Educomp Solutions (BOM:532696)

QUOTE AND NEWS
The Economic Times  Sep 24  Comment 
At 09:25 a.m.; Educomp Solutions was trading 7.3 per cent higher at Rs 34.90. It hit a low of Rs 34.75 and a high of Rs 35.75 in trade today.
The Times of India  Sep 24  Comment 
One of the richest Indians in the Gulf, Sunny Varkey, is eyeing K-12 schools of Educomp Solutions as the Dubai-based billionaire looks to expand his education business empire in the country.
The Hindu Business Line  Aug 30  Comment 
Educomp Solutions informed the stock exchanges that its subsidiary, Educomp Online Supplemental Service, has completed stake sale of its entire 55.41 per cent holding in Gateforum Educational Serv...
The Economic Times  Apr 1  Comment 
As per the reports, a large US-based strategic acquirer is in fairly advanced talks to buy majority shares in Educomp Solutions, a diversified education services provider.
The Times of India  Apr 1  Comment 
A large US-based strategic acquirer is in fairly advanced talks to buy majority shares in Educomp Solutions, a diversified education services provider, as its founder seeks to restructure the debt-laden company.     
The Times of India  Aug 16  Comment 
Education solutions provider Educomp Solutions on Friday said it has cut 3,500 jobs in the last three months and has also initiated measures to spur growth.     
The Hindu Business Line  Aug 5  Comment 
Educomp Solutions has reportedly not paid salaries to over 6,000 employees for a number of months. One employee at a computer faculty in Assam said the lag in salary payment is as...
The Hindu Business Line  Jul 25  Comment 
HCL Infosystems Ltd and education company Educomp Solutions Ltd on Thursday announced their partnership under which the former will provide life cycle services (support services for impl...
The Hindu Business Line  Jul 10  Comment 
Extending a sharp rally for the second straight session, shares of Educomp Solutions today jumped nearly 10 per cent, after the company initiated discussions with its lenders and approached the cor...
The Hindu Business Line  Jul 9  Comment 
Educomp Solutions shares today surged 10 per cent, to touch the upper circuit, after the company initiated discussions with its lenders and approached corporate debt restructuring forum to rejig i...




 
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Company Overview

Educomp Solutions is an education solutions provider in India. Company’s products have unique position in Indian Education Market. The company works closely with schools to implement innovative models to create and deliver content to enhance student learning.

Educomp serves 26,000 [1]schools and 15 million learners through its 775 preschools,43 high Schools, 7 colleges, 250 vocational training centres. The Company has installed SmartClass content in around 4000 schools, has set up 15,500 ICT labs in government schools. More than 2.5 million students are enrolled in eLearningwebsites.

The company has pan India presence with contacts from 13 [2] state governments at present.The Company operates through its various subsidiaries including authorGEN, ThreebrixeServices, Learning.com, USA, AsknLearn Pte Ltd, Singapore, and via its associates such as SavvicaIncin Canada.

Educomp provides comprehensive educational programs involving infrastructureimplementation,teacher training and content development projects.It brought about a transformation in the teaching-learning processes by empowering teachers and encouraging students to acquire knowledge and gain clarity of concept through use of Information Communication Technology (ICT).

Financial Analysis

Standalone Financial Position for Q3 ended
Particular Dec 2010 (Rs. In Crores) [3] Dec 2009 (Rs. In Crores) [4] YOY (%) Mar 2010 (Rs. In Crores) [5]
Net Sales 276.42 203.88 35.58 832.22
Total Income 282.45 215.95 30.79 832.22
PBT 128.44 99.99 28.45 371.83
PBT Margin (%) 45.47 46.30 44.67
Net Profit 112.03 64.13 74.69 371.83
Net Profit Margin (%) 39.66 29.70 26.66
EBITDA 150.80 129.40 16.53 461.90
EBITDA Margin (%) 53.39 59.92 55.50
EPS 11.73 6.76 23.99

