Veranda Learning Solutions Ltd. IPO

Veranda Learning Solutions Ltd. IPO - SWOT Analysis

Strengths:

• Promoters have experience in the education space which aids in better decision making
• Asset light model which allows for scaling up pan India at a lower cost as compared to more established offline players
• Edureka has approx. 3 million subscribers on YouTube and has a niche reach of in-demand instructor led courses in the Information Technology space

Weaknesses:

• Loss making entity with negative Earnings Per Share (EPS) and negative operating cash flows asking for a Price to Sales ratio of almost 25x which seems expensive
• Acquisition focused model which relies heavily on purchase of similar companies to boost sales numbers – inability to do so may heavily affect the operating effectiveness of the overall business
• Part of the proceeds being used to fund an acquisition from the past (Edureka acquisition)
• Very competitive space with no listed peers to compare the valuation metrics with
• High geographic concentration with most of its business being driven from Tamil Nadu and Karnataka
• Company has entered into related party transactions (RPT) in the past and may continue to do so in the future
  Intellectual property developed by the company has not been registered under the copyright or patent laws in India

Opportunities

• E-learning is one of the fastest growing markets in the world and is expected to grow at a CAGR of 21% till 2027
• BYJUs IPO planned for 2022 will be a watershed moment for the industry in terms of growth and valuation

Threats

• Poor recent performance of similar ‘new age’ tech companies such as PayTM, Zomato and PolicyBazaar may affect perception towards the IPO
• Outstanding legal proceedings involving promoters, directors and group companies may adversely affect operations
• Any changes with their relationships with their Preferred Delivery Partners (PDPs) may directly affect business operations