Educomp Solutions hits the roof on acquisition buzz

Educomp Solutions hit an upper circuit limit of 10% at Rs 27.75 at 15:25 IST on BSE after a report suggested that a US-based firm is in talks to acquire the Indian company.

Meanwhile, the BSE Sensex was up 80.53 points, or 0.36%, to 22,466.80.

On BSE, so far 2.25 lakh shares were traded in the counter, compared with an average volume of 86,944 shares in the past one quarter.

The stock hit a low of Rs 27.30 in early trade. The stock hit a 52-week high of Rs 75.40 on 9 May 2013. The stock hit a record low of Rs 17.50 on 29 August 2013.

The stock had outperformed the market over the past one month till 31 March 2014, rising 9.54% compared with the Sensex's 5.99% rise. The scrip had, however, underperformed the market in past one quarter, falling 11.25% as against Sensex's 5.74% rise.

The small-cap diversified education services provider has an equity capital of Rs 24.49 crore. Face value per share is Rs 2.

According to the report, a large US-based strategic acquirer is in fairly advanced talks to buy majority shares in Educomp Solutions, as its founder seeks to restructure the debt-laden company.

The potential acquirer may invest about $300 million (Rs 1800 crore) through a combination of primary shares and mandatory open offer to emerge as the majority shareholder in Educomp, the report added.

The ongoing negotiations are veering towards the acquirer subscribing to primary shares giving it an over 40% ownership, thereby triggering an open offer to public shareholders, the report said.

The promoter and promoter group as of 31 December 2013 held 44.79% in the company.

The report further added that this capital infusion in Educomp comes at a big premium to its prevailing market valuation, which is expected take care of a large part of the Rs 2500 crore debt.

However, Educomp Solutions clarified during trading hours today, 1 April 2014, that the media report is without basis. "The company has categorically informed the said publication yesterday that there was no such development at Educomp," the company said in a clarification.

On a consolidated basis, Educomp Solutions reported a net loss of Rs 86.02 crore in Q3 December 2013 compared with net loss of Rs 6.57 crore in Q3 December 2012. Net sales fell 37.1% to Rs 155.33 crore in Q3 December 2013 over Q3 December 2012.

Educomp is the largest education company in India. The company has 27 offices worldwide including an office in Canada, two in Singapore, three in the United States, and 21 in India. Educomp reaches out to over 6.7 million students across 14,561 private schools, over 5.9 million students across 10771 government schools. It also runs over 209 pre-schools, 51 brick and mortar K12 schools, six colleges, one higher education campus, 94 test preparation centers, and have 5.5 million users of our online learning properties.

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