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Career Point Infosystems Ltd IPOCirculation


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Recommendation Career Point Infosystems Ltd. provides tutorial services to


high school and post high school students for various
competitive entrance examinations including AIEEE, IIT-
Date Sep 2010
JEE and All India Pre-Medical and Pre-Dental Test. The
tutorial services are provided through classroom training
Offer Price Rs. 295-310
programmes conducted through a network of company
operated training centres and franchisee centres.
Issue Opens 16th Sep 2010

CPIL currently operates in two core business areas namely


Issue Closes 21st Sep 2010 Tutorial services and Education Consultancy and
Management Services (‘ECAMS’).
Issue Size Rs 115 Crs
During the years FY07-FY09, the total operating income of
No. of Shares 37.10-38.98 Lakh CPIL grew at a CAGR of 25%. As per the audited results for
the half year ended September 2009, CPIL registered a
Face Value Rs 10 growth of 30% over H1FY09 to Rs 31.58 crore with
EBITDA and PAT margin of about 40% and 33%
Centrum Capital Ltd, respectively.
BRLM
JM Financials Pvt Ltd
CPIL has developed a Synchro-School programme to
synchronize preparation for competitive examination with
Shareholding Pattern Pre Issue Post Issue formal school education. The company has recently forayed
into Education Consultancy and Management Services
Promoter & Promoter Group 75.3% 59.4-60%
(‘ECAMS’), catering to K-12 and Higher Education
segments in order to diversify its operations which would
Bodies Corporate & Others 24.7% 19.4-19.6%
provide an additional source of revenue.
Public [●] 20.4-21.2%
CPIL is valued at 30.1x its P/E at its lower price band and
31.6x at the upper price band. CARE has graded 3/5 for the
CPIL IPO indicating that the fundamentals are average
relative to other listed equity securities in India.
Objective of the Issue
(Rs in Crs)
Construct and development cost for 68.15
integrated campus facility

Expansion of classroom infrastructure and 16.44


office facility
Acquisitions and other strategic initiatives 15
To meet expenses towards general corporate NA
purposes

Arijit Das Ph:(033) 40042712/13/14


arijit.das@vckgroup.org VCK Research reports are available on Bloomberg VCKR <Go>

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Investment Rationale
Strong brand & geographic presence: The company has
established strong brand recognition and network of training centres
which comprises of Company Operated Training Centres and
Franchisee Centres across 13 states. The network provides access to
major markets in northern and eastern India. Also, the Kota centre
draws students from across the country and from Singapore and the
Middle East, which in turn reinforces the brand equity and its
geographical reach.

Training Centres No. of Centres

Company Operated Training Centres 14

Franchisee Centres 18
Source: Company, VCK Research

Source: Company, VCK Research

Development of integrated campus facility: The company is expected to complete the construction of integrated campus
facility at Kota by FY12 which will allow it to increase their enrollments. In order to support the expansion, company is also
increasing the number of faculty with a view to ensure adequate faculty student ratio. Further, the integrated facility would
increase the role in necessary addressing needs to students in addition to the tutoring services, which in turn will help in
tapping a wide range of the revenue flows arising out of the expenses incurred by a student during his stay at Kota.

Revenue Model
Revenue Break up
Centre Sale of
Royalty Study
3% Material
1%

Education
and
Training
96%

Source: Company, VCK Research

Source: Company, VCK Research

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Participation in formal education through ECAMS (Education Consultancy and Management Services) :
Under ECAMS the company is providing necessary management services which include laying strategic plan, human
resource management services, administrative services, advisory services and information technology related services. In
order to leverage its experience, the company has forayed into ECAMS contract with educational institutions.

Risks and Concerns


Difficulties in introducing new courses and expanding network: The company is having limited experience with
new course offerings and may need to modify systems and strategy or enter into arrangements with other institutions to
provide new courses effectively and profitably. Network Expansion poses unique challenges like acquisition of premises,
establishment of infrastructure across cities and maintain consistent standard of services through-out the network.
Significant amount of its revenue comes from Kota centre: A significant amount of CPIL's revenues are generated
from its Company Operated Training Centre situated at Kota as compared to other Training Centres. The Kota training
centre alone contributed ~56% and ~59% of its total revenues for FY09 and FY10 respectively. Any event including
slowdown or any economic or civil unrest in Kota or failure to perceive it as an appropriate destination for preparation of
competitive entrance examinations could materially impact enrollments of prospective students for Kota centre which may
adversely affect business.
Strong competition in the tutorial market: Tutoring business for competitive entrance examinations is highly
fragmented and competitive. There is a strong competition in the tutorial market, especially in the sector of preparatory
courses for competitive entrance examinations which could eventually decrease its market share and compel them to
reduce tuition fee.

