Flop: Educomp Solutions

From the heady days of 2007 when Educomp Solutions enjoyed triple digit valuations, it has come crashing down to low single digit price-earnings multiple.

In recent times, there was negative news flow in the form of IT searches conducted in its premises and also the company postponing its fund raising exercise in light of the present volatile market conditions. The stock also took a knock as a result of corrections in the broader markets. Increase in debtor days too weighed on the share.

Barring a difficult FY09, Educomp has consistently been delivering healthy growth in both its revenues as well as net profits.

The average selling price a class room in its lucrative smartclass segment has increased steadily over the past 3-4 quarters to Rs 4.04 lakh. Cumulative number of students covered has risen from 3.4 million in June 2010 to 4.5 million. Educomp has now covered 7,202 schools across the country.

Its hardware intensive ICT division too continues to see steady deal flows, evidenced by the contract won from the Chhatisgarh Government for implementing ICT in 582 Schools. The order is worth Rs 60.72 crore.

Analysts would be keenly watching how the company manages to repay a large portion of its debt obligations which is due in July 2012.

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