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Nov 27, 2012, 01.29 PM IST | Source: CNBC-TV18

Expect additional 15% EPS post acquisition: MT Educare

In an interview to CNBC-TV18, Yagnesh Sanrajika, chief financial officer, MT Educare gives the details of the acquisition of Lakshya Forum for Competitions. MT Educare's shares rose 4.5 percent to a 52-week high of Rs 130.90 on NSE in morning trade today.

The strategic kind of acquisition was to also get a foothold in North India, as well as launch these services in Mumbai where we are already strong. So this is going to be a double effect for us

Yagnesh Sanrajika

CFO

MT Educare

In an interview to CNBC-TV18, Yagnesh Sanrajika, chief financial officer, MT Educare gives the details of the acquisition of Lakshya Forum for Competitions. MT Educare's shares rose 4.5 percent to a 52-week high of Rs 130.90 on NSE in morning trade today.

Sanrajika says the deal is spread over a three year period and will be in the range of Rs 25-30 crore. On how the acquisition will result in MT Educare's earnings, he says, "Going forward, the EPS additions, just in terms of profits that it'll contribute in the next three years, should be to the tune of about 15 percent."

Below is the edited transcript of Sanrajika's interview.

Q: Can you tell us what you paid and what you get?

A: This is a North India based IIT entrance player. It is a leading player in its segment. So, they are currently at a run rate at about Rs 12-13 crore but growing at about 40-45 percent compounded annual growth rate (CAGR) over the next three years. The consideration is spread out over a period of three years. It is an earned graded payout, based on milestones that Lakshya management will achieve over a period of next three years. We are assuming that the total consideration will be in the range of Rs 25- 30 crore.

Q: Take us through this Lakshya’s financials? Is it breaking even on the operating front as well as on the bottomline? What sort of revenue contribution can we see for your consolidated numbers going forward?

A: Lakshya is already more than breaking even. This is a company established by four IITians, back in 2006. So the operating leverages are now kicking in.The first year of profitability is in 2012-2013. They will make about 10 percent PAT margins in 2012-2013. We are expecting these margins to double as the operating leverage kicks in. So, the margins are expected to be about 18-20 percent in the next three years. The topline is expected to be somewhere in the range of about Rs 35-36 crore by 2015-2016.

MT Educare stock price

On October 23, 2014, MT Educare closed at Rs 140.40, up Rs 2.00, or 1.45 percent. The 52-week high of the share was Rs 154.90 and the 52-week low was Rs 66.90.


The company's trailing 12-month (TTM) EPS was at Rs 6.52 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 21.53. The latest book value of the company is Rs 28.63 per share. At current value, the price-to-book value of the company is 4.90.

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