Relative Valuation
CPIL is primarily engaged in the business of providing tutorial services for various competitive entrance examinations
including AIEEE, IIT-JEE, AIPMT. There are many other established player in the market that have greater brand recall like
Bansal Classes, FIITJEE, Akash Institute, Resonance, Allen and Brilliant Tutorials. Since there is no listed comparable
company having a similar business model, we have chosen the companies which we believe are peers in the segment in
which the company operates:

Peer Comparison

EV/EBIDTA
Companies Market Cap FV P/E (times) P/B (times) ROE (%) OPM (%) ROCE(%)
(times)

Career Infosystems Limited - 10 31.6 4.3 69.47 13.27 53.5 51.40

Everonn Education 10607.44 Mn 10 22.34 2.2 6.03 19.42 25.8 17.02

Educomp Solution 55408.82 Mn 2 25.2 4.31 12.97 26.68 45.27 14.41

NIIT 11845.61 Mn 2 32.4 2.35 9.68 14.31 6.91 11.39

Source: Company, VCK Research

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Financial Summary (Rs in Crs) (Rs in Crs)

Consolidated Profit & Loss Statement Consolidated Balance Sheet

PARTICULARS FY 07 FY 08 FY 09 FY10 PARTICULARS FY 07 FY 08 FY 09 FY10

INCOME : SOURCES OF FUNDS:

Net Sales 29.07 38.02 45.15 61.7 Share Capital 5.07 12.07 12.07 14.4
Share Warrants & Outstandings 0.52 0 0 0
Other Income 0.9 3.01 2.7 2.1
Total Reserves 16.86 30.42 45.41 119.6
Total Income 29.97 41.03 47.85 63.8
Net Worth 22.45 42.5 57.5 134.1
Cost of Study Material Consumed 2.13 2.38 1.79 2.2 Minority Interest 0 0.15 0.14 0
Employee Cost 4.6 7.2 11.9 20.9 Secured Loans 0 0 5.2 0.1
General and Administration Unsecured Loans 2.9 0 0 0
5 7.9 9.9 14.7
Expenses
Total Debt 2.9 0 5.2 0.1
Miscellaneous Expenses 0.02 0.08 0.08 0.08
Total Liablilities 25.4 42.6 62.8 134.2
Total Expenditure 11.78 17.52 23.61 37.8 APPLICATION OF FUNDS :
EBIDTA 17.29 20.5 21.54 23.9 Gross Block 2.06 6.59 20.68 24.5

Interest 0 0.05 0.18 0.02 Less: Accumulated Depreciation 0.17 0.34 0.71 1.2
Net Block 1.89 6.25 19.97 23.2
Depreciation 0.13 0.2 0.42 0.26
Intangible Assets 3.75 3.61 7.34 17.7
Profit Before Tax 18.06 23.26 23.54 27.3
Capital Work in Progress 2.06 8.84 7.28 7.2
Provision for Tax 6.05 7.99 8.56 9.5 Total Fixed Assets 7.7 18.7 34.59 48.1
Profit After Tax 12.01 15.27 14.99 17.8 Investments 2.92 1.38 2.19 76.6
Current Assets, Loans & Advances
Inventories 0.35 0.96 1.85 1.7
Financial Ratios
Sundry Debtors 0.56 1.8 2.35 0.5

PARTICULARS FY 07 FY 08 FY 09 FY 10 Cash and Bank 12.07 17.2 13.29 22.7


Loans and Advances 9.2 10.71 18.5 32.1
Debt to Equity(x) 0.13 0 0.1 0 Total Current Assets 22.19 30.66 35.99 57.1
Less: Current Liabilities and
Current Ratio(x) 3.00 3.65 3.56 5.39 7.4 8.4 10.1 10.6
Provisions

ROE(%) 53.50% 35.93% 26.07% 13.27% Net Current Assets 14.79 22.26 25.89 46.5
Deferred Tax Liability (0.1) (0.1) (0.2) (0.2)
ROCE(%) 116.90% 92.09% 83.20% 51.40% Preliminary Expenses 0.1 0.4 0.4 1.6

EBIDTAM% 59.48% 53.92% 47.71% 38.74% Total Assets 25.4 42.6 62.8 134.2
Source: Company, VCK Research
PATM% 41.31% 40.16% 33.20% 28.85%

Source: Company, VCK Research

Disclaimer - The information in this report has been obtained from sources, which VCK Research believes to be reliable, but we do not hold
Source: Company, VCK Research
ourselves responsible for its completeness in accuracy. All estimates and opinions in this report constitute our judgment as of this date and are
subject to change without notice. VCK Research will not responsible for the consequence of reliance upon our opinion or statement contained
herein or for any omission.
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Fax: (022)(022) 6632-5727
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