Retail Research

Sector: Education
14 September 2010

Career Point Infosystem Ltd.

IPO Note Price Band (Rs.): 295 - 310

ISSUE DETAILS:
Career Point Infosytem is a tutorial services provider in India.
They provide tutorial services to high school and post high school Date of Opening 16th September 2010
Date of Closing 21st September 2010
students for various competitive entrance examinations including
Issue Size Rs. 115 cr.
AIEEE, IIT - JEE All India Pre-Medical and Pre-Dental Test. The
No. of Share Offered 3,898,305 (38.98 Lacs) -
tutorial services are provided through classroom training @ Rs. 295 - 310 3,707,677 (37.08 Lacs)
programs conducted through a network of Company Operated Face Value Rs. 10
and Franchisee Centers. BRLM Centrum Capital Ltd.
JM Financial Consultants Pvt. Ltd.
As on July 31, 2010 they had 17 Company Operated Training Registrar Link Intime (I) Pvt. Ltd.
Centers and 16 Franchisee Centers and during the four months Bid Lot 20
period till July 31, 2010 they have received 28,626 enrollments. Post Issue Share Capital Rs. 18.32 cr. -
@ Rs. 290 - 310 Rs. 18. 13 cr.
The company has a team of 231 faculty members as on July 31,
2010 (excluding faculty members of franchisees) comprising of
OBJECTS OF ISSUE
graduates in engineering and science.
Construction and development an integrated campus facility 68.25
They have, over a period of time, built their content repository of Expansion of classroom infrastructure and office facility 16.49
over 10,000 pages of text content and over 12,000 minutes of video Acquisitions and other strategic initiatives 15.00
content for various tutorial services offered by them. For students General Corporate Purposes [•]
who are not able to attend the regular classroom program, they Total [•]
offer distance learning program comprising of correspondence
and test series courses which have been systematically designed SHAREHOLDING PATTERN

to provide effective and efficient education to students in a simple PRE ISSUE No. of Shares %

and lucid manner. Promoter & Promoter Group 10,866,000 75.35

Institutions 1,001,100 6.94
Non Institutions 2,553,197 17.71
They plan to use technology as a tool to provide access of their
Public - -
content repository to students across India. To leverage their
Total 14,420,297 100.00
content repository and to provide a personalized learning
environment to the students, they have recorded the lectures of
POST ISSUE @ Rs. 295 / Share No. of Shares %
their experienced fac ulty members through Career Point Promoter & Promoter Group 10,866,000 59.32
Knowledge Lab. Further, they have designed and developed Institutions 1,001,100 5.46
Synchro-School program to synchronize preparation for Non Institutions 2,553,197 13.94
Public 3,898,305 21.28
competitive examination with formal school education.
Total 18,318,602 100.00
They have recently forayed into Education Consultancy and
Management Services ('ECAMS'), catering to K-12 and Higher POST ISSUE @ Rs. 310 / Share No. of Shares %
Promoter & Promoter Group 10,866,000 59.93
Education segments. Further, to address larger base of potential
Institutions 1,001,100 5.52
students, they have introduced technology enabled education Non Institutions 2,553,197 14.08
delivery platform for delivering content through 'TechEdgeClass'. Public 3,709,677 20.46

Total 18,129,974 100.00

Source: RHP, SSL Research

For complete information and a complete list of the risk factors,
please refer the Red Herring Prospectus.

SBICAP Securities Limited, Corporate Office: 191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005
Tel.: (Board) +91 22 30273300/01 • Fax: (022) 30273420.
For a list of our branches refer to our website: www.sbicapsec.com
Career Point Infosystem Ltd. Education

Key Strengths

Commitment to offering quality courses and student success

CPIL offers quality tutorial courses, and intends to improve the learning
experience for its students. Offering quality academic courses is contingent
upon recruiting and retaining experienced faculty members, providing updated
educational content and effective academic administration and control on
content delivery. They retain faculty and instructors with relevant industry
experience and appropriate academic credentials.

Their R&D Cell helps in reassessing and updating tutorial courses on a regular
basis which also helps in designing new academic courses. Their academic
management team prepares clear and well defined layouts for content delivery
by each faculty member.

