Educomp Solutions: Learn & Earn!

Educomp Solutions Ltd. (Educomp) is India’s largest technology driven education company. Educomp is the largest owner of K-12 digital content, principal professional development company and pioneering eTutoring and R&D company. Educomp’s products & services can be classified under 7 categories:

Educomp Solutions’ History & Salient Features:

• Educomp Solutions Limited is India’s number one Kindergarten to Class12 (K-12) Education Company. It serves over 15,000 schools and 7 million learners and educators across the world.
• Educomp was incorporated in September of the year 1994 as a Private Limited Company.
• Educomp is promoted by Shantanu Prakash.
• Educomp has 27 offices worldwide including an office in Canada, 20 in India, two in Singapore, one in Sri Lanka, and three in the United States. In addition, Educomp operates through its various subsidiaries including AuthorGen, Threebrix eServices, Learning.com, USA, AsknLearn Pte Ltd, Singapore and via its associates such as Savvica Inc. in Canada.

Educomp works closely with schools implementing innovative models, creating and delivering content to enhance student learning. Educomp has maintained a long, undiluted focus in the K-12 curriculum design and teacher education space.

Educomp’s innovative applications and products have revolutionized the way information technology and the Internet is used to deliver new age learning to people. Apart from the products & services of Educomp listed above, Educomp launched eCampus in the year 1998 and in the same year also launched one portal as PlanetVidya.com. In 1999 Educomp introduced an educational portal.

• Educomp’s status was converted from private limited to public limited in 18th September of the year 2000.
• In 2000, Educomp started its trading operations with CD-ROMs.
• In 2002, Educomp entered into the e-learning space with its Learning Mate division and launched Learning Mate Nhance, the learning Content Management platform.
• In 2002 Educomp set up its fully owned USA subsidiary by the name of Edumatics Corporation. Educomp launched Smart Class Content solutions during June of the year 2003, a novel concept in Education space, which aimed at transforming an entire classroom into a Technology enabled classroom.
• In 2003, Educomp fashioned a subsidiary by the name of Learning Mate Solutions Pvt. Ltd. Furthermore it was transferred to the management team and assets and liabilities pertaining to the e-Learning division of the company.
• In August 2004, Educomp entered into the US market with the signing of a US pilot project with Franklin Elementary School, Santa Barbara, California (USA).
• Educomp entered the Asia Pacific Market with pilot projects at Cedar Girls School, Singapore in November 2004.
• Educomp obtained an ISO 9001: 2001 certifications for ICT solutions in the year of 2004.
• Educomp successfully executed the pilot projects in both. In 2005 Educomp launched Online Tutoring for teaching mathematics to the students in US. In recognition of its innovations and product offerings, Educomp was conferred the ‘CNBC-ICICI Bank Emerging India Award’ as the Company of the year 2005′ in the ICE and ITeS category. Educomp was chosen as the ‘FUTURE TITAN’, one of the 10 hottest companies in India by Outlook Business Magazine in November 2006. Educomp was also rated the best performing IPO of the year 2006 across all sectors in India.
• In October 2007, Educomp signed a memorandum of understanding (MoU) with Singapore-based Raffles Institution to provide consultancy advice and services of Raffles Institution for schools set up by Educomp though its related entities. In November 2007, Educomp entered into the formal school education and also during the same period Educomp launched an IP system called Millennium Learning. In December 2007, BT 500 ranked Educomp as the 7th biggest in percentage gain in market cap (H1, 2007 over H1, 2006) and 140 in the list of the most valuable private sector companies in India.
• As of May 2008, Educomp Solutions entered into two equal-equity joint ventures with Raffles Education Group of Singapore, which involved investments worth $ 150 million. In May 2008, Educomp acquired 51% stake in US-based e-learning company learning.com for $ 24.5 million.
• Educomp aims to usher an era of anytime, anywhere learning to break down the barriers to education. Educomp is aligned with emerging paradigms in pedagogy that underline ‘What Learning Can Be’.

Educomp is the best play on rising use of multimedia content in schools

Educomp is the best way to capitalize on the growing acceptability of multimedia content for teaching in K-12 schools and the increasing share of private schools in India. Educomp has the potential to increase its presence sevenfold to around 17,000 private schools by F2015 driven by its strong competitive position and low penetration in a fast-growing market.

Educomp Solutions’ Consolidated Performance Review Q3 FY’10 Vs. Q3 FY’09

• Strong Quarterly Growth Trend Continues – 92.3% growth in Consolidated Profits after Tax
• Net Income from operations up 37.2% to Rs 260.1cr from Rs 189.6cr
• EBITDA up 76.4% to Rs 130.5cr from Rs 74.0cr
• EBIDTA Margins up to 50.2% compared to 39.0%
• PAT up 92.3%to Rs 61.2cr from Rs 31.8cr
• PAT Margins at 23.5% compared to 16.8%
• Educomp Solutions declared Interim Dividend at Re 1 per share i.e 50% for FY’10. Total payout of Rs 11.1cr

Educomp reported robust performance recording 37.2% yoy growth in Top-line and a robust 92.3% yoy increase in Bottom-line with EBIDTA Margins expanding by 580bp to 52.4% in 3QFY2010. Strong government backing pertaining to higher budgetary spends to spur growth of the Education and Training Sector across the globe, and particularly in India, is a key positive for companies in this space like Educomp, which has been growing aggressively through its strong execution capabilities. Educomp can be expected to thrive on the upcoming opportunities in Education space and continue to witness strong growth trajectory backed by ongoing investments for newer initiatives with focus on product and content innovation.

Educomp’s strong Operational efficiency in SLS:

Educomp recorded 37.2% yoy growth in Revenues for 3QFY2010 driven by strong growth recorded by its School Learning Solutions (SLS) Business. The SLS Business comprising Smart Class and ICT Solutions (ICT) registered robust 55.3% yoy growth. The company implemented 355 new schools under the Smart Class Business and signed in 363 new schools in ICT during the quarter. EBITDA Margins grew by a strong 580bp yoy following strong improvement in SLS Margins. Strong Margins and Other Income boosted Bottom-line by 92.3% yoy despite higher Depreciation and Interest costs.

Educomp’s Outlook and Valuation:

In addition to the aggressive expansion plans in the Smart Class Segment, Educomp is also investing considerable amounts towards newer initiatives in terms of setting up its own K-12 high-schools and has embarked on expansion of its Online, Supplementary business.

Educomp can be expected to record strong CAGR of 48.5% and 45.4% in Top-line and Bottom-line respectively, over FY2009-12E.

At the CMP of Rs. 650, the stock is trading at a P/E of 14.2x FY2012E EPS. A patient investor will be richly rewarded.

Educomp’s Research Reports of Analysts: