Educomp sees FY09 net, revenue nearly doubling

Educomp Solutions Ltd's profit and revenue could likely double in 2008/09, as more schools adopt its teaching aids, its managing director told investors late on Wednesday.Rising household income and demand for quality education from India's fast-growing middle class have created a lucrative market for multimedia teaching-aids and computer-education programmes that Educomp offers to schools.

Smart Class is Educomp's interactive education-aid which contributes nearly half of the firm's revenue. Orders for computer-aided-education programmes from government-run schools add another third. Educomp's stand-alone net profit is seen rising to 1.35-1.4 billion rupees in the year to March 2009, up from 700.7 million rupees a year ago, Prakash said. Revenue will rise to 5.4-5.5 billion rupees from 2.62 billion rupees in 2007/08, he said.

With little competition and high entry barriers for its largest businesses, Educomp trades at nearly 98 times its 2007/08 earnings. Prakash said 1,700 schools would use Smart Class in 2008/09, up from 933 currently. The firm also expects 12,000-15,000 schools to order computer-aided-education programmes in the year, with the government hiking spending on elementary education.

The order value from the 933 schools stands at 5.92 billion rupees over 3-5 years, he said. Educomp's capital expenditure in the current year will be 3 billion rupees, up from 1.75 billion a year ago, Chief Financial Officer Sangeeta Gulati said on the call.

Educomp's board on Wednesday approved raising up to $500 million overseas, $150 million of which would be used to set up 150 schools over four years. Prakash said he expected to have 25 schools by the end of the financial year.Educomp has a tie-up with Ansal Properties & Infrastructure Ltd to lease out and manage schools in townships built by the real-estate developer. It is also in talks with other developers for similar agreements. The firm has no immediate plans for using the remaining $350 million, Prakash said. Educomp shares were up 1 percent at 4,031 rupees at 10:57 a.m. in a flat Mumbai market.