Veranda Learning Solutions IPO opens today: New company, loss-making business and high valuations —Avoid this issue, says Anil Singhvi

The initial public offering (IPO) of Veranda Learning Solutions Limited is opening for subscription on March 29, Tuesday. The three-day IPO will close on March 31. The IPO price has been fixed at Rs 130-137 per equity share. One lot comprises 100 shares and a minimum order quantity of 100 shares. The company's issue size aggregates to Rs 200 crore (fresh issue).  

Ahead of the IPO, the company raised Rs 46.75 crore from anchor investors on Monday. Anchor investors who participated in the offer include names like AG Dynamic (53.48%), Resonance Opportunities (21.39%) and Next Orbit ventures (25.13%). 

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What should investors do? 

As the IPO went live on Tuesday, Zee Business Managing Editor recommended investors to avoid this issue saying it is a very new company and do not infuse much confidence 

"The company started business operations only 15 months back and seems to be in rush to float the IPO. Besides, it caters to a loss-making business and has poor and complicated Financials," said Anil Singhvi.  

Zee Business Managing Editor said the most importantly it comes at extremely High valuations 

The only positive thing about this IPO is that the company has highly qualified management.  

The company aims to use proceeds of the offer to repay debts worth 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 (Rs 25.2 crore), and growth initiatives (Rs 50 crore). 

"Considering the FY21/FY22 (annualized) revenue of Rs.25.40 mn/ Rs.164.63 mn on a post issue basis, the company is going to list at a MCap/Sales of 300.84x/24.71x respectively with a market cap of Rs.7,641 mn . There are no listed companies in India that engage in a business similar to that of the company. We assign “Avoid” rating to this IPO as the company is a loss making company with negative operating cash flows and is available at expensive valuation on an absolute basis, said Marwadi Financial Services in its IPO note.

Company details

Veranda started its operations in December 2020. It provides preparatory courses for students preparing for UPSC exams, state public service commissions, SSC, banking, insurance, railways and chartered accountancy, through four wholly-owned subsidiaries for different exams — Veranda Race Learning Solutions, Veranda XL Learning Solutions, Veranda IAS Learning Solutions, and Brain4ce Education Solutions (Edureka).