Everonn Education Company Update; JV with NSDC; Emkay

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Everonn Education Company Update; JV with NSDC; Not Rated

Everonn Education has signed a Joint Venture Agreement with India’s National Skill Development Corporation (NSDC) to impart vocational training across the country over 12 years. We attended the Analyst meet and present our key takeaways:

n    Everonn and NSDC have jointly launched ‘International Skills School’ to impart vocational training with respect to various technical courses. Everonn’s wholly owned Skill development subsidiary, Everonn SKILL development Ltd. has been mandated by NSDC to train 15 million people (10% of NSDC’s overall target of 150 million) by 2022. NSDC will invest 27% as equity in the wholly owned Skill development subsidiary of Everonn Education Ltd. i.e. Everonn Skill development Limited (ESDL).

n    The NSDC was set up as part of a national skill development mission to fulfill the growing need in India for skilled manpower across sectors and narrow the existing gap between the demand and supply of skills. The NSDC is a public-private partnership, wherein 49% is owned by the finance ministry and the remaining 51% held by various industry bodies like the CII, NASSCOM, FICCI, Assocham, etc.

n    The courses offered under the same will be for nine different industries like Textile and apparel, Retail, Hospitality, Automobile, Healthcare, Construction, IT and ITeS (IT-enabled Services), Basic engineering and Multimedia. Duration differs from course to course and ranges between 3 weeks to 6 months.

n    Average fees for such technical courses works out to be Rs. 9000 (Ranges between Rs. 24,000 to Rs. 3,000 for different courses). Considering the estimated number of students at 15 mn, this turns out to be the revenues of Rs. 135-145 bn over next 12 years for Everonn. EBITDA margin to remain in the range of 23-25% initially and should improve going further, per management.

n    Everonn is looking to set up 271 centers across India. Currently there are 9 operational centers and company is planning to roll out 70 more such centers in next three months.

n    Capex requirement will be Rs. 3 bn in next 3 years. Of this, NSDC would provide Rs 0.142 bn as equity for 27% stake and Rs. 1.01 bn in the form of debt at a subsidized interest of 6%. The remaining Rs1.85bn will be funded by Everonn through internal accruals and external debt funding.

n    Vocational training, unlike other educational segments, does not face regulatory hurdles and remains attractive, per management. There will be no government intervention in the business. Two board members on the Board of Everonn Skill will be represented by NSDC. 

n    We believe Government’s partnership, great demand for the vocational courses and lack of skilled manpower, seem to be favorable for Everonn. However, there are several challenges with respect to (a) student acquisition being responsibility of Everonn (either though B2B or B2C) (b) Execution & scalability of the venture (c) Affordability of students and (d) industry and market acceptance of courses offered.

n    We do not have any rating on the stock. Company has done Revenue/EPS of Rs. 2908 mn (+54% YoY) & Rs. 25 (+33% YoY) for 9M FY11. At CMP of Rs. 681, the stock trades at 20x/14.8x/11x for FY11E/12E/13E consensus earnings of Rs.34/46/62.