IPO note on Career Point Infosytem

Investors can consider taking exposure to the initial public offering by Career Point Infosystems, a tutorial services provider, given the encouraging prospects for its business with sustainability and visibility over the long-term. At the upper end of the price band (Rs 295-315), the offer discounts the company's estimated FY-11 per share earnings by about 25 times on a fully diluted equity base. This makes the offer expensive and investors may have to hold on to the shares for a two-three year period for reasonable capital gains. Although there are no comparable peers, companies that broadly come under the ‘education' category have enjoyed superior valuations.
Career Point saw its revenues grow at a compounded annual rate of 31.2 per cent over a three-year period to Rs 67.8 crore in 2009-10, while net profits expanded at the rate of 18.4 per cent during the same period to Rs 19.9 crore. These figures may have been better but for FY-09, when the profits grew a mere 4.5 per cent due to a spike in manpower costs. In FY-10, profits have grown by 22.8 per cent over the previous fiscal, which is more in line with the rates at which Career Point has historically grown its profits. A strong enrolled student base, a business that may be sustainable given India's competitive entrance-exams' dynamics and the ability to innovate with the latest audio-visual technologies in its pedagogy, are key positives for the company. Besides, a strong presence in Kota, the hub for ITT JEE coaching, and a near debt-free balance-sheet are added attractions.

Career Point Infosytem is a tutorial services provider in India. They provide tutorial services to high school and post high school students for various competitive entrance examinations including AIEEE, IIT - JEE All India Pre-Medical and Pre-Dental Test. The tutorial services are provided through classroom training programs conducted through a network of Company Operated and Franchisee Centers.

As on July 31, 2010 they had 17 Company Operated Training Centers and 16 Franchisee Centers and during the four months period till July 31, 2010 they have received 28,626 enrollments. The company has a team of 231 faculty members as on July 31, 2010 (excluding faculty members of franchisees) comprising of graduates in engineering and science.

They have, over a period of time, built their content repository of over 10,000 pages of text content and over 12,000 minutes of video content for various tutorial services offered by them. For students who are not able to attend the regular classroom program, they offer distance learning program comprising of correspondence and test series courses which have been systematically designed to provide effective and efficient education to students in a simple and lucid manner.

They plan to use technology as a tool to provide access of their content repository to students across India. To leverage their content repository and to provide a personalized learning environment to the students, they have recorded the lectures of their experienced faculty members through Career Point Knowledge Lab. Further, they have designed and developed Synchro-School program to synchronize preparation for competitive examination with formal school education.

They have recently forayed into Education Consultancy and Management Services ('ECAMS'), catering to K-12 and Higher Education segments. Further, to address larger base of potential students, they have introduced technology enabled education delivery platform for delivering content through 'TechEdgeClass'.

Business Strategies

Development of integrated campus facility
CPIL currently operates 17 Company Operated Training Centres and 16 Franchisee Centres. Realising the need of students, they are constructing an integrated facility at Kota. They expect to complete the construction of integrated facility at Kota by Fiscal 2012. In addition to catering to the existing student base, the new integrated facility will also allow them to increase enrollments. In order to support the expansion, they will also be increasing the number of faculty with a view to ensure adequate faculty student ratio.
Enter new geographic markets and new course offerings
The company believes they can increase their student enrollments by entering new geographic markets that offer significant growth potential. In particular, they look to expand in those markets which offer optimum opportunities in terms of student enrollments based on parameters like lack of proper education, aspiration of students, socio-economic background. They intend to continue enhancing course offerings to meet the evolving market demand in fields which do not form part of their traditional offerings. They may seek to provide tutorial services in specialties other than engineering and medical. They also intend to foray into course offerings relating to vocational education and training.
Reaching students through innovative productsTechEdge Class is a concept based on virtual classroom environment which replicates the model of a real classroom with the help of VSAT/VPN technology. In a TechEdge Class, students interact with instructors online using audio and video conferencing facility. In order to reach the students through this technology, CPIL has entered into an agreement with Hughes Communication India Limited ('HCIL') for providing satellite based interactive services through HCIL's network spread across India. They intend to provide Synchro-School Programme under their TechEdge Class initiative through VSAT/VPN technology and learning management software. They also intend to increase the number of Career Point Knowledge Labs across the nation.
Opportunistically pursue strategic acquisitions
In evaluating potential acquisitions, the company seeks to pursue selective strategic acquisitions and joint venture opportunities to augment capabilities, broaden service offerings and increase geographical presence with the potential for course replication at existing centres, new course offerings, and new markets with attractive growth opportunities. Their potential targets are companies involved in the education sector or companies engaged in providing services to the education sector and whose operations can be scaled up by leveraging CPIL's experience.

Blog including the analysts and others involved in the preparation or issuance of this material and their dependants, may on the date of this report or from, time to time have "long" or "short" positions in, act as principal in, and buy or sell the securities, mutual fund units, or derivatives thereof of mutual funds, asset management companies mentioned herein. Our people, dealers, traders, advisors and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinion that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein.