Tree House Education & Accessories Ltd

Transcription

1 Tree House Education & Accessories Ltd NSE Symbol - TREEHOUSE TABLE 1 - MARKET DATA (STANDALONE) (AS TRADED ON 22 ND FEBRUARY, 2019) Sector - Education NSE Market Price (`) 4.25 NSE Market Cap. ( Cr.) Face Value (`) Equity (` Cr.) Business Group N.A. 52 weeks High/Low ( ) 12.60/3.45 Net worth ( Cr.) * Year of Incorporation 2006 TTM P/E N.A. Traded Volume (Shares) 43,066 TTM P/BV 0.05 Traded Volume (lacs) 1.83 Registered Office - Source - Capitaline, TTM - Trailing Twelve Months, N.A. - Not Applicable, * As on 30 th September, , C, Morya House, COMPANY BACKGROUND Off New Link Road, Andheri (West), Mumbai , Maharashtra Company Website: Tree House Education & Accessories Limited, an educational services provider, operates pre-schools in India. The company offers a range of programs for children, including play group, nursery, junior kindergarten (KG), senior KG, day care services, teacher training courses, summer camps, and hobby classes. It also franchises its schools, as well as leases education infrastructure. In addition, it provides various educational services to K-12 schools, which include designing curriculum and providing teaching aids, supplying methods for imparting education, organization extra-curricular activities for students, and teacher training. Tree House Education & Accessories Limited was founded in 2003 and is based in Mumbai, India. Surveillance Actions: There was no surveillance action on the Company as on date of this Report i.e. 23 rd February, Revenue and Profit Performance (Standalone) Quarterly revenue and Profit ( CRORE) The revenue of the Company decreased from 1.73 crores to 0.69 crores from quarter ending Sep 17 to quarter ending Sep 18. The Company made a loss of 8.61 crores in quarter ending Sep 18 vis-avis making a loss of crores in quarter ending Sep Source: Moneycontrol Sep'18 Mar'18 Sep'17 Revenue Profit 0.00 Feb 18 Apr 18 Jun 18 Aug 18 Oct 18 Dec 18 Feb 19 Tree House Education & Accessories Ltd NIFTY Performance vis-à-vis Market Tree House Education & Accessories Ltd TABLE 2- Returns 1-m 3-m 6-m 12-m -6.59% % % % Nifty -0.54% 0.99% -7.70% 3.19% Source - Capitaline/NSE 1 P A G E

2 TABLE 3 QUATERLY FINANCIALS (STANDALONE) ( Cr.) Sep 18 Mar 18 Sep 17 % Change Sep 18 vs Mar 18 Mar 18 vs Sep 17 Net Worth % % Current Assets % % Non-Current Assets % % Total Assets % % Investments % -3.62% Finance Cost % % Long Term Liabilities % % Current Liabilities % -0.51% Turnover % % Profit After Tax N.A. N.A. EPS ( ) N.A. N.A. Source - Money Control/Stock exchange filing AUDIT QUALIFICATIONS Audit Qualifications in last 3 years: The Statutory Auditors have not made any qualifications in their Report for FY and FY However, the Statutory Auditors have made qualifications in their Report for FY Qualifications for FY : - Basis for Adverse Report & Management Response: I) The Company has defaulted in repayment of loans availed from financial institutions due to which these borrowings have been classified as short term borrowings. The amount payable to financial institutions is Rs lakhs. Since the play group centers closed during the year, the company was facing acute cash shortage, due to which the company was not able to repay loans from financial institutions. The company is trying to pay outstanding amount to settle the dues with the financial institutions. II) The company has discontinued most of the centers operated by the company and have converted some of them into franchisee, The company has not passed any adjustment entries/ impairment loss for the fixed assets including furniture and fixture, teaching equipment and lease hold improvements for most of the centers discontinued/ closed/ converted into franchisee during the year. The management has informed us that the recoverable amount of these assets within the meaning of Indian Accounting Standards (IND AS) -36 is more than the carrying value and as such no amount needs to be recognized in the financial statements for impairment loss. We have not been able to validate this assertion in the absence of internal exercise or external valuation report of an independent agency and the uncertainty of resumption of future operation/ results of future operations thereof. We are unable to comment on the carrying value of these assets. During the year owing to exceptional year, and the very fact that the management of the company was for the major part of the year being handled by another group, who have chosen to discontinue the centers. The company is trying to convert its centers to franchise centers, no impairment loss for the assets needs to be recognized for the year. The company is confident in earning future income out of the assets lying in closed centers. III) No revenue is received from school management services rendered to K-12 schools from last 2 quarters and the invoices raised in the first 2 quarters have also not been acknowledged by the other party creating dispute over its realization. In our opinion, since there is no probable certainty of revenue from the cash generating unit, the carrying amount shown under Business Commercial Rights (BCR) under Intangible assets needs to be impaired and impairment test is required as per Indian Accounting Standard (IND-AS)-36 and impairment loss needs to be recognized. Management has informed us that the recoverable amount of these Intangible Assets within the meaning of Indian Accounting Standards (IND AS) -36 is more than the carrying value and as such no amount needs to be recognized in the financial statements for impairment loss. We have not been able to validate this assertion in the absence of internal exercise or external valuation 2 P A G E

