Arihant Academy Limited

Arihant Academy Limited is engaged in providing coaching services and parallel educational support vertical in the western suburbs of Mumbai, Maharashtra for Class 8, 9 and 10 for both State Board and ICSE Board; Class 11 and 12 for commerce and science section; tutoring students in science field for entrance exams such as JEE (Main), JEE (Advanced) and MHT- CET (State level), NEET (National Level), MHT- CET (State Level, Maharashtra) and preparing students for professional exams such as CS and CA for entry level and second level exam, in the commerce section. They offer hybrid model of teaching services through classroom-based coaching under traditional Chalk & Talk concept and digital and distance learning, which supplement their classroom courses and allow students to engage in self-paced learning. Company operates under the brand name 'Arihant Academy'. As on date of this Prospectus, company is operating prominently in the western suburbs in Mumbai, they are having 14 operational Coaching centres. All the services provided are through are classroom training program conducted through a network of company operated employees. In all the above centres they run all the 3 section namely School section, Commerce section and Science section. They cater to around 6,000 students from all the 3 sections from these above 14 coaching centres As on October 31, 2022, they have around 155 teaching staff and 145 non-teaching staff at office (including their coaching centers) to look after the day-to-day business operations, administrative, secretarial, legal and accounting functions in accordance with their respective designated duties. As per financial performance, AAL has posted total income/net profits of Rs 19.21 Cr / Rs 0.42 Cr (FY20), Rs 14.10 Cr / Rs 1.13 Cr  (FY21), Rs 15.32 Cr / Rs 2.2 Cr (FY22) and Rs 13.01Cr / Rs 1.42 Cr (6M FY23). So company has shown declining revenue, but jump in net profit that is very surprising. Company has posted an average EPS of Rs 3.29 and average RoNW of 37.33% for last three fiscals. Issue is priced at a P/B of 2.71 as per NAV of Rs 33.16 post issue. As per FY22 earnings on fully diluted equity post issue, asking price is at P/E of around 27 and as per annualised FY23 earnings P/E is 19.13. Comparison between listed peers is shown in above table. On BRLM's front, Shreni Private Limited associated with this SME IPO and handled 15 SME IPOs in last 3 years. From last 10 IPO all opened above issue price or at par. As of now from last 10 IPOs, three are trading below and remaining are trading above issue price or at par. ( As on 10.12.22 ) As per financials, AAL has shown declining sales and increasing net profits, RoNW is 40.98% and P/E is respectively 27 and 19.13 as per FY22 and annualised FY23 earnings, which looks fully priced. As sales are continuously declining and increasing net profit generates doubts and same margins post IPO looks difficult. Company is in coaching service and its highly fragmented and competitive segment. Performance of BRLM is good. So we are giving NEUTRAL rating to this SME IPO.

• 1 Mr. Anil Suresh Kapasi
• 2  Mr. Umesh Anand Pangam