Strong brands and geographic presence

They believe that their training centres have established a competitive position ~ Strong brands and geographic presence
and brand recognition in their markets. They currently have presence across
13 states (including Franchisee Centres) which provide access to major markets
in northern and eastern India. Also, their Kota centre draws students from
across the country and from outside India.

Qualified faculty team

CPIL's faculty members are graduates in engineering and science from IIT, ~ Qualified faculty team
NIT and other colleges in India. The faculty members are well equipped with
subject knowledge guiding and tutoring students. They also have an ongoing
in-house faculty training facility which ensures that all faculty members undergo
training on teaching methodologies and skills and subject matter of relevant
courses and to keep them abreast of the changes in competitive entrance
examination trends and changing student needs.

Quality teaching methodology

The company has over a period of time developed a scientific teaching ~ Quality teaching methodology
methodology and system of teaching, which is essential for success in any
competitive entrance examination. They understand that in order to achieve
success, one needs knowledge which should be acquired through a
comprehensive systematic approach, rigorous practice, time management and
confidence. In competitive examinations, their teaching methodology plays a
key role in enhancing students' overall performance.

For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. • Source: RHP

SBICAP Securities Limited 14 September, 2010 • 2

Career Point Infosystem Ltd. Education

Business Strategies

Development of integrated campus facility

CPIL currently operates 17 Company Operated Training Centres and 16 ~ Development of integrated campus facility
Franchisee Centres. Realising the need of students, they are constructing an
integrated facility at Kota. They expect to complete the construction of
integrated facility at Kota by Fiscal 2012. In addition to catering to the existing
student base, the new integrated facility will also allow them to increase
enrollments. In order to support the expansion, they will also be increasing
the number of faculty with a view to ensure adequate faculty student ratio.

Enter new geographic markets and new course offerings

The company believes they can increase their student enrollments by entering
new geographic markets that offer significant growth potential. In particular,
they look to expand in those markets which offer optimum opportunities in
terms of student enrollments based on parameters like lack of proper
education, aspiration of students, socio-economic background.
They intend to continue enhancing course offerings to meet the evolving
market demand in fields which do not form part of their traditional offerings.
They may seek to provide tutorial services in specialties other than engineering
and medical. They also intend to foray into course offerings relating to
vocational education and training.

Reaching students through innovative products

TechEdge Class is a concept based on virtual classroom environment which ~ Reaching students through innovative products
replicates the model of a real classroom with the help of VSAT/VPN technology.
In a TechEdge Class, students interact with instructors online using audio
and video conferencing facility. In order to reach the students through this
technology, CPIL has entered into an agreement with Hughes Communication
India Limited ('HCIL') for providing satellite based interactive services through
HCIL's network spread across India.
They intend to provide Synchro-School Programme under their TechEdge
Class initiative through VSAT/VPN technology and learning management
software. They also intend to increase the number of Career Point Knowledge
Labs across the nation.

Opportunistically pursue strategic acquisitions

In evaluating potential acquisitions, the company seeks to pursue selective ~ Opportunistically pursue strategic acquisitions
strategic acquisitions and joint venture opportunities to augment capabilities,
broaden service offerings and increase geographical presence with the
potential for course replication at existing centres, new course offerings, and
new markets with attractive growth opportunities. Their potential targets are
companies involved in the education sector or companies engaged in
providing services to the education sector and whose operations can be scaled
up by leveraging CPIL's experience.

For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. • Source: RHP

SBICAP Securities Limited 14 September, 2010 • 3

Career Point Infosystem Ltd. Education

Risk Factors

Poor performance of students may cause a loss to the company and

business
Individual performance in a particular competitive entrance examination ~ Poor performance of students may cause a loss to
determines the rank and the professional college or institute, the student gets the company and business
admission into. In addition to the tutoring provided, individual performance
also depends on various personal factors including personal merit, ability to
perform under pressure and mental state. The performance of students is
critical for CPIL's business. If their students do not perform well in the
competitive entrance examinations despite putting in same efforts and
resources, enrollments and therefore revenues could be adversely affected.

