Educomp's FCCB Repayment Could Trigger 200+ Cr Loss

Educomp announced today that it had tied up loans of $155 million to repay its FCCBs that are coming up for redemption and also for further capex. In addition, it also announced that it had further raised 10 million in FCCBs from IFC and dilute further equity of up to $50 million and Rs 149.5. Would also allot additional equity ($15 Mn) and warrants ($40 million) on a preferential basis to promoters at a price of Rs 193. Which is at a premium to current market price.  The shares are today trading 9% up at Rs 149 on the back of this news.

There is a surprise waiting for Educomp's investors in Q1/Q2 in the form of a loss of almost $32 million dollars of redemption premium on FCCBs, that they had (it appears) not amortized over the duration of the FCCBs + further loss of about Rs 50-60 Cr on unamortized component of MTM loss on 78.5 million dollars of FCCBs that were outstanding for a total loss of over Rs 200 Cr.

What may comfort the investors is the share allocation at a premium to FIIs (at Rs 149) and the proposed allotment to promoters at Rs 193 (equity and warrants) . However the loss in Q1 or Q2 (depending on when the FCCBs are repaid, would offset these notional gains from allocation at premium.