3 report of an independent agency and the uncertainty of resumption of future operation/ results of future operations thereof. We are unable to comment on the carrying value of these assets. During the year due to lack of manpower, the company was not able to provide school management services to K12 schools for last two quarters and thus no income was recognized for those quarters. The company has secured contract with all K12 schools and will resume its services shortly. As the contract is in force, impairment of Business Commercial Rights (BCR) was not carried out. We cannot comment on other party's acknowledgement of invoices, as we do not have any control on trusts. IV) In respect to various deposits given to Educational trust amounting to Rs lacs, the balance lying in the company's books could not be verified in absence of confirmations received from the trust. Further the management has informed that the carrying amount of these deposits classified as financial assets have not been accounted at fair value as required within the meaning of Indian Accounting Standard (Ind AS)109. In view of the management the carrying amount of these assets is the fair value and no amount needs to be recognized as loss. We have not been able to validate this assertion in the absence of internal exercise or external valuation report of an independent agency. We are neither able to comment on the carrying value of these assets nor we are able to ascertain the impact of not valuing these deposits at fair value in the attached financial results. The deposits given to Educational trust amounting to Rs. 18,889 lakhs was provided for development of schools. The amount is receivable from trusts and is verified with the trust from time to time. The transactions during the year were found reconciling with the trust accounts. As the deposits are fully recoverable in near term, fair valuation of deposits was not carried out. V) In respect to Receivables amounting to Rs. 2,877 lacs due from Educational trust, the deliverables and receipts are outstanding for a long time. Absence of recoveries from these parties since long indicates the existences of material uncertainty that may cast doubt on the recoverability of these receivables. However, in view of management no provision is required as such balances are good and recoverable. The company is receiving amounts due from two educational trust out of four education trusts VI) The carrying value of lease deposits with landlords amounting to Rs 1,473 lacs is related to closed/ discontinued centers and administrative office. We are of the opinion that the recoverable amount is much lower than the carrying value of these lease deposits and impairment test needs to be carried out. The company is trying to convert the centers to franchise centers and thus the lease deposits are being taken over by franchises by settling liabilities of the respective center. Lease deposits are thus fully recoverable and no impairment for the same was required to be carried out. VII) The Loans & Advances and Receivables which have been classified as Financial Assets in compliance to Ind AS, have been recognized at their carrying amount and not at fair value. In view of the management the carrying amount of these assets is the fair value and no amount needs to be recognized as loss. We have not been able to validate this assertion in the absence of internal exercise or external valuation report of an independent agency. We are unable to comment on the carrying value of these assets as the same is not in conformity to Ind AS. In view of lack of man power, fair valuation of financial assets could not be carried out and same is taken at carrying cost by the company. VIII) The policies, procedures and overall internal controls needs to be strengthen in order to provide proper evidences regarding recoverability of receivables, valuations of financial assets including deposits, write off of fixed assets including impairments and accounting for direct & indirect taxes including other statutory compliances and timely and proper recording of capital and revenue transactions. We are unable to ascertain its impact, if any on the statement in respect of the above matters. The internal controls are well in place and the company will continue to strengthen its internal controls as per the requirement and scale of business. IX) The company has neither carried out the fair valuations of assets classified as financial assets and financial liabilities including ESOP'S, nor it has carried out the impairment testing for intangible assets (Goodwill & Brands) wherever required and stated above in compliance to Indian Accounting Standards issued under Companies (Indian Accounting standards) Rules Therefore, the possible impact of the same on the profit & loss and retained earnings, if any, cannot be ascertained. 3 P A G E