They derive significant amount of revenues from their Company

Operated Training Centre situated at Kota
In terms of the number of enrollments, CPIL received 13,574 enrollments for ~ They derive significant amount of revenues from
the Kota centre compared to 9,249 enrollments at other Company Operated their Company Operated Training Centre situated
Training Centres for the year ending March 31, 2010. The Kota training centre at Kota
contributed 55.78% and 58.88% of restated standalone total revenues for the
year ended March 31, 2009 and March 31, 2010, respectively.
Any events including slowdown or any economic or civil unrest in Kota or
failure to perceive Kota as an appropriate destination for preparation of
competitive entrance examinations could materially impact enrollments of
prospective students for the Kota centre which may adversely affect business
and results of operations.

The company has experienced negative cash flow in the past and may
experience the same in future
The company had negative cash flows from investing activities for prior years.
This has been primarily due to addition to fixed assets and purchase of
investments. There can be no assurance that they will not experience periods
of negative operating cash flow in the future. If the negative operating cash
flow trend persists in future, CPIL may not be able to generate sufficient
amounts of cash flow to finance their working capital and capital expenditure
requirements which could have a material adverse effect on business and
results of operations.

The company may face difficulties in introducing new courses and

expanding their network
CPIL's business strategies include introducing new courses and expanding ~ The company may face difficulties in introducing
its network across India. Introducing new courses and expanding network new courses and expanding their network
requires them to make additional investments in infrastructure, faculty,
marketing and other resources. Expanding their network poses unique
challenges like acquisition of premises, establishment of infrastructure across
cities and maintain consistent standard of services through-out the network.
Therefore, the expected return on incremental investments, pursuant to
expansion of network and introducing new courses may not be in line with
past performances or such investments may not be profitable at all.

For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus. • Source: RHP

SBICAP Securities Limited 14 September, 2010 • 4

Career Point Infosystem Ltd. Education

Financials & Valuations Snap Shot:

Career Point Infosystem Ltd. (Rs. cr.)

Pre Issue Post Issue

FY10 FY10

Lower Price Band (Rs.) Upper Price Band (Rs.)

Particulars 295.00 310.00

Net Sales 61.66 61.66 61.66

Total Income 65.84 65.84 65.84
EBIDTA 23.81 23.81 23.81
PAT 17.79 17.79 17.79
Equity Share Capital 14.42 18.32 18.13
No of Equity Shares 1.44 1.83 1.81
Face Value 10.00 10.00 10.00
EPS 12.34 9.71 9.81
CMP 310.00 295.00 310.00
Cash and Bank 22.74 22.74 22.74
Debt 0.11 0.11 0.11
Market Cap 447.02 540.40 562.03
PE(x) 25.12 30.37 31.59
Enterprise Value 424.39 517.77 539.40
Mcap/Sales (x) 7.25 8.76 9.11
EV/Sales (x) 6.88 8.40 8.75
EV/EBIDTA (x) 17.82 21.74 22.65
Source: RHP, SSL Research

Relative Valuations
Particulars. Educomp Sol. Everonn Education NIIT Career Point Infosystem Ltd.

CMP (Rs) 570.10 629.90 67.35 295.00 310.00

TTM Sales (Rs Cr) 849.92 226.99 643.09 61.66 61.66

M.cap (Rs Cr) 5,441.60 952.41 1,111.95 540.40 562.03

P / E (x) 24.05 20.54 34.82 30.37 31.59

EV / Sales (x) 6.93 4.40 2.07 8.40 8.75

EV / EBIDTA (x) 13.47 9.59 14.57 21.74 22.65

M.cap / Sales (x) 6.40 4.20 1.73 8.76 9.11

OPM (%) 51.45 45.83 14.23 38.62 38.62

NPM (%) 26.62 20.43 4.97 28.86 28.86

Source: RHP, Capitaline, SSL Research

For complete information and a complete list of the risk factors, please refer the Red Herring Prospectus.

SBICAP Securities Limited 14 September, 2010 • 5

Career Point Infosystem Ltd. Education

Corporate Office: SBICAP Securities Limited,191, Maker Towers 'F', Cuffe Parade, Mumbai 400 005
Tel.: 91-22-30273300 (Board) • Fax: (022) 30273420
For any information contact us:
Toll free: 1-800-223345 • Tel.: (022) 2436 4059 / (022) 2436 8629 Or E-mail: helpdesk@sbicapsec.com

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