Educomp Solutions soars on tie-up to repay FCCB

The stock has gained 25% since June 20, as compared to a marginal 0.33% rise in the Sensex

Educomp Solutions is trading higher by 3% at Rs 172, extending its four-day 22% rally after the company said it has tied up $155 million, or about Rs 852 crore, worth funds to pay off its existing foreign currency convertible bonds (FCCB) on due date and to fund its capital expenditure and strengthen its balance sheet.

“The board of directors approved a comprehensive financing package of $155 million. Of this amount, approximately $111 million is proposed to be utilised for existing FCCB redemption including redemption premium, the balance would be utilised towards capex, and strengthening the balance sheet of the company," Educomp, the country's leading education services firm said in a filing.

In 2007-08, the company had issued at par 5-year, FCCB at an exercise price of Rs 589.97 per share (adjusted to stock split from Rs 10 to Rs 2 paid-up) aggregating to $ 80 million (Rs 324 crore as on the date of issue) for financing overseas acquisition, capital expenditure and other expenditure.

These bonds are redeemable at 141.087% of the principal amount on July 26, 2012 unless previously converted, redeemed or purchased and cancelled. As on date $78.5 million FCCB’s are outstanding. The components of the financing package are expected to close simultaneously before the FCCB redemption date,” the company said.

Post the announcement, the stock has outperformed the market by surging 25% since June 20, as compared to a marginal 0.33% rise in the Sensex. A combined 5.52 million shares have changed hands on the counter so far, as against less than six million shares that were traded daily in past two weeks.