Everonn Systems India is entering the capital market on 5th July 07 with a public issue of Rs.50 crores in the price band of Rs.125 to Rs.140 per share. At the upper band, issue would comprise of 35.70 lakh equity shares.
For FY 07, the company recorded a sales of Rs.43.04 crores, EBITDA of Rs.17.63 crores, PAT of Rs.4.86 crores on equity of Rs.10.28 crores, resulting in an EPS of Rs.4.72.
The company is now expanding its institutional education and IT infrastructure services as also for Virtual and Tech enabled learning solutions and total fund requirement is estimated at Rs.66.06 crores. This is largely met from equity issue, of which Rs.14.06 crores preferential allotment having made in August 2006 at Rs.106 per share.
The company would bid for BOOT projects to set up and run computer education centres across government schools. These contracts are funded out of government budgetary allocations made from Sarva Sikhsha Abhiyan and ICT schools and company plans to add 1,000 schools every year. The company has signed an MoU with West Bengal government to take up IT education in 555 schools and have in turn signed MoU with 146 schools of which 96 schools are made operational. The company has also got 216 schools in Karnataka under the ICT project for such schools.
The company needs to supply all hardware, software and reading materials to the school for which lease/royalty for 6 years is charged by the company. At the end of 6 years, hardware is transferred to the school, free of cost. One school needs an investment of about Rs.4 lakh and the company had estimated requirement of Rs.30 crores for 750 schools. Also, working capital cycle is very high and payment is coming after 180 days. Due to this, the sundry debtors of the company was at Rs.27.97 crores on 31-03-07 on topline of Rs.43.04 crores. A cycle of about 8 months. As cost of equipments needs to be recovered over 6 years, depreciation and amortization of the company are very high, which was at Rs.8.44 crores for FY 07.
The revenue model of the company is very much comparable with Educomp Solutions, which had sales of Rs.49.86 crores and net profit of Rs.13.13 crores for March 07 quarter. On equity of Rs.16.37 crores, EPS was at Rs.17.30 for FY 07. EBITDA margin was at 47% for FY 07 as well as for Q4 of FY 07.
The EBITDA margin of the Everonn was at 41% for FY 07, which would increase with improvement in the topline. Even expanded equity of Rs.13.85 crores would be very much comparable with Educomp. Fresh infusion of Rs.60 crores would sharply improve the financial performance of the company and it is capable of posting a growth of 40% plus, over next 3 to 4 years.
Considering these facts and performance of Educomp in the secondary market, investment is strongly recommended.