Brickwork assigns BWR A+ rating to Educomp`s NCD issue

Brickwork Ratings has assigned BWR A+ rating with 'Stable' Outlook to Educomp Solution Limited's ("Educomp") proposed secured Non-convertible Debt Issue of INR 50 Crores. Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.

The rating has factored, inter alia, Educomp’s experienced management, dominant position in the growing education technology segment in India. The rating is however constrained by, execution risk associated with the huge expansion plans of Educomp and increasing competition in the SmartClass segment.

Educomp, founded in 1994, is a diversified education solutions provider and a leading provider of digital education content solutions. Educomp has presence across all segments of the education system - both formal and informal pre-schools, high schools, provides multimedia and content in private schools, ICT projects for Government schools, online/offline tutoring, teacher training, e-learning and professional and vocational education. The company is the market leader in most of these segments.

The company operates 27 offices worldwide including an office each in Canada and Sri Lanka, two in Singapore, three in the United States, and 20 in India. The Educomp Group reaches out to over 29,000 schools and ~19 million learners and educators across the world. As of Q3FY12 Educomp operates 842 pre-schools, 69 K12 schools, 7 colleges, one higher education campus, 343 Vocational Training Centers, 74 Test Prep Centers, and have 4.2 million online learning users.

For 9MFY12, Educomp reported consolidated PAT of INR 74.00 cr on operating revenues of Rs. INR 977.70 Cr. In FY11, Educomp reported consolidated revenues of INR 1,397.00 Cr and PAT of INR 336.70 Cr. Educomp has outstanding Foreign Currency Convertible Borrowings (FCCB) of US$78.50 mn which is due for conversion in July 2012 at a conversion price of ~INR 589 per share. Given the current market price of INR 132.50 per share (as on June 04, 2012), the conversion of FCCBs is highly unlikely. Educomp plans to refinance the FCCB through fresh borrowings. These FCCBs’ are redeemable at 141.087% of the principal amount. Going forward, the ability of Educomp to improve its leverage ratios and maintain profitability while achieving the envisaged growth would remain the key rating sensitivities.

Disclaimer: Brickwork Ratings (BWR) has assigned the rating based on the information obtained from the issuer and other reliable sources, which are deemed to be accurate. BWR has taken considerable steps to avoid any data distortion; however, it does not examine the precision or completeness of the information obtained. And hence, the information in this report is presented “as is" without any express or implied warranty of any kind. BWR does not make any representation in respect to the truth or accuracy of any such information. The rating assigned by BWR should be treated as an opinion rather than a recommendation to buy, sell or hold the rated instrument and BWR shall not be liable for any losses incurred by users from any use of this report or its contents. BWR has the right to change, suspend or withdraw the ratings at any time for any reasons.

Read More