4 The company has transferred fund to meet its ESOP's requirements to Tree House Employee Welfare Trust. The ESOP is being managed by the trust and the company does not exercise any control. As and when the ESOP's are being exercised by the employee, the amount is transferred back to the company. Goodwill and Brands are owned by the company, and the company is able to convert its centers to franchise centers on the basis of goodwill it has created in the past. Due to lack of manpower intrinsic value of ESOP could not be carried out. The company is of the view that no impairment loss towards ESOP, Goodwill and Brands is required to be recognized by the company. X) Confirmation letters have been sent by the company to Sundry Creditors and parties to whom Loans and Advances have been granted for confirming the balances lying in their ledger accounts in books of the company. In view of confirmations having been received from only few of the parties, the balances under these heads have been shown as per books of accounts and are subject to reconciliation and adjustment, if any. The confirmations have all being sent to creditors and other parties. As no information/objections was received from them, the same is considered to be confirmed by the company. XI) Some landlords, creditors as well as statutory authorities have initiated legal proceedings against the company, which may result in compensation, interest and penalties. The possible impact of the same on financial results cannot be ascertained, pending such outcome. As the matter is subjudice, we are unable to comment on the same. Response Frequency of Qualifications in last 3 years? No - Comment Have the Auditors made any adverse remark in last 3 years? Yes Adverse Remark for FY Are the material accounts audited by the Principal Auditors? Yes - Do the financial statements include material unaudited financial statements? No - TABLE 4: BOARD PROFILE (AS PER ANNUAL REPORT - FY ) Regulatory Norms Company % of Independent Directors on the Board 50% 50% % of Promoter Directors on the Board - 50% Number of Women Directors on the Board At least 1 1 Classification of Chairman of the Board - Promoter Executive Director Is the post of Chairman and MD/CEO held by the same person? - Yes Average attendance of Directors in the Board meetings (%) - 100% Note: Board Composition is as on 31 st March, 2018 Composition of Board: As per Regulation 17(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company should have at least 50% Independent Directors as the Chairman of the Board is a Promoter Executive Director. The Company has 50% of Independent Directors on the Board and hence, it meets the regulatory requirements. Board Diversity: The Company has 4 directors out of which 1 is Woman Director. Attendance at Board Meetings: During the FY , the average attendance of Directors in the Board meetings was 100%. 4 P A G E

5 Shareholding (%) Trading Ratios Solvency Ratios Liquidity Ratios Return Ratios Turnover Ratios TABLE 5 - FINANCIAL RATIOS Ratios Sep 18 Mar 18 Sep 17 % Change Sep 18 vs Mar 18 Mar 18 vs Sep 17 Inventory Turnover % % Debtors Turnover % % Fixed asset Turnover % % Current Asset Turnover % 47.21% Total Sales to Total Assets Ratio % % Operating Profit Margin -5.80% % % N.A. N.A. Net Profit Margin -1,248% -2,889% -1,493% N.A. N.A. Return on Assets (ROA) N.A. N.A. N.A. N.A. N.A. Return on Equity (ROE) N.A. N.A. N.A. N.A. N.A. Return on Capital Employed (ROCE) N.A. N.A. N.A. N.A. N.A. Current Ratio % % Quick Ratio % % Cash Ratio % % Working Capital Turnover ratio N.A. N.A. N.A. N.A. N.A. Debt to Equity Ratio % 19.81% Total Liabilities to Totals Asset Ratio % % Retained Earnings to Totals Assets Ratio* N.A N.A. N.A. N.A. Long Term Debt to Total Asset Ratio N.A % Interest Coverage Ratio N.A. N.A. N.A. N.A. N.A. Market Cap / Sales % % Market Cap/ Net Worth % % Market Cap/PAT N.A. N.A. N.A. N.A. N.A. Market Cap/EBITDA N.A. N.A. N.A. N.A. N.A. Source - Money Control/Stock exchange filing *Retained Earnings information is not available in quarterly financial results TABLE 6 - TRADING VOLUME Particulars Sep'18 Mar'18 Sep'17 % Change Sep 18 vs Mar 18 Mar'18 vs Sep'17 Trading Volume (shares) (avg. of 1 qtr) 51,458 57,266 1,14, % % Trading Volume (shares) (high in 1 qtr) 1,99,881 2,97,109 21,04, % % Trading Volume (shares) (low in 1 qtr) 14,480 10,107 20, % % Ratio - High/low trading volume % % Ratio - High/average trading volume % % Source - Capitaline TABLE 7 (A): OWNERSHIP & MANAGEMENT RISKS Sep' 18 Mar' 18 Sep' 17 Comments Promoter shareholding Public - Institutional shareholding Public - Others shareholding Non Promoter Non Public Shareholding No new equity shares were issued during the period from 1 st Oct, 17 to 30 th Sep, 18. There was no change in the promoter shareholding during the said period. The shareholding of public institution decreased from 10.13% to 8.71% and that of public others increased from 69.33% to 70.75% during the same period. The promoters have pledged 99.45% of their shareholding. Source - NSE 5 P A G E

