights.

 

A significant portion of the company's operating revenue is derived from its business of exam-oriented courses offered by Veranda Race and IT related professional courses offered by Edureka. Failure to attract students or working professionals in its courses, including due to an unsatisfactory success ratio, may adversely affect the company's business.

 

The company's ability to retain the present number of students serviced by it and attract new students is dependent upon various factors including its reputation and its ability to maintain a high level of service quality. Any failure by the company to retain or attract students may impact its business and its revenues.

 

 

The exam oriented and training courses offered by the company depends substantially on its Mentors and the company's ability to attract and retain them. Sudden decrease in the number of its Mentors due to attrition may affect the operations of the company.

 

The company has issued 7,378,585 fully paid-up, secured, redeemable, non-convertible debentures of face value of Rs 100 carrying a coupon rate of 4% per annum aggregating to Rs 73.78 crore to certain of the then shareholders and Promoters of Edureka. The NCDs are secured by way of pledge of 343,687 Edureka equity shares which is 40.44% of the equity share capital of Edureka. The NCDs are redeemable on September 17, 2024, together with interest aggregating Rs 82.99 crore. If the Company is not able to service its payment obligations for the redemption of the NCD and interest thereon, the NCD holder will have the option to enforce the pledge on Edureka shares and transfer such shares onto its own name which might lead to shareholding of the company in Eduraka might reduce and Edureka may cease to be the wholly owned subsidiary of the company.

 

The coaching and training sector in which the company operates is not specifically regulated. The central and state governments may change the existing regulations or introduce a new regulatory framework in the future. The impact of such changes or new regulations on the business cannot be ascertained presently and may affect the business of the company adversely.

 

The company's success depends significantly on its ability to continue to innovate and implement technological advances. If the company is unable to keep pace with evolving technology and user preferences, the business of the company will be adversely affected.

 

 

Valuation

The company was incorporated in November 2018 and commenced operations in Dec 2020. For 6M ended Sep 2021, the company incurred net loss of Rs 18.27 crore on sales of Rs 15.46 crore.

 

For FY2021, the company incurred net loss of Rs 8.28 crore on revenues of Rs 2.54 crore.

 

Edureka, which became the subsidiary of the company post share purchase agreement dated August30, 2021,has revenues of Rs 70.43 crore and 80.48 crore in FY2020 and FY2021 respectively. Edureka had EBITDA of Rs -21.38 crore and Rs -9.91 crore in FY2020 and FY2021 respectively.

 

Most of the students aspiring for preparation of competitive examinations and training courses enrol themselves with the company in the first quarter, i.e., from April to June of a Financial Year, thereby leading to an increase in the number of enrolment of students and consequently increase in the revenue as compared to other three quarters of the year.

 

Overall, its business and revenues fluctuate based on the academic cycle of courses and timelines of the entrance &competitive exams, which are cyclical and instantaneous in nature and dependent on the dates of the examinations as well as release of the examination results by respective authorities empowered to conduct such exam. Depending on the entrance / recruitment exams, company may recognize lower revenues in certain months or quarters of the year. In terms of its expenses, many of them are fixed in nature and are incurred throughout the year, though some expenses may increase during beginning of new batches, such as increments for Mentors and advertising and publicity expenses to recruit students for courses. Since revenues and expenses fluctuate quarter-to-quarter, it will result in fluctuation of profitability over different quarters.

 

At the higher price band of Rs 137, the offer is made at around 24.70 times P/(S H1FY2022 annualised sales). As explained above annualising first-half sales may not be appropriate due to Q1 being the peak quarter. However, FY21 sales are too low to factor it into valuation.

 

On December 28, 2021, and December 31,2021, the company has issued 29,94,669 and 82,300 equity shares of Rs 10 each at Rs 130 (including premium) on private placement basis.

 

6 warrants were issued to BCCL (Bennett, Coleman and Company Limited) for an upfront amount of Rs 32,50,000 per warrant and a warrant excise amount of Rs 3,25,00,000; 2 of which were converted into 5,00,000 equity shares of the company on January 17,2022 at Rs 130 per equity share and the balance 4 warrants were cancelled.

 

There are no listed peers for the company in India.

 

Veranda Learning Solutions: Issue Highlights

Fresh issue (in Rs crore)

200

Offer for sale (in Rs crore)

-

Offer for sale (in number of shares)

 

- in Upper price band

-

- in Lower price band

-

 

 

Price Band (Rs)

130-137

For Fresh Issue Offer size (in no of shares)

 

- in Upper price band

14598540

- in Lower price band

15384615

Pre issued capital (Rs crore)

 

Post issue capital (Rs crore)

 

- in Upper price band

55.8

- in Lower price band

56.6

Pre issue promoter and Promoter Group shareholding (%)

89.2

Post issue Promoter and Promoter Group shareholding

 

-On higher price band (%)

65.9%

-On lower price band (%)

65.0%

Bid Size (in No. of shares)

100

Issue open date

29/03/2022

Issue closed date

31/03/2022

Listing

BSE, NSE

Rating

35/100

 

 

Veranda Learning Solutions: Consolidated Financial

 

1903 (5)

2003 (12)

2103 (12)

2109 (6)

Sales

 -

 -

2.54

15.46

OPM (%)

-

-

-300.47

-98.62

OP

-0.10

-0.20

-7.63

-15.25

Other inc.

 -

 -

0.01

0.20

PBIDT

-0.10

-0.20

-7.63

-15.05

Interest

 -

 -

0.03

1.37

PBDT

-0.10

-0.20

-7.65

-16.42

Dep.

 -

 -

0.63

2.06

PBT Before EO

-0.10

-0.20

-8.29

-18.48

Exceptional items

 -

 -

-

-

PBT After EO

-0.10

-0.20

-8.29

-18.48

Total Tax

 -

 -

-0.01

-0.21

PAT

-0.10

-0.20

-8.28

-18.27

Minority Interest

 -

-

-

Net Profit

-0.10

-0.20

-8.28

-18.27

EPS (Rs)*

-0.02

-0.04

-1.48

-6.55

EPS is calculated based on post issue share capital of Rs 55.8 crore at upper price band. Face Value of Rs 10

EPS annualised

Figures in Rs crore

Source: Capitaline Corporate Database