Established track record of operations supported by diversified revenue streams
MEF has an established track record of operations offering varied courses across different domains such as engineering, law, management, nursing, physiotherapy, etc. The University has been accredited with NAAC A+ Grade providing it an edge over its competition. Further, the University has been adding new courses every 1-2 years which enables it to horizontally expand its reach in offering different streams of education. Currently, it operates 16 institutes and has a combined strength of 15,000+ students with 5,500+ students staying in in-campus hostels and ~4,000 students using the transport services, 970+ faculty members and have assisted in providing more than 10,000 placements. The management of the entity bears an experience of over two decades in the education industry, thus, enabling the entity to increase its reach in the industry.
Acuité believes that the established track record of operations along with introduction of new courses will enable the entity to grow over the medium term.

Growing student strength leading to improvement in the operating performance
While the student strength of the company improved by 7% in FY24, the operating performance stood moderated to Rs. 139.35 Cr. in FY24 as against Rs. 152.64 Cr. in FY23 due to delay in income receivables from the government for the international students and lower contributions from hostel. Further, for FY25, the company has reported a student strength growth of ~37% attributable to the receipt of NAAC A+ accreditation to all the courses of the University in November 2023 as against the earlier accreditation to only three courses. This along with yearly fees escalation and increase in hostel enrolments post completion of the new hostel development in FY25 has led to reporting of revenue of Rs. 195.05 Cr. till February’ 2025. 
Further, while the operating margins moderated to 27.06% in FY24 (35.30% in FY23) due to lower absorption of fixed cost, the same is estimated to have improved in FY25 with increase in the revenues. The PAT margins of the company stood negative at (6.08) percent in FY24 as compared to 15.15 percent in FY23 on account of increase in depreciation and finance costs.
Acuité believes, going forward, this continued momentum of increasing student strength, addition of newer courses and fees escalations shall lead to growth in the revenues.

Moderate financial risk profile driven by significant capex plans over the medium term
The financial risk profile of the company stood moderate, marked by moderate net worth of Rs. 178.84 Cr. as on March 31, 2024 as against Rs. 187.29 Cr. as on March 31, 2023. The decrease in net worth is on account of losses made by the company during the year FY24. The total debt of the company stood increased at Rs. 245.35 Cr. in FY24 as compared to Rs. 233.31 Cr. in FY23 owing to the infusion of Rs. 32.98 Cr. by promotors in the form of unsecured loan in FY24. This led to increase in the gearing (debt-equity) to 1.37 times as on March 31, 2024 as compared to 1.25 times as on March 31, 2023. The debt protection metrics also deteriorated with interest coverage ratio falling to 2.07 times in FY24 as against 3.79 times in FY23 and debt service coverage ratio at 1.28 times in FY24 as against 3.79 times in FY23.
Moreover, with increase in the cash accruals, the net worth and debt protection metrics are estimated to have improved in FY25. Further, promoters infused Rs. 18.00 Cr. in FY25 in the form of unsecured loans to support capex. Also, Acuité has considered unsecured loans to the tune of Rs. 120 Cr. as on 31st March 2025 as a part of quasi equity on account of receipt of management’s undertaking to the lender. The company has also refinanced their existing debt of ~Rs. 87 Cr. in FY25. 
Further, the company completed the construction of 13-storey hostel building in FY25, constructed at a cost of Rs. 78 Cr. and currently is undergoing the expansion of two floors in the academic building wherein it is expected to incur total cost of Rs. 10 Cr. Going forward, the company plans to build 3 new hostel buildings,1 new academic building and a sports complex at an estimated cost of ~Rs. 480 Cr. wherein the construction is expected to start from June 2025 post receiving the required approvals from the respective authorities. The company plans to fund the capex through a combination of debt (~60% of total project cost) and balance through the internal cash accruals and promotor’s infusion. Further, the debt tie-up is under discussion with the lender. Therefore, any further deterioration in the financial risk profile shall remain a key rating sensitivity.

Exposure to intense competition
MEF is exposed to intense competition from various reputed educational institutes providing the similar courses which may continue to limit scalability and profitability. Given the competition, the ability of the university to attract requisite students in tune with its sanctioned intake would be a challenge. Further, MEF also faces the risk related to qualified and experienced professional in the field of education.

Risk from stringent regulatory framework
The education industry is highly regulated, and it is crucial to adhere to certain infrastructure and operating standards established by regulatory organizations. Various state and central bodies, including AICTE, NBA, NAAC, CBSE, and SPPU, among others, prescribe a regulatory framework for MEF based on the professional courses that are being offered. Thus, continual investment in the workforce and infrastructure is required to run operations efficiently.