6 MAJOR SHAREHOLDERS (AS ON 30 th SEPTEMBER 2018) S. No. Promoters Shareholding S. No. Public Shareholders Shareholding 1 Rajesh Doulatram Bhatia 12.00% 1 FC Vi India Venture Mauritius Ltd 6.85% 2 Geeta Rajesh Bhatia 8.43% 2 Bajaj Holdings and Investment Ltd 5.75% 3 Girdhari Bhatia 0.11% 3 Kashmira Investment and Leasing Private Ltd 4.24% 4 Polus Global Fund 4.08% Source - NSE TABLE 7 (B): OWNERSHIP & MANAGEMENT RISKS 5 Greencrest Financial Services 2.60% Market Activity of Promoters* The promoters have not sold/bought any shares during FY Preferential issue to promoters No preferential issue of shares was made to the promoters during FY Preferential issue to others No preferential issue of shares was made to other shareholders during FY GDRs issued by the Company The Company did not issue any GDRs during FY Issue of ESOPs/Issue of shares other than Preferential allotment The Company did not issue any stock options to its employees during FY Source - Annual Report FY *Source - As per Form MGT 9 forming part of Annual Report FY TABLE 8: PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY Sr. No. Name and Description of main products / services % to Total turnover of the Company 1. Pre-primary Education Services 66.39% 2. Education support services 33.61% Source - Annual Report FY P A G E

7 Glossary Equity: The equity shares capital of the Company Net Worth: The amount by which the Assets exceeds the liabilities excluding shareholders funds of the Company Turnover: The revenue earned from the operations of the Company EPS: Earning Per Share is net profit earned by the Company per share EPS = Profit After Tax Number of outstanding shares P/E ratio: It is the ratio of the Company s share price to earnings per share of the Company P/E ratio = Price of each share Earnings per share Current Assets: Cash and other assets that are expected to be converted to cash in one year Fixed Assets: assets which are purchased for long-term use and are not likely to be converted quickly into cash, such as land, buildings, and equipment Total Assets: Current Assets + Fixed Assets Investments: An investment is an asset or item that is purchased with the hope that it will generate income or appreciate in the future. Finance Cost: The Financing Cost (FC), also known as the Cost of Finances (COF), is the cost and interest and other charges incurred during the year in relation to borrowed money. Long Term Liabilities: Long-term liabilities are liabilities with a maturity period of over one year. Current Liabilities: A company's debts or obligations that are due within one year. Inventory Turnover ratio: Inventory Turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. Inventory Turnover ratio = Inventory Debtors Turnover: Accounts receivable turnover is an efficiency ratio or activity ratio that measures how many times a business can turn its accounts receivable into cash during a period Debtors Turnover ratio = Accounts recievables Fixed Asset Turnover: The fixed-asset turnover ratio is a financial ratio of net sales to fixed assets Fixed Asset Turnover ratio = Fixed Assets Current Asset Turnover: The current-asset turnover ratio is a financial ratio of net sales to fixed assets Current Asset Turnover ratio = Current Assets Operating Profit Margin: Operating margin is a measurement of what proportion of a Company s revenue is left over after paying for variable costs of production such as wages, raw materials etc. It can be calculated by dividing a Company s operating income (also known as operating profit ) during a given period by its sales during the same period. Operating Profit Margin = Operating profit Net Profit Margin: Net profit margin is the percentage of revenue left after all expenses have been deducted from sales Net Profit Margin = Net profit 7 P A G E

