NSE-MANTRA

About Company

THEAL is one of the educational service providers in India, which mainly operates in pre-school segment and provides educational services to K-12 schools in India. As of 15th June 2011, the company have 223 pre-schools (149 – self operated and 74 thru franchisee) spread across 33 cities under the brand name of "Tree House". As of 31st March 2011, the company's self operated pre-schools has 5000 students in the age group of 1.5-6 years and has team of 370 teachers with teacher to student ratio at 1:14. In K – 12 segment, as of 31st March 2011, the company provides educational services to 12 schools, which has over 5000 students, in 4 cities in India.

• Issue-open date:10th Aug 2011 & Issue-close date:12th Aug 2011
• Retail Discount: Rs 6/share

Valuations

At the lower price band of Rs 135/share, the stock is trading P/E of 37.1x and 49.5x (based on FY11 earnings) on pre-issue and post-issue capital respectively. At upper price band of Rs 153/share, the stock is trading P/E of 42.1x and 56.1x (based on FY11 earnings) on pre-issue and post-issue capital respectively. Even, if we assume the PAT to grow at 100% in FY12E, the stock will trade at P/E of 24.7x FY12E earnings on post-issue capital and lower price band. Although, the business model is good with stable earnings profile, we believe in current uncertain environment, such higher valuation is unjustified. We believe investors will get an opportunity to buy the stock cheaper post listing and therefore recommend AVOID to the issue. (Since, we don't have subscribe rating on the stock, we will not issue detail note).