CHETANA EDUCATION LIMITED IPO: Is the Valuation Too High?

CHETANA EDUCATION LIMITED Introduction

Chetana Education Limited is a prominent player in the education sector, known for its commitment to providing quality education and fostering academic excellence.

Brief about CHETANA EDUCATION LIMITED

Summary of the business of CHETANA EDUCATION LIMITED

CHETANA EDUCATION LIMITED is a content-based company, specializing in educational book publishing for the CBSE/State Board curriculum catering to the K-12 segment. Additionally, we provide access to educational software for learning videos (for teachers and Students) accessible through QR (Quick Response) codes, backed by a comprehensive sales and distribution network. We currently focus on serving the Maharashtra State Board and Central Board of Secondary Education (CBSE), covering the spectrum of education books from early pre-primary learning to K-12 course. During the Fiscal year 2023, we sold over 6 million books, covering students across different standards ranging from pre-primary, primary, secondary, and higher secondary levels.

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History

Company was originally formed as a Limited Liability Partnership in the name and style of “Chetana Publications (India) LLP” under the provisions of the Limited Liability Partnership Act, 2008 on December 30, 2017 vide Certificate of Incorporation issued by Central Registration Centre, Registrar of Companies. Consequently, our name was changed to ‘Chetana Education LLP’, and a fresh certificate of incorporation dated October 17, 2021 was issued by the RoC Subsequently, our Company was converted into a public limited company under Companies Act with the name ‘Chetana Education Limited’ pursuant to a fresh certificate of incorporation dated January 21, 2024 was issued by the Registrar of Companies, Mumbai, Maharashtra, bearing CIN: U58111MH2024PLC417778.

Anil Jayantilal Rambhia, Rakesh Jayantilal Rambhia, Shilpa Anil Rambhia, Diva Anil Rambhia, Aashna Anil Rambhia, Jania Rakesh Rambhia and Chetana Publications Private Limited were the initial subscribers to the Memorandum of Association of our Company.

Promoters & Board of Directors

• Anil Jayantilal Rambhia, Rakesh Jayantilal Rambhia & Shilpa Anil Rambhia are the Promoters of our Company.

Board of directors

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Share Holding pattern

Qualitative Factors

• Focused digital and technology platform
• Consumer focused education content player
• Healthy position in the K-12 market
• Established network for content development and printing
• Widespread sales and distribution network
• Experienced management and leadership team

Strategy

• Increasing our presence in Maharashtra State Board, CBSE and other State Boards.
• Strengthening technology enabled system including digital media
• Focus on talent acquisition.
• Diversification of product range

Industry Outlook

EDUCATION AND TRAINING SECTOR OUTLOOK

• With ~26.31% of India’s population in the age group of 0-14 years, India’s education sector provides numerous opportunities for growth.
• According to the Union Budget 2023-24:
• The government allocated Rs. 68,804.85 crore (US$ 8.3 billion) for the Department of School Education and Literacy, compared with Rs. 59,819.37 crore (US$ 8 billion) in the Union Budget 2022-23, a 13.06% YoY increase.
• Allocation towards the Samagra Shiksha Scheme increased by around 20.3%, from Rs 31,050.16 crore (US$ 4.16 billion) in FY22 to Rs. 37,383.36 crore (US$ 5.01 billion) in FY23.
• Government of India’s target of Gross Enrolment Ratio (GER) of 50% by 2035 for students in the 18-23 age group is expected to drive investments in the education space. In 2020-21, GER stood at 27.3%.
• According to KPMG, India has also become the second largest market for E-learning after the US.
• The online education market in India is expected to grow by US$ 2.28 billion during 2021-2025, growing at a CAGR of almost 20%. The market grew by 19.02% in India in 2021.
• The Indian edtech market size is expected to reach US$ 30 billion by 2031, from US$ 700-800 million in 2021.
• The edtech space has attracted private equity investments of over US$ 4 billion over the last five years.
• A total of 100 Indian institutions were qualified for the Times Higher Education World University Rankings 2023, up from 63 in 2020.
• India had 89 universities in Times Higher Education Emerging Economies University Rankings 2022, behind Russia with 100 and China with 97.
• As per the QS World University Rankings 2023, India is home to 41 out of almost 1,500 top global institutions in the world, with the Indian Institute of Science in Bengaluru being the highest-ranked institution in the country at rank 155.

