Friday, November 11, 2011

Educomp Q2 FY12 Results: Profit slumps 78%

Educomp today reported Q2 FY12 results and surprised negatively on the profits. The profit after tax came in at Rs 13 Cr which was 78% lower than corresponding quarter of last year (Q2 FY11 PAT was Rs 58 Cr). This despite the 16% increase in revenue.

Profit was impacted by 37 Cr of forex losses and an almost fifty percent jump in interest cost to Rs 31 Cr for the quarter  What is of concern is Rs 1908 Cr of debt on the books of the company and the muted growth rate in the School Learning Solutions which consists of the flagship smart class business.

Further the jump in debtors, inventories and provisions is a matter of concern, as is the increase in Loans and Advances.

Post Script: Educomp reported 28% growth in smart class segment which is impressive, but overall numbers are a matter of concern and do not inspire confidence.  Given the high debt, investors are likely to stay away from this counter till FCCB's are paid off and overall debt comes down. The de-leveraging would keep growth rates low in the short to medium term .

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