CL Educate Shares Close 16% Lower Than Issue Price On Listing Day
CL Educate’s Rs 239 crore IPO was subscribed 1.9 times.
CL Educate Ltd., which runs test preparation centres under the Career Launcher brand, became the first education service provider in almost five years to make a stock market debut.
The company’s shares closed 16.7 percent lower on the BSE Ltd. than the initial public offer’s issue price of Rs 502. The company listed at Rs 402, a 19.9 percent discount to its issue price on the National Stock Exchange, but closed Rs 20 higher than the listing price.
CL Educate's Rs 239-crore initial public offering was subscribed nearly two times, with the highest demand coming from non-institutional investors.
It had raised nearly Rs 72 crore by allocating shares to anchor investors.
The company will use the amount raised to meet working capital requirements, fund acquisitions and reduce debt, it had said in its red herring prospectus. Ten promoters and 29 other shareholders have also diluted 18.2 percent stake through this IPO.
The company plans to increase its focus on the test preparations segment and is also going to increase its presence in the online tutorial space.
Going ahead, our focus will be on the asset light business which is test prep (test preparations) and when you talk about the new segment we have just acquired ETEN and ETEN opens up the opportunity of CA (chartered accountancy) to us. In terms of other products you can say it is going to be our online push.Gautam Puri, Managing Director, CL Educate
CL Educate, which is the fourth educational service provider to list in India, plans to increase its presence in Tier-III and Tier-IV cities. The company expects its revenue to grow at the rate of 10 percent annually and its profit to grow at the rate of 14 percent.
Education stocks have been under pressure in the recent past. MT Educare Ltd. which went public in 2012, traded 13.5 percent lower in the previous trading session than its listing price. The stock has seen its value fall around 51 percent in the last one year.
Tree House Education and Accessories Services Ltd., which made its debut in 2011, trades more than 500 percent lower than its listing price. In the last year alone, it lost 76 percent , after Zee Learn scrapped a merger plan citing Tree House’s worsening financials and reports that it may shut playgroup school branches.
Career Point Ltd. which listed in 2010, has fallen 438 percent below its listing price.
While the historical performance of its peers may not portend well for CL Educate, the popularity of initial public offerings in India this year may be seen as something to cheer about.
The demand for initial public offerings in India touched an 11-year high this year as five IPOs were cumulatively subscribed 70 times. The three companies that listed saw an average listing premium of 54.3 percent over the average issue price. Avenue Supermarts Ltd. led the pack with a premium of 102 percent, while Music Broadcast Ltd. and BSE Ltd. listed at a premium of 26 percent and 34.6 percent respectively.