Advantages in India for education and training industry

• COMPETITIVE ADVANTAGES
  • Large English-speaking population allows easy delivery of educational products. India was ranked 52nd out of 111 countries in the English Proficiency Index 2022.
  • Nine Indian institutes- the Indian Institute of Science (IISc) in Bengaluru and eight Indian Institutes of Technology (IITs) were among the top 500 universities in the QS World University Rankings 2023.
• ROBUST DEMAND
  • India has the largest population in the world in the age bracket of 5-24 years with 580 million people, presenting a huge opportunity in the education sector.
  • India has over 250 million school-going students, more than any other country.
  • Huge demand-supply gap with an additional requirement of 200,000 schools, 35,000 colleges, 700 universities and 40 million seats in the vocational training centres.
  • Applications for the ‘Study In India’ programme increased by 146% in 2021.
• INCREASING INVESTMENTS
  • The education market in India is expected to amount to US$ 225 billion by FY25.
  • From April 2000-March 2023, Foreign Direct Investment (FDI) equity inflow in the education sector stood at US$ 9.2 billion.
  • The edtech space has attracted private equity investments of over US$ 4 billion over the last five years.
  • Indian edtech startups have received total investment of US$ 3.94 billion across 155 deals in FY22.
  • In June 2022, edtech platform Physics Wallah became India’s 101st unicorn by raising US$ 100 million in a Series-A funding round from West Bridge Capital and GSV Ventures, valuing the company at US$ 1.1 billion.
• POLICY SUPPORT
  • 100% FDI (automatic route) is allowed in the Indian education sector.
  • To liberalise the sector, the Government has taken initiatives such as the National Accreditation Regulatory Authority Bill for Higher Educational, and the Foreign Educational Institutions Bill.
  • The government schemes of Revitalising Infrastructure and System in Education (RISE) and Education Quality Upgradation and Inclusion Programme (EQUIP) are helping the government tackle the prominent challenges faced by the education sector.

Education landscape in India

School education

• The new education policy emphasis on early childhood care and education. The 10+2 structure of school curricula is to be replaced by a 5+3+3+4 curricular structure corresponding to ages 3-8, 8-11, 11-14, and 14-18 year, respectively.
• In August 2023, Union Minister of Education Dharmendra Pradhan unveiled the National Curriculum Framework for School Education (NCF), which has been developed based on the National Education Policy (NEP), 2020 vision. As per that, in order to guarantee that students have adequate time and opportunity to perform successfully, board exams will be offered at least twice a year.
• A new National Assessment Centre, PARAKH (Performance Assessment, Review, and Analysis of Knowledge for Holistic Development), was set up as a standard-setting body.
• According to the Unified District Information System for Education (UDISE) data, in 2021-22, India had 1,489,115 schools; government schools accounted for the largest share at ~70% of the total number of schools in India.
• According to UNESCO’s ‘State of the Education Report for India 2021’, the Pupil Teacher Ratio (PTR) at senior secondary schools is 47:1, as against 26:1 of the overall school system.
• The Union Cabinet accepted the continuance of the Samagra Shiksha School Education Scheme in 2021 from April 1, 2021-March 31, 2026.

Higher education

• Number of colleges in India reached 49,385 in FY24 (as of September 13, 2023) and 43,796 in FY21, up from 42,343 in FY20.
• Number of universities in India reached 1,196 in FY24 (as of September 13, 2023), up from 760 in FY15. FY24*
• ICAR is one of the largest national agricultural organisations in the world. It has 97 institutes and 45 agricultural universities across India, as of July 2021.
• A total of 100 Indian institutions have been qualified for the Times Higher Education World University Rankings 2023, with the Indian Institute of Science in Bengaluru being the highest-ranked.
• The University Grants Commission approved the ‘Guidelines for Sustainable University-Industry Collaboration in Indian Universities’ in June 2023. Higher educational institutions have been asked to take measures to boost R&D by creating R&D clusters at State or regional levels through University-Industry (UI) linkages.
• India has the world’s largest higher education system, and it ranks second in terms of student enrolment.
• India had 41.38 million students enrolled in higher education in 2020-21 with 21.2 million male and 20.1 million female students, as against 38.5 million students enrolled in higher education in 2019-20, with 19.6 million male and 18.9 million female students.
• The online education market in India is expected to grow by US$ 2.28 billion during 2021-25, growing at a CAGR of almost 20%.
• NEP 2020 aims to increase the Gross Enrolment Ratio (GER) in higher education, including vocational education, from 26.3% in 2018 to 50% by 2035.
• NEP 2020 aims to add 3.5 crore new seats to higher education institutions.
• In 2020-21, GER in higher education in India was 27.3%, up from 21.5% in 2012-13.

