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Chart: Educomp zooms on Rs 410 cr deal but exposure to FCCBs a concern

Educomp Solutions today shot up 15 percent to Rs 215 after the company said it has been able to securitise its receivables. The announcement said that Educomp Solutions has received a sanction towards the buy out of its receivable from one of the leading public sector banks. The gross amount sanctioned is Rs 410 crore at a limited recourse of 20 percent. The company is expecting sanctions from other banks towards the securitisation programme.

Securitisation helps the company receive the money for the fees it would collect over the year. The banks give this money for a fee and charge interest on it. Against this amount they keep a margin, which in the case of Educomp is 20 percent.

Collection period of the company increased from 145 days in 2010 to almost 160 days in 2011. This securitisation deal of Rs 410 crore accounts for almost 30 percent of the company's 2011 sales figure of Rs 1,350 crore.

 Chart: Educomp zooms on Rs 410 cr deal but exposure to FCCBs a concern

Screen grab from company website

Analyst had downgraded the counter on two main reasons. One was its exposure to FCCB (Foreign Currency Convertible Bonds) and second was due to its very high debt days.

Though Educomp will be able to improve its financials in the short term through securitisation, they will continue to remain affected by the high exposure to FCCBs. In the second quarter of the current fiscal the company has been hit to the extent of Rs 37.5 crore for foreign exchange fluctuation provisioning. Analysts expect the company to raise another round of FCCBs to repay its earlier bonds.

The stock touched an intra-day high of Rs 206.50 and an intra-day low of Rs 188.50. At 11:37 hrs the share was quoting at Rs 205.45, up Rs 18.05, or 9.63 percent. It was trading with volumes of 832,132 shares. In the previous trading session, the share closed down 2.95 percent or Rs 5.70 at Rs 187.40.

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Updated Date: Dec 20, 2014 15:51:45 IST