8 Total Sales to Total Assets Ratio: The total sales to total assets ratio measures the ability of a business to generate sales on assets. Total Sales to Total Assets Ratio = Total Assets Return on Assets: ROA tells you what earnings were generated from invested capital (assets) Return on Assets = Net profit Total Assets Return on equity/net worth: return on equity (ROE) is the amount of net income returned as a percentage of shareholders equity. Return on Equity = Net profit Net worth Return on Capital Employed: Return on capital employed (ROCE) is a financial ratio that measures a company's profitability and the efficiency with which its capital is employed. Return on Capital Employed = Net profit Total Debt + Equity share capital Current ratio: The current ratio is a financial ratio that measures whether or not a firm has enough resources to pay its debts over the next 12 months. It compares a firm's current assets to its current liabilities. Current ratio = Current Assets Current Liabilities Quick ratio: The quick ratio is a measure of how well a Company can meet its short term financial liabilities. Quick ratio = Current Assets Inventories Current Liabilities Cash ratio: The ratio of the liquid assets of a Company to its current liabilities. Cash ratio = Current Assets Inventories Account Recievables Current Liabilities Working Capital Turnover ratio: The working capital turnover ratio is also referred to as net sales to working capital. It indicates a Company's effectiveness in using its working capital. Working Capital Turnover ratio = Current Assets Current Liabilities Debt to Equity ratio: The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. Debt to Equity ratio = Short Term Debt + Long Term Debt Net Worth Interest Coverage ratio: The Interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a Company can pay interest on outstanding debt. Interest Coverage Ratio = Earning Before Interest and Tax Finance Cost Long Term Debt to Total Assets Ratio: The long-term debt to total assets ratio is a measurement representing the percentage of a corporation's assets financed with loans or other debt obligations lasting more than one year. Long Term Debt to Total Asset Ratio = Long Term Debt Total Assets Retained Earnings to Total Assets Ratio: The ratio of retained earnings to total assets helps measure the extent to which a company relies on debt, or leverage. Retained Earnings to Total Assets Ratio = Retained Earnings Total Assets 8 P A G E

9 Total Liabilities to Total Assets Ratio: The liabilities to total assets ratio is a solvency ratio that examines how much of a company's assets are made of liabilities. Total Liabilities to Total Assets Ratio = Total Liabilities Total Assets Market Cap/Sales ratio: Market Cap/sales ratio, Price sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the pershare stock price by the per-share revenue. Market Cap/Sales ratio = Market Cap Market Cap/ Net Worth ratio: It is a valuation ratio calculated by dividing Company s market cap to net worth. Market Cap/Networth ratio = Market Cap Networth Market Cap/ PAT ratio: It is a valuation ratio calculated by dividing Company s market cap to net profit. Market Cap/PAT ratio = Market Cap net profit Market Cap/ EBITDA ratio: It is a valuation ratio calculated by dividing Company s market cap to EBITDA. Market Cap/EBITDA ratio = Market Cap EBITDA Trading Volume (shares) (avg. of 1 year): Average number of shares/day traded in 1 year Trading volume (shares) (high in 1 year): Highest number of shares/day traded in 1 year Trading volume (shares) (minimum in 1 year): Lowest number of shares traded on any one day in 1 year 9 P A G E

10 DISCLAIMER Sources Only publicly available data has been used while making the factsheet. Our data sources include: NSE, SEBI, Capitaline, Moneycontrol, Businessweek, Reuters, Annual Reports, IPO Documents and Company Website. Company Information Analyst Certification The analysts involved in development of this factsheet certify that no part of any of the research analyst s compensation was, is, or will be directly or indirectly related to the contents of this factsheet. Disclaimer This Report has been made by SES as a paid service for which consideration has been paid by NSE. While SES has made every effort and has exercised due skill, care and diligence in compiling this factsheet based on publicly available information, it neither guarantees its accuracy, completeness or usefulness, nor assumes any liability whatsoever for any consequence from its use. This factsheet does not have any approval, express or implied, from any authority, nor is it required to have such approval. The users are strongly advised to exercise due diligence while using this factsheet. This factsheet in no manner constitutes an offer, solicitation or advice to buy or sell securities, nor solicits votes or proxies on behalf of any party. SES, which is a not-for-profit Initiative or its staff, has no financial interest in the companies covered in this factsheet except what is disclosed on its website. The factsheet is released in India and SES has ensured that it is in accordance with Indian laws. Person resident outside India shall ensure that laws in their country are not violated while using this factsheet; SES shall not be responsible for any such violation. SEBI Reg. No. INH This factsheet or any portion hereof may not be reprinted, sold, reproduced or redistributed without the written consent of Stakeholders Empowerment Services Contact Information Stakeholders Empowerment Services A 202, Muktangan, Upper Govind Nagar, Malad East, Mumbai Tel research@sesgovernance.com info@sesgovernance.com Research Analyst: Pallavi Gawkar All disputes subject to jurisdiction of High Court of Bombay, Mumbai. 10 P A G E