Veranda Learning Solutions IPO: All You Need To Know

Veranda Learning Solutions Ltd., an offline hybrid edutech company based out of Tamil Nadu and Karnataka, will launch its three-day initial public offering on Tuesday, March 29.

The IPO comprises a fresh issue of Rs 200 crore, according to its red herring prospectus. It is seeking a market value of Rs 764.1 crore at the upper end of the price band by selling shares at Rs 130-137 apiece.

Proceeds will be used for repaying or prepaying certain borrowings and to fund growth initiatives, among other purposes.

The company raised Rs 40 crore through a preferential placement of shares to veteran investment banker Hemendra Kothari, and Bennett, Coleman and Co., among others, in December, at Rs 130 apiece.

This is the first IPO to launch after the market witnessed a global equity selloff amid market volatility that led to the value erosion of new-age companies such as Paytm (One97 Communications Ltd.) and Zomato Ltd., after listing.

Veranda Learning's maiden offer constitutes 26.17% equity of the post-equity share capital. Promoters will hold 65.9% post issue.

Issue Details

• Issue opens on: Mar. 29.

• Issue closes on: Mar. 31.

• Issue size: Rs 200 crore.

• Face value: Rs 10 apiece.

• Lot size: 100 equity shares and multiples.

• Listing on: BSE and NSE.

• Lead managers: Systematix Corporate Services Ltd.

Use of Proceeds

The company proposes to use the proceeds for:

• Repayment or prepayment, in part or full, of all or certain borrowings: Rs 60 crore

• Payment of acquisition consideration of Edureka: Rs 25 crore

• Growth initiatives: Rs 50 crore

Business

Promoter Kalpathi Suresh and others entered the capital markets in 1995 with the listing of SSI Ltd., which subsequently acquired Aptech Ltd. before its was sold to Rakesh Jhunjhunwala. They again forayed into the education space with Veranda Learning Solutions, the holding company for the educational segment they acquired in the last two years. The company was incorporated on November 2018, as Andromeda Edutech Pvt. It is a "multi-course tech-infused company" that delivers courses online, offline and in hybrid format.

The company started its business operations in December 2020 by acquiring the coaching institute Chennai Race, and subsequently acquired Edureka for Rs 193 crore.

It targets the southern market of Tamil Nadu and Karnataka, and provides course material in Tamil, Telugu, Malayalam, Kannada, English and Hindi.

The company has four verticals:

• Veranda Race Learning Solutions Pvt. provides educational training for state service commission, bank and insurance exams.

• Veranda CA provides training for chartered accountancy.

• Veranda IAS Learning provides educational training for civil services examinations or UPSC.

• Brain4ce Educations, through its brand Edureka, provides online training platform for short-term technology skills for tech professionals.

The company operates through preferred delivery centres with whom it shares 65-75% revenue. It plans to expand its delivery centres to Hyderabad, Bengaluru, Gurugram, Kolkata, and Mumbai, as well as offer content in languages such as Hindi, Marathi, Gujarati, Bengali and Odiya.

Edureka and Veranda CA are the largest revenue earners for the company.

Financials

The company has a relatively short financial history as it began operations in December 2020. It has been loss-making during the financial year 2021 and the six-month period ending September 2021.

Peer Competition

The company claims there are no listed companies in India that engage in a business similar to that of the company.

Risk Factors

• If it is unable to successfully identify and integrate acquisitions, its growth strategy, business, results of operations and prospects may be adversely affected.

• Any changes in relationships with its preferred delivery partners or non-adherence to prescribed service standards, payment defaults or other contractual breaches or irregularities may adversely affect business, results of operations, and prospects.

• The intellectual property developed by the company has not been registered under the patent or copyright laws of India.

• A significant portion of operating revenue is derived from 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 courses, including due to an unsatisfactory success ratio, may adversely affect revenues, business, results of operations and prospects.

• Ability to retain the present number of students and attract new students is dependent upon various factors, including its reputation and ability to maintain a high level of service quality. Any failure to retain or attract students may impact business and its revenues.

• The exam-oriented and training courses offered by the company depends substantially on "mentors" and the ability to attract and retain them. Sudden decrease in the number of mentors due to attrition may affect operations and business.