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MT Educare - Lagging Behind The Class

| 4/19/2012 9:00 PM Thursday

MT Educare, better known as Mahesh Tutorials, was listed on 12th April, 2012. Upon listing, it opened at Rs 86.50, which is higher than its upper price band of Rs 80. Within an hour of trade, the scrip closed with an upper circuit limit of five per cent at Rs 90.35.

On the second day of listing trading, it again hit the upper circuit at Rs 94.85. This also shows the investors’ appetite for the counter, as we saw more buyers and fewer sellers on the BSE for the scrip. The issue was oversubscribed by 4.8x with an upper price band of  Rs 74-80 a share at the time of subscription.

At the time of writing the new issue analysis, we had recommended subscribing to the issue with a view to earn benefits from the listing day gains. As we expected, the scrip opened on the BSE at Rs 86.50 and closed at Rs 98.60 per share, a premium of 23.3 per cent over its issue price. Now, we advise investors to book profits at the current levels, as there are several concerns with regard to increasing competition, higher usage of technology and no visible future expansion plans of the company in terms of classrooms, etc.

Recommendation

Book Profit

Price Band

Rs 74-80

Issue Price

Rs 80

Shares Offered

1.23 crore equity shares

Oversubscribed

 

Total

4.8x

QIB

6.01x

Non-Institutional

8x

Retail Investors

 2.7x

Listing Price

Rs 86.05

CMP

Rs 98.60

BSE Code

534312

Percentage Gain/(Loss) on Listing

12.93

Percentage Gain/(Loss) at CMP

18.56

Date of Listing

April, 12, 2012

A major concern is about the sustainability of the business in the long term. One of the major worries would be the increased usage of technology by schools and students, which is offered by other education companies like Educomp, Everonn, etc. This involves interactive content in the form of CDs, websites, etc. so that students can learn better. This factor can lead to a lesser number of students opting for conventional coaching classes. Another factor is that the company is sitting on a huge cash balance that has not been utilised, which raises questions on its ability to utilise funds optimally.

On the valuations front, at the current market price of Rs 98.60, the scrip discounts its FY12E EPS of Rs 5 by 19.7x, which is a bit expensive. Taking these concerns into account, we advise investors to book profits in the counter at its current levels.

Shareholding Pattern

As on 12-04-2012

Promoter

42.88

Institutional

15.64

Public

41.48

Total

100

 

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