Educomp rebounds smartly on filing police complaint

Educomp Solutions jumped 9.97% to Rs 1688 at 12:36 IST on BSE, on 21st Jan'09 (Latter at the day end it touched Rs:1800)after the company filed a complaint with the Economic Offences Wing of the Delhi police against alleged reports that the company's accounts have been fudged to boost share price.
The stock had on 21 January 2009 hit a 52-week low of Rs 1375 on BSE as media reports resurfaced about promoter shareholding in the company, fixed assets, investment in subsidiaries and other ancillary matters. However the stock recouped some losses to settle with 22.44% loss to Rs 1534.90. The stock hit a 52-week high of Rs 4799.70 on 21 January 2008.
The stock hit a high of Rs 1790 and a low of Rs 1534.90 so far during day.
Educomp Solutions on Wednesday, 21 January 2009 after trading hours said that the company has filed a police complaint with Additional Commissioner of Police, Economic Offences Wing, Crime Branch, New Delhi to identify the sources of these rumors and unwanted mails.
Only on Tuesday, 20 January 2009, the company had denied all the allegations and termed the reports as malicious and aimed at misleading the investors. Educomp clarified that there are no fictitious assets as all the assets are installed in the schools. It is wrong to say that intangible assets are mainly purchased from subsidiary companies. In fact, the total expense on account of intangible assets is Rs. 25.82 crore in 2007-08, whereas the purchase from subsidiaries companies (EducomP Learning Pvt. Ltd.) is Rs. 7.28 crore.
The reports had cited Educomp booking fictitious assets to adjust bogus profits arising out of bogus sales and purchases. The company also rejected reports of promoters diluting their stake in the company to the extent of up to Rs 250 crore at the high time of share market price.
The promoters' group has so far sold only about 5.07%. The promoters still hold 55.03% in the company, Educomp said in a statement.
The company had on 9 January 2009 signed a pact with US based Michael & Susan Dell Foundation. As part of the project, Educomp will analyze data on student attendance, enrollment, and do in-depth audit of six schools for poor students in Hyderabad. The value of the contract is Rs 4.78 crore for a term starting from 1 September 2008 to 31 March 2012.
Educomp Solutions will declare its Q3 results on 27 January 2009. The company's net profit surged 51.40% to Rs 25.39 crore on 41.39% increase in net sales to Rs 98.14 crore in Q2 September 2008 over Q1 June 2008.
The mid-cap stock had underperformed the market over the past one month till 21 January 2009, declining 43.83% as compared to the Sensex's decline of 13.08%. It had also underperformed the market in the past one quarter, declining 25.72% as compared to the Sensex's decline of 17.82%.
The company's current equity is Rs 17.28 crore. Face value per share is Rs 10.
The current price of Rs 1688 discounts the company's Q2 September 2008 annualized EPS of Rs 58.77, by a PE multiple of 28.72.
Educomp Solutions is a technology-driven, e-learning solutions provider specializing in creation, management and delivery of learning content.