S Chand offering fairly priced, but business strategy bit risky: Analysts

MUMBAI: The three-day initial public offering (IPO) of S Chand and Co will open for subscription on Wednesday, making it the first publisher of educational books to seek a stock-exchange listing in more than 10 years.

Priced between ₹660 and ₹670 apiece, the IPO comprises new shares worth ₹325 crore and an offer for sale of 6.02 million shares by existing shareholders. At the upper end, the IPO is expected to raise ₹728.55 crore.

Analysts said the issue was fairly priced and reasonable. In a report on April 24, Angel Broking said S Chand’s pre-issue works out to three times the FY2017 price-to-book value (P/BV) at the upper end of the price band, which is lower than its peers.

Navneet Education Ltd is trading at 6.3 times its FY2017 P/BV.

“Also, S Chand’s enterprise value to sales (EV/sales) multiple (at) 3.2 times is at a discount to Navneet’s 3.7 times. On EV/ EBITDA front too, S Chand’s issue appears to be attractive at 13.4 times against 16.3 times of Navneet” Angel Broking said.

EV/sales is a valuation measure that compares the enterprise value of a company to its sales. Ebitda stands for earnings before interest, tax, depreciation and amortisation.

Prabhudas Lilladher Pvt. Ltd says the issue values S Chand at ₹2,300 crore, implying an EV/ EBIDTA of 16.4 times of FY17. S Chand’s issue offers investors an opportunity to “play the publishing segment which has limited listed opportunities,” it added.

“The seasonality of S Chand’s business does not help in allaying fears as it earns more than 3/4th of its business in fourth quarter,” LKP Securities Ltd said in a report on April 21.