Career Point sizzles on debut, but analysts wary

Career Point sizzles on debut, but analysts wary
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First Published: Wed, Oct 06 2010. 03 44 PM IST
Updated: Wed, Oct 06 2010. 03 44 PM IST
New Delhi: Tutorial services provider Career Point Infosystems saw a dream market debut on Wednesday as investors bet on robust growth outlook for the Indian education sector, though analysts viewed it as an expensive buy.
Shares in Career Point more than doubled on listing, to end almost 104% up at Rs632.35 in a Mumbai market that rose 0.66%. Nearly 15 million shares changed hands, making it one of the most active stocks on the Bombay Stock Exchange.
Rajasthan-based Career Point provides tutorial services for various entrance examinations, including the highly competitive engineering and medical exams for admission into India’s premier colleges.
Although the company has a niche play in terms of service offering, it is focused only in a particular region, which may hurt its growth avenues in the near term, Angel Broking analyst Shristi Anand said.
The company’s revenue outlook of Rs 830- Rs 840 million and Rs 250 million in profit this year makes its 12-month forward price to earnings ratio “very high” at about 40, Anand said.
“Tutorial services business is too localised. For them to go pan-India, it will take some time to establish leadership. So we would suggest exit by taking the listing gains,” she added.
Career Point, which raised Rs 115 crore through the public issue, intends to utilise the proceeds to meet costs of construction and development of an integrated campus facility and to build classroom infrastructure.
VVLN Sastry, country head, Firstcall India Equity Advisors, said companies like Career Point and Firstobject Technologies Ltd enjoy a lot of attention due to “an e-education buzz,”, but there was definitely some profit-taking risk with the stock.
Analyst Krupal Maniar of ICICI Securities said despite people’s inclination towards “recession-free stories,” Career Point is “definitely expensive” at this level.
“There is always some fancy valuation attached to these stocks, specially when the market is moving up and you are flooded with liquidity,” Maniar, who also advises profit taking on the stock, said.
IPO Appetite
Career Point follows in the wake of successful listings by Microsec Financial Services on Tuesday and movie distributor Eros International Media on Wednesday, both of which debuted at significant premiums, underscoring a revival in investor appetite for Indian share sales.
Foreign funds have bought a record $20.1 billion of Indian equities so far this year, with more than one-third of that having come in since the start of September. Dealers expect foreign fund inflows to maintain pace at least until end-October. A swarm of Indian companies plan IPOs in the next few weeks, tapping a market trading at 33-month highs, and rushing to get out of the way of many jumbo state-run offerings expected over the next couple of months.
“There is big appetite from all the funds in Singapore, Hong Kong for education stocks in India, and we believe there are very few companies where they can invest,” Naushil Shah, an analyst with Anand Rathi Securities, said.
Since Career Point has a franchise-based business model, it will not require significant money to be invested upfront, which will raise profitability, Shah said.
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First Published: Wed, Oct 06 2010. 03 44 PM IST