What you must know about Addictive Learning Technology IPO?

Addictive Learning Technology Ltd was incorporated in the year 2017. It is positioned as an educational technology platform that substantially caters to the needs of senior and mid-career professionals. It provides them with upskilling, cross skilling and career services and also caters to the needs of young and upcoming professionals in various fields. Addictive Learning Technology Ltd offers specialized and high quality courses and training programs to help such professionals advance their skills. The content palate of Addictive Learning Technology Ltd  encompasses areas such as law, finance, compliance, human resources, business consulting, artificial intelligence, content writing, and data science. It currently is the owner of three proprietary verticals viz., LawSikho, Skill Arbitrage, and Dataisgood. The idea is to enable mid and senior professionals who find themselves at career crossroads to enhance their skills to enable growth and cross movement where necessary. The courses are accredited by the National Skill Development Corporation (NSDC), a PPP under the Ministry of Skill Development and Entrepreneurship of the Government of India.

With the emergence of new technology like machine learning, artificial intelligence, and big data; many of the traditional jobs are likely to become redundant or at least, the need of manpower is going to reduce. The need of the hour is for employees to make themselves globally competitive. Addictive Learning Technology Ltd, apart from India based courses, also aids such executives to clear international exams to improve their job opportunities. Addictive Learning Technology Ltd also offers international bar exam courses, such as the Canada Bar Exam for Indian legal professionals looking to practice in Canada and who are looking to clear the Canadian Barrister and Solicitor Exam and NCA exam. It also helps Indian trained lawyers to qualify as solicitors in England and Wales by passing the solicitors qualifying exam (SQE). In addition, its courses also support professionals to clear the California Bar Exam to start practising law in the United States. The company has 145 full time employees on its rolls and another 444 full-time consultants providing expertise.

Key terms of the Addictive Learning Technology IPO

Here are some of the highlights of the Addictive Learning Technology IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 19th January 2024 and closes for subscription on 23rd January 2024; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a book built issue. The price band for the book built issue has been set in the range of ₹130 to ₹140 per share. The final price of the IPO will be decided by book building within this price band.
   
• The IPO of Addictive Learning Technology Ltd has a fresh issue component and an offer for sale (OFS) component. The fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, Addictive Learning Technology Ltd will issue a total of 41,37,000 shares (41.37 lakh shares), which at the upper end of the book building band of ₹140 per share aggregates to fresh fund raising of ₹57.92 crore.
   
• The offer for sale (OFS) portion of the IPO of Addictive Learning Technology Ltd will entire the sale of 1,60,000 shares (1.60 lakh shares), which at the upper end of the book building band of ₹140 per share aggregates to an OFS size of ₹2.24 crore. The entire OFS of 1.60 lakh shares is being offered by the promoter group.
   
• As a result, the overall IPO size will comprise of the issue and sale of 42,97,000 shares (42.97 lakh shares) which at the upper IPO band price of ₹140 per share will aggregate to overall IPO size of ₹60.16 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker inventory allocation of 3,16,000 shares. The appointment of the market maker is yet to be finalized. The market maker will provide two-way quotes to ensure liquidity on the counter and low basis costs, post listing.
   
• The company has been promoted by Ramanuj Mukherjee and Abhyudaya Sunil Agarwal. The promoter holding in the company currently stands at 92.27%. However, post the fresh issue and the OFS, the promoter equity holding will get diluted to 67.27%.
   
• The fresh issue funds will be used by the company for funding inorganic expansion, investments in technology, development of new course, branding, marketing and for working capital needs; apart from a small portion towards general corporate expenses.
   
• Narnolia Financial Services Ltd will be the lead manager to the issue, and Maashitla Securities Private Ltd will be the registrar to the issue. The market maker for the issue is yet to be officially announced.

IPO allocation and minimum lot size for investment

Addictive Learning Technology Ltd has already announced the market maker allocation at 3,16,000 shares as inventory for market making. The name of the market maker is also yet to be announced by the company. The net offer (net of market maker allocation) will be divided between the QIB investors, retail investors and the HNI / NII investors. The breakdown of the overall IPO of Addictive Learning Technology Ltd in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,000 shares. Thus, retail investors can invest a minimum of ₹140,000 (1,000 x ₹140 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 2,000 shares and having a minimum lot value of ₹280,000. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the Addictive Learning Technology IPO (SME)

The SME IPO of Addictive Learning Technology Ltd IPO opens on Friday, 19th January 2024 and closes on Tuesday, 23rd January 2024. The Addictive Learning Technology Ltd IPO bid date is from 19th January 2024 at 10.00 AM to 23rd January 2024 at 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is 23rd January 2024.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account. The credit of shares to the demat account on January 25th 2024, will be visible to investors under the ISIN Code – (INE0RDH01021).

Financial highlights of Addictive Learning Technology Ltd

The table below captures the key financials of Addictive Learning Technology Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenues have grown nearly 5-fold over the last 2 years, albeit from a very low base. The growth in the top line has been extremely robust in the last two years and indicates that the top line flows have picked up traction in the last two years.
   
• Only the latest year figures are relevant in this case as there were losses and negative equity in previous years. PAT margins are attractive at 7% plus but the ROE and ROA are also very attractive. However, sustenance is key as there is only 1 year of positive data.
   
• The asset turnover ratio or the asset sweating ratio is very impressive, combined with a strong ROA. However, this is an asset light business and the long term operating margins would be the more relevant picture here.

The company has latest year EPS of ₹4.94 and the weighted average EPS of for the last 3 years would not really be relevant as it had made losses in the last two years. Either ways, the valuations look reasonable if you consider latest year EPS at 28.34 times P/E discounting. High end digital training is a high growth area. Apart from a high growth and high potential market, the company has also built up a scalable model and a good client franchise among professionals. Investors can look at the IPO, but with a long term perspective only.