Trends and Strategies

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Notable trends in the K-12 segment

• PRIVATE SCHOOLS ADOPTING FRANCHISE MODELS
  • Various operating models like a mix of franchise and owned- schools are being used by private players to ensure their economic viability.
  • Setting up an all new education institution is very difficult and expensive. Franchising provides opportunities to start a new business with less capital
• EMERGENCE OF INTERNATIONAL SCHOOL SEGMENT
  • With increasing awareness, private Indian players are collaborating with international brands to provide an international standard of education.
• INCREASING USE OF TECHNOLOGY
  • By 2024, ~47% learning management tools are expected to be enabled by AI capabilities.
  • With cutting-edge technologies such as AI, ML, IoT and blockchain, India’s education sector will redefine itself in 2022. It has also embraced the Education 4.0 revolution, which promotes inclusive learning and increased employability.
  • As part of a comprehensive initiative known as PM eVIDYA, the Department of School education and the Ministry of Education were recognised by UNESCO for their use of information and communication technology (ICT) during the COVID-19 pandemic.
  • On its 75th Independence Day, India announced plans to launch 75 student-made satellites
• KEY CHALLENGES
  • Enrolment rate across the senior classes is quite low, while the girl’s dropout rate has witnessed an increase in comparison to that of boys at primary and secondary levels.

Notable trends in the higher education segment

• STREAMLINE THE PROCESSES TO REDUCE COMPLIANCE BURDEN
  • In April 2021, the Ministry of Education (MoE) and the University Grants Commission (UGC) started a series of online interactions with stakeholders to streamline the forms and processes for reducing compliance burden in the higher education sector, as a follow-up to the government’s focus on ease of doing business to enable ease of living for the stakeholders.
• SPECIALISED DEGREES GAINING POPULARITY
  • With more and more students opting for industry focused qualifications, the demand for specialised degrees is picking up.
  • A lot of universities are offering MBA/ technical degrees with focus on specific sectors.
• SHIFT TOWARDS ONLINE LEARNING
  • Higher education institutes in India are focusing on creating online programmes due to the increasing demand from consumers.
  • The online education market in India is expected to grow by US$ 2.28 billion during 2021-25, growing at a CAGR of almost 20%.
  • In July 2023, the Indian government announced a new free AI training course as part of its India 2.0 program. Developed in a collaborative effort between Skill India and GUVI, the program proudly holds accreditations from the National Council for Vocational Education and Training (NCVET) and IIT Madras.
  • In November 2022, the Indira Gandhi National Open University (IGNOU) launched an online MA programme in Sustainability Science.
• INCREASE IN STUDENT ENROLMENT
  • The total enrolment in higher education increased to nearly 4.14 crore in 2020-21 from 3.85 crore in 2019-20.
  • Since 2014-15, there has been an increase of around 72 lakh in enrolment (21%).

Notable trends in the vocational training segment

• PRIMARY COOPERATIVE INSTITUTIONS TRAINING
  • Sahakar Pragya’ initiative was introduced by the Minister of Agriculture and Farmers’ Welfare, Rural Development, Panchayat Raj and Food Processing Industries, Narendra Singh Tomar.
  • The National Cooperative Development Corporation (NCDC) will provide training to primary cooperative societies in rural areas, using 45 new training modules from Sahakar Pragya.
• ONLINE CHANNEL GAINING MOMENTUM
  • In September 2022, Unfold U Group, India’s leading online education player, announced plans to enter the space of Metaverse education.
• CORPORATE PARTNERSHIPS
  • In February 2022, the AICTE – backed by AWS Academy and EduSkills – launched a two-month virtual internship program in AI for 5,000 students. The course duration is two months and the students will receive a certificate and a digital badge upon completion.
  • In December 2023, UNICEF and its global partnerships platform Generation Unlimited (also known as YuWaah in India) partnered with key organisations committed to working towards a green future for children and young people as a part of the Green Rising India Alliance.

Business Data of CHETANA EDUCATION LIMITED

Below are the details of the number of titles currently published by the company under different brand names as of March 31, 2023

Quarter wise break-up

(Amt in Rs. Lakhs)

Revenue contribution from Geography presence

CHETANA EDUCATION LIMITED generate major portion of revenue from Maharashtra Board and CBSE and any adverse developments affecting our operations with them could have an adverse impact on our revenue and results of operations.