Major Factors affecting the Company

Growth Prospectus

1. Order Book
a. Order from Government of Maharashtra worth Rs. 67.93 crore. [6] The order is with respect to implementation of ICT@Schools Project - Phase 2 in two regions - Nasik and Latur. The terms of Letter of Intent states the project to be implemented in build, own, operate and transfer (BOOT) model for a period of five years including supply and maintenance of computer hardware, software and lab accessories, training of school teachers, among other things.

b. Order form Government of Gujarat and Assam worth Rs. 6.81 Crores. [7]
The Company is awarded contract by Government of Gujarat for providing computer aided learning to the students of state-run schools. During the contract period of 5 years, the Company will develop and install 2D / 3D based multimedia content covering the core academic subjects in regional language in state of Gujarat and Assam.

2. Joint Venture with Zeebo Inc. [8]
The Company has entered into joint venture with US based Zeebo Inc. a Qualcomm funded company and Lakshya Digital, India’s largest interactive content development studio to introduce a customised version of Zeebo’s 3G-connected education and entertainment system specifically for the Indian market in 2011, with each partner making an investment of $4 [9] million towards JV.

The joint venture will come up with device that works on 3G services. This device will benefit Indian school going children by having an access to educational content on connecting the device to television. With the rollout of 3G and wireless broadband across India, the product launch will provide greater penetration and accessibility for its products.

3. Supplementary Education Market
The supplementary education market is growing rapidly at 18%[10]CAGR and expected to reach $19 billion by 2014. To take the advantage of this, the Company has undertaken two major investments.

a. Acquisition of VidyaMandir Classes Private Limited, a premier test preparation Institute for IIT-JEE and other engineering entrance exam for Rs. 34 Crores[11] was a major synergy provider Company’s existing test preparation Leap program.

b. The Company has also invested to acquire majority stake in Gateforum Educational Services Private Limited[12]. The acquired company was the only organisation that provided with comprehensive tool guide for Graduate Aptitude Test in Engineering (GATE), the entrance test for admission to post graduate courses in institute like IIT and NITs. The acquired company had presence in 40 cities and had been pioneer in offering online coaching to its student

4. Launch of 3D Technology
The project to be launch next is a uniquely developed three dimensional digital content in schools developed using the 3D stereoscopic technology.

5. Change in Business Strategy
The Company expect rapid growth in the SmartClass segment due to the change in its business from strategy BOOT to the “Outright Sale” basis. This will enable Company to rapidly penetrate the large addressable market and to be free cashflow positivebusiness

Major Challenges

1. Higher Learning Segment and Online supplementary and Global are showing losses. The losses are small compared to overall profitability of the company

2. Delay in Cash Flow from Government:
As the company has large number of government projects, delay in payment from government may affect cash flow.

3. Entry of new player:
High profit margin in the Company’s product may likely attract new player to enter the market. However, the market is large enough for multiple product and price points to co-exist.

Product

Business Segments [13]
Segment Comprising of Product Contribution of total revenue (%) in Dec 2010 [14] Contribution of total revenue (%) in Dec 2009 [15] Future Outlook
School Learning Solutions SmartClass and EduResearch (ICT) business 78.15 76.39 1. Continues to maintain outlook of dominant market share for the product
2. 949 schools added during the quarter
3. Deeper penetration in all tiers across the country
4. Addition of second service provider and new product launch based on 3D Technology
K-12 Schools Preschools (Roots to wings, Euro Kids)
High schools (Millennium School,Takshila School)
8.50 9.65 1. Strategy - to cover the entire spectrum of school customer segments and address the education capacity shortages at various price points
2. Likely announcement of Marquee Brand Partnership
3. New concept introduced by offering the option of Private Schooling
Higher Learning Solutions Vocational, higher education and professional development 4.08 3.00 1. Received the AICTE approval to launch Engineering and PGDM program
2. Students enrolment for vocational program increased by almost 51% during the quarter.
Online, Supplementary & Global business Others 9.27 10.96 VidyaMandir Classes added three center and achieved 100% capacity utilisation

References

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