On January 22,2009 I had blogged on Educomp Solutions after it had plummetted from Rs 2100 levels to below Rs 1400 on a FV Rs 10 share on ‘Daily Pioneer’ expose
From October 27,2009,the Share Quotes are on a FV of Rs 2 after a split from FV Rs 10 to FV Rs 2 was announced in August 2009
Despite the adverse media bashing and a host of controversies that surrounded Educomp Solutions,the Share Price shot up inside Nine months by nearly 300% in 2009 to over Rs 5000 in the first week of October 2009….it closed cum split on October 26,2009 at Rs 4705 and opened at Rs 950 the next day ex split….since then it has been downhill dropping to Rs 450 levels in the last week of May 2010…currently it quotes at Rs 570…this would read as Rs 2850 cum split,yet twice the level from where it had collapsed in January 2009 on controversies
The reason I blog on this is that I’ve just received a very adverse blog response on this Company…I have not approved it for viewing on the blog as it directly accuses and casts aspersions on the Company’s Promoter and Top Management without any real evidence or proof….levelling charges of fudging and faking accounts,widescale bribing,laundering and fooling schools and education societies….moreover the person does not have the courage to put his name
However,if you do indulge in Trading in Educomp Solutions,do understand the Risks associated with doing so…The Share Price has shown abnormal volatility in the past two years as detailed above…while this presents dramatic opportunities for insiders,it can be tragic for those caught on the wrong side of the road
If Corporate Governance Issues continue to crop up,sooner or later Educomp will have a lot to answer to
In FY 10 it earned Rs 218 crs…that’s an EPS of @ Rs 25 on an Equity of Rs 19 crs (FV Rs 2)….yet it declared an interim dividend of Rs 1 (50%) and Final Dividend of Rs 1.75(87.50%)…that’s Rs 2.75 Dividend…that’s a payout of barely above 10% of what it earned !….This is curious that it rewards shareholders who own the company with just Rs 23 crs,while other stakeholders like Lenders are rewarded with Rs 32 crs as Interest and the Government with Rs 153 crs in Taxes !….Q1 FY 11 it has netted Rs 44 crs…so this year too an EPS of over Rs 20 is on the cards…at Rs 570,this is quoted under 30 earnings multiple
Clearly Trading and Investment in Educomp is not for the faint hearted…in this context,where Educomp is concerned I’m faint hearted !….I love the Education Sector though….but am unable to put my finger on something here…something is eluding me…..but I know of quite a few who trade this Stock…when they make Money they praise it….when they lose,they curse it !……clearly Luck,more than Skills at play here !
Oh ! it’s an FII favourite too…wonder why !
So Educate yourself on Educomp before you conclude that the best solution is to or not to play it !