What’s wrong with Educomp Solutions?
Educomp Solution was termed as one of the best stock listed in Education Sector. Once termed as a blue chip has lost 90% of it’s market cap in the last two and a half years!
The stock is currently trading at Rs 35.05 on BSE up 4.94% (upper circuit). 52 Week Price range of the stock is Rs 182.70 – Rs 33.40. The stock had been in lower circuit since quite a few trading sessions and only today it has seen a reversal.
Chart Source – Google Finance
The companies management are from elite business schools and once were termed as gurus of management in India, specially Shantanu Prakash who is the founder & CEO of the company. He has been mentioned in various management/biz books, news papers and journals as well.
Stats from Forbes India:
Even with good management what has gone wrong with Educomp?
Poor performance. In quarterly results the company has reported a consolidated net loss of Rs 148 crore for the quarter ended March 2013 (Q4) against a net profit of Rs 62 crore in the corresponding quarter, a year-ago. It’s consolidated total income too is down by 35% at Rs 336 crore on year-on-year basis.
*One of the major clients for Educomp has been Government of India. Now that’s one major hurdle these companies have to tackle. The receipt of money from various projects get’s delayed as it being GOI. (*Confirmations Awaited)
Business Models – This is one major threat. Quality education is becoming free online check out websites like Khan Academy which are widely used in various parts of the world. Khan Academy is free to use with quality content.
Though these kind of websites are not a big threat to companies like Educomp now but in future they can be.
SP Tulsian told CNBC-TV18, “Considering the Q4 numbers of Educomp Solutions , which are very disturbing, then you have the concerns on the financials, corporate governance, and business model of the company. And every passing day we see the destruction happening in the stock price. (source)
So should you invest?
No. The stock may reach up-to a level of Rs 50 in short term but it’s not advisable to buy it. It’s a risky bet.
Investing makes sense once company gives out clarity on future growth prospects.
You can find an interesting article on Rise & Fall of Educomp on Forbes (here).
Over to you.. What do you think about this stock? Should you buy or wait? Comment & Share your thoughts.