Saturday, August 6, 2011

Tree House Education IPO

Tree House Education and Accessories, an Education services provider, is entering the capital market with an IPO of upto 84,32,189 equity shares of face value of Rs 10 each by diluting 25.01% stake.

The company operates the largest number of self-operated pre-schools in India and has 223 pre-schools under the brand name of “Tree House” across 33 cities in India out of which 149 are operated by the company and the rest by franchisees. The company also provides educational services to K-12 schools which includes designing curriculum and providing teaching aids, supplying methods for imparting education, organizing extra-curricular activities for students and teacher training. The pre-schools are mainly located in the states of Maharashtra, Gujarat, Karnataka, Rajasthan and Andhra Pradesh. The company has been ranked amongst the 100 Small Business of the year 2010 in the annual survey conducted by the Franchising World.

Tree House Education IPO shall open on 10th August and shall close on 12th August, 2011. The company has fixed the price band of Rs 135 to Rs 153 for the IPO. The company will offer discount of Rs 6 per equity share on the final issue price to retail investors.

Tree House Education and Accessories intends to utilise the issue proceeds for expansion of pre-school business; acquisition of office space; procurement of exclusivity rights to provide educational services; construction of infrastructure for educational complexes in Rajasthan and Gujarat; and repayment of loan.

The company reported a net profit of Rs 9.2 crore in the year ended March 31, 2011 on total income of Rs 41.15 crore. In the financial year 2009-10, net profit of the company stood at Rs 2.6 crore and total income was at Rs 21.87 crore.

JM Financial Consultants Pvt Ltd and Motilal Oswal Investment Advisors Pvt Ltd are the book running lead managers to the issue. Link Intime India Pvt Ltd is the registrar.

Recommendation:
CRISIL has assigned an IPO Grade 3 to Tree House Education IPO which indicates average fundamentals. We would not recommend Tree House IPO to investors with so much volatility in the global stock markets at this time.

Subscription:
Tree House Education IPO managed to get fully subscribed on the last day of the IPO. The IPO has got 1.84 times subscribed at the close of the IPO.

At the close of the IPO,
QII segment got subscribed by 1.02 times
NII segment got subscribed by 1.68 times
Retail segment got subscribed by 2.76 times

Allotment:
Click here to check Tree House Education IPO Allotment status!

Listing:
Tree House Education IPO got listed on 26 August 2011. The IPO had a disappointing listing and dropped nearly 12% at the close due to weak market conditions. The stock closed at Rs 119.30 as against issue price of Rs 135 on the NSE. It touched an intra-day high of Rs 161.50 and low of Rs 105.15 after opening at Rs 132.