Tuesday, August 02, 2011

Aptech Is Up For Sale?

CNBC reported today that Aptech may be up for sale, and that its promoters may be eyeing partial or complete exit.  Rakesh Jhunjunwala, often dubbed India's Buffet, holds over 32% in the company and stands to make a decent return over his investment of 6 years. At its current price of 135.80, the company has a market cap of Rs 6.62 billion (Rs 662 Crore). However, I believe that any deal would be tough and here is why:

Aptech, which acquired MAAC last year, to increase its leadership in the multimedia training business in India, derives bulk of its valuation from its investment in China (BJB Career Education) where it holds about 22 percent stake. BJB had filed for a US listing but plans were deferred due to market conditions. It was also rumored that BJB's recent performance (or lack of it) and material difference in numbers on translation of accounts from statutory to US GAAP before filing may have been the real reasons the listing did not go through.

Which is what makes any deal very difficult. Even if a private equity or strategic investor were to believe that it can drive the India business of Aptech (which would be difficult, as it faces tough competition from market leader NIIT and a string of other new players with deep pockets, including Pearson (JV with Educomp) and Everonn), it would not have any control on the destiny of the China investment except hope to cash out, as and when the IPO happens. A portfolio investor can take such a bet but not a private equity or strategic investor which wants control. 

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