Photo: Bloomberg
Photo: Bloomberg

CL Educate to file for IPO by end of March

The proposed issue includes both fresh shares and an offer for sale by some of its investorsboth institutional and individual

New Delhi: Education company CL Educate Ltd, a key name in the test-prep segment, is looking to raise 300-350 crore through share sales and is set to file documents with market regulator Securities and Exchange Board of India (Sebi) by March end.

CL Educate, formerly known as Career Launcher, had filed documents with Sebi in September 2014 but withdrew them in April 2015 to acquire a education service firm. In September, it acquired a majority stake in Accendere.

The firm said it is now ready to enter the market again—to file the documents by March-end and go public in the second quarter of 2016-17.

“We are ready to file the papers and go public. The issue size is bigger than last time," said Nikhil Mahajan, chief financial officer (CFO) and executive director. Last time, it was looking to raise between 180-240 crore.

Kotak Mahindra Capital is managing the proposed initial public offer (IPO). The proposed issue includes both fresh shares and an offer for sale by some of its investors—both institutional and individual, Mahajan added.

CL Educate has two institutional investors—private equity firm Gaja Capital and Housing Development Finance Corp. Ltd (HDFC), who are looking to exit in parts.

Similarly some of the dozen-odd individual investors are likely to exit as well, the CFO said. He said that when it filed the draft red herring prospectus, HDFC was not eligible to exit but now it is.

While Gaja Capital has invested $10 million ( 66.7 crore) in several tranches, HDFC Ltd has invested 35 crore. Gaja has been invested for the past eight years and HDFC for the past five years. Individual investors with a few crore rupees each have been invested for over a decade.

While the firm is looking to raise nearly 150 crore through the fresh issue, the rest will be through dilution of stake by promoters—“thus making it a 350 crore issue with plus-minus 10%", said a company official on condition of anonymity.

Once public, the firm will be the third test preparation firm after Career Point Ltd and MT Educare Ltd to be listed. Kota-based coaching company Resonance Eduventure has deferred its IPO plans, Mint reported on 26 February.

Mahajan said that though his firm is known for test prep, it has diversified in last few years, both organically and inorganically.

CL Educate is active in vocational education, formal schooling, education content publishing and event management, too; 45% of its revenue comes from test prep, 30% via its back-end event firm Keystone, 10% from vocational education, 10% from publishing and 5% from school education. It said growth at all its businesses is in the double digits.

CL Educate started operations in 1996 as test prep firm for MBA aspirants. It has 146 coaching centres in 86 cities and 27 vocational educational centres in six states. Its publishing arm has some 900 distributors, Mahajan said.

The CFO said the funds will be utilized to “expand their existing business" without diversifying further. Nearly 65% of Indians are below 35 years of age and over 300 million of them are pursuing education.

“Education firms want to expand their reach and its needs investments. Earlier IPO was not the option as their size was not good, but now some of them are well placed to go to market. CL Educate going for IPO in a way is logical from their growth point of view but like all listed firms they have to be more transparent in their transactions," said Sunil Sinha, a director at credit rating firm India Ratings.

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