Educomp Selling Its Stake In IndiaCan to Pearson?

There is rumor of Educomp selling its stake in its 50:50 JV with Pearson. IndiaCan has been losing money hand over fist, ever since the investment. In the first 9 months for FY13, it reported revenues of Rs 83 Cr with EBIT loss of 34 Cr. In my view, the JV was doomed from the beginning but more on that later. 

In current state, any money that Educomp would get for its stake in this venture would be more than welcome, especially since Educomp is reeling under piles of debt (over 2000 Cr as of December 31, 2012) . 

In reality, Pearson should be asking money from Educomp to take over this stake in IndiaCan. Year over year, the revenues have almost doubled but losses have remained almost as much  (loss of 34 Cr in 9MFY13 vs loss of 42 Cr for 9MFY12), which means that even on marginal basis, the company is hardly making any money.  Sale of stake by Educomp's is not going to magically start delivering profits. 

If Pearson wants to enter training business in India, it would do well to look at other companies (even listed ones) which are available at very attractive valuations, and while profits are depressed for them at this stage due to slow hiring across sectors, at least some of them have shown that with volume recovery, their business model can deliver large profits.