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For the period and financial year ended January 21, 2024, March 31, 2023 and March 31, 2022, we derived major portion of our revenue from the state of Maharashtra i.e. 72.90%, 66.12% and 64.83% respectively.

Capacity Utilisation

CHETANA EDUCATION LIMITED company has opted for partnerships with the printers and binders in India, and decided to remain asset-light and focus on content development for the education sector. By providing the necessary raw materials, including paper, plates and packaging material, we maintain strict quality control standards, guaranteeing that every printed material adheres to our stringent specifications.

As CHETANA EDUCATION LIMITED do not undertake any direct printing or binding of the book published by our company, thus we do not have any specific installed capacity and capacity utilization.

Competition

CHETANA EDUCATION LIMITED product portfolio and customer base spans the entire educational spectrum, and as a result we compete with a variety of companies in different product offerings. Competition in each of our business segments, as well as in the education sector is generally fragmented. The focus on technology and digital products in education may result in the emergence of additional competitors over time. We believe that we primarily compete on the quality of our content and effectiveness of our digital solutions, product implementation support, brand and reputation, author reputation, customers’ history using our products and, to a lesser extent, price point.

Peer companies comparison

(Rs. In Lakhs)

(₹ In Lakhs except percentages and ratios)

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Business risk factors

• CHETANA EDUCATION LIMITED business is intricately tied to the academic cycle, making it somewhat cyclical in nature. As a result, our revenue and profitability may not be comparable from one period to another.
• CHETANA EDUCATION LIMITED product is subject to changing examination paper pattern and syllabus, and customer preferences, our inability to meet such needs or preferences may affect business.
• The contents of the books we publish and the authors who drafts these content are very significant for CHETANA EDUCATION LIMITED business. The loss of all or any of authors could adversely affect our business, results of operation, cash flows and financial condition.
• CHETANA EDUCATION LIMITED generate major portion of revenue from Maharashtra Board and CBSE and any adverse developments affecting our operations with them could have an adverse impact on our revenue and results of operations.
  • For the period and financial year ended January 21, 2024, March 31, 2023 and March 31, 2022, we derived major portion of our revenue from the state of Maharashtra i.e. 72.90%, 66.12% and 64.83% respectively.
• CHETANA EDUCATION LIMITED have had negative net cash flows in the past and may continue to have negative cash flows in the future.
• Any rise in costs or a deficiency in the availability of the raw materials we procure could impact on our company’s sales, profitability, and operational results in an adverse manner.
• Illegal copying of our books and piracy of our digital content, can affect sales and future growth.
• CHETANA EDUCATION LIMITED operate in a highly-competitive and disintegrated industry, and our business, results of operations and financial condition may be adversely affected if we are not able to compete effectively.

Financials of CHETANA EDUCATION LIMITED

Key Performance Indicators

(₹ In Lakhs except percentages and ratios)

Balance Sheet

(Amount in Rs. Lakhs)

Profit & Loss

(₹ In Lakhs except percentages and ratios)

Cash Flow

(Amount in ₹ Lakhs)

Capital structure

(Amount in Rs. Lakhs )

SWOT ANALYSIS Chetana Education Limited

• Strengths
  • Established Brand: Chetana Education Limited has a strong brand presence in the education sector, which helps in attracting students and partnerships.
  • Diverse Course Offerings: The company offers a wide range of educational programs, catering to various segments of students.
  • Experienced Faculty: Having a team of experienced educators enhances the quality of education and student satisfaction.
• Weaknesses
  • High Operational Costs: Running educational institutions involves significant operational expenses, which can impact profitability.
  • Dependence on Traditional Methods: A reliance on traditional teaching methods may hinder the adoption of innovative educational technologies.
  • Limited Online Presence: In the digital age, a limited online presence can restrict the company’s reach and growth potential.
• Opportunities
  • Expansion into Online Education: There is a growing demand for online education, and expanding into this area can open new revenue streams.
  • Partnerships and Collaborations: Forming partnerships with other educational institutions and tech companies can enhance offerings and reach.
  • Government Initiatives: Leveraging government initiatives aimed at promoting education can provide additional support and funding.
• Threats
  • Intense Competition: The education sector is highly competitive, with many players vying for market share.
  • Regulatory Changes: Changes in educational policies and regulations can impact operations and profitability.
  • Economic Downturns: Economic challenges can affect enrollment rates and the financial stability of the institution.

IPO Details

Chetana Education Limited IPO Details

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