PL Stock Update – Navneet Education: K-12 valuation witnesses a jump of 25-30%

PL Stock Update – Navneet Education – Jinesh Joshi – Research Analyst, Prabhudas Lilladher Pvt Ltd

Navneet Education: K-12 valuation witnesses a jump of 25-30%.

✳️As per media reports, Kedaara Capital is likely to invest US$130mn (~Rs10.7bn) in K12 Techno Services. Kedaara is likely to buy-out an existing investor and also infuse some fresh capital.

✳️As per the last funding round, K-12’s valuation stood at ~Rs30bn and Navneet’s 22% stake was valued at Rs6.4bn.

✳️As per media reports, fresh valuation is at 25-30% premium to last round.

✳️As per our interaction with management, a larger chunk of equity is simply changing hands and fresh infusion is minimal. This indicates Navneet’s stake would remain intact at 22% and there is no dilution.

✳️Scenario 1: If premium is 25%, Navneet’s stake would now be valued at Rs8.2bn (Rs30bn*1.25*22%). Assuming 35% illiquidity discount, per share value of K12 would stand at Rs23.7 (earlier Rs18.5).

✳️Scenario 2: If premium is 30%, Navneet’s stake would now be valued at Rs8.6bn (Rs30bn*1.3*22%). Assuming 35% illiquidity discount, per share value of K12 would stand at Rs24.7 (earlier Rs18.5).

Our view: As per revised valuation, Navneet’s option value in K-12 business rises by ~25-30% and our per share value of K-12 business would increase by a similar amount. Retain BUY on the stock with a TP of Rs192.