Credit Suisse downgrade: Double whammy for Everonn

Two foreign institutional investors (FII) have partly sold their shares in Everonn. Morgan Stanley Mauritius Company sold 1,97,602 shares at an average of Rs 244.45 while JF Eastern Smaller Companies Fund offloaded 1,11,953 shares at Rs 250.59 on Wednesday (September 7). Everonn checked its falling trend on Wednesday after the stock tumbled from Rs 438 to Rs 227.25, a slide of nearly 48 percent.The stock has been falling after the arrest of its managing director P Kishore in a bribery case.

[caption id=“attachment_79278” align=“alignleft” width=“380” caption=“The report argues that while the immediate business continuity might not be a concern, there will be risks to long-term business prospects of the company. Reuters”]  [/caption]

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FII holding in the company is to the extent of 23 percent. New Vernon is the largest holder with 5.69 percent of the equity, or 10.93 lakh shares. Both Morgan Stanley and JF Eastern Smaller Companies Fund continue to hold some shares in the company. As of June-end 2011, Morgan Stanley had 8,28,727 shares - 4.32 percent of Everonn’s equity capital - while JF Eastern had 3,94,162 - 2.05 percent - shares.

Meanwhile, Credit Suisse(CS) has downgraded the company to ‘Neutral’. The report argues that while the immediate business continuity might not be a concern, there will be risks to long-term business prospects of the company. Government-related business, which currently accounts for 18-20 percent of the sales, are at risk.

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Apart from this, there is also the likelihood that the National Skill Development Corporation (NSDC) contract, which was to train 15 million candidates, can also be in jeopardy. The company was expected to earn a revenue of Rs 14,000 crore over the next 10 years from NSDC order. CS has reduced the revenue and earning estimate of the company by 8-17 percent.

The report notes that the new top management of the company has reached out to its bankers, key customers and employees. A business council has been formed to advise the new CEO of the company, Susha John, who is also a co-promoter of the company, along with P Kishore.