Education companies’ stocks take a beating on bourses

By: | Published: April 4, 2018 2:01 AM

Even as venture investors have been pumping big money into digital and app-based education start-ups, the stock markets that traditionally evaluate companies on more conservative parameters like profitability and earnings growth have given companies in the sector a thumbs down.

bsae sensex, education, education sectorWhile the BSE Sensex delivered a return of 28.06% in 2017 calendar and a 10.23% return in FY18, stocks of education companies kept sliding. (Reuters)

Even as venture investors have been pumping big money into digital and app-based education start-ups, the stock markets that traditionally evaluate companies on more conservative parameters like profitability and earnings growth have given companies in the sector a thumbs down.

While the BSE Sensex delivered a return of 28.06% in 2017 calendar and a 10.23% return in FY18, stocks of education companies kept sliding. While stocks of the larger educational companies excluding CL Educate slipped by up to 38.7% in FY18, those of small cap education stocks saw a steeper decline of up to 84.8%.

What’s more, education sector stocks that listed in 2017 were not able to gain from the bullish sentiment in the market. CL Educate, which raised Rs 239 crore through an offer priced at `502 per share in March 2017 is currently trading at Rs 179.10, a 64.3% discount to its issue price. Educational content provider, S Chand & Company, which raised `728.5 crore through an offer priced at `670 per share in April 2017 currently trades at `405, 39.5 % below its issue price. The market capitalisation of CL Educate has shrunk from Rs 597.8 crore to `254.9 crore since listing, while that of S Chand and Company has near halved to `1,418.7 crore from `2,345 crore, showed Bloomberg data.

In FY18 the stock price of Navneet Education fell by 13.38%. Share prices of Zee Learn and MT Educare too declined 27.04% and 16.78%, respectively in the fiscal. “Earlier (three quarters ago) Zee Learn had ventured into some new businesses, which was unrelated to their existing business. This new venture was not liked by investors. Also, there is not much enthusiasm for Zee Learn and MT Educare’s acquisition. Zee is acquiring MT which again the investors have not liked. Earlier MT Educare had a lot of capex in one segment and has not been able to monetise that particular segment. They want to venture in a different segment but they never actually performed. This has affected the performance of both the stocks,” said an analyst from Edelweiss on condition of anonymity.

Although the net revenues of prominent educational companies have risen for the nine months period ended on December 31, 2017, their profits have either contracted or they have posted losses. S Chand and Company reported losses for the nine month period ended on December 31 of 2016 (`45.95 crore) and 2017 (`37.19 crore).

MT Educare reported a loss of `107.7 crore in 9MFY18 against a profit of Rs 23.11 crore for the same period in the previous year. Navneet Education’s profit declined to `138.15 crore for 9MFY18 from `144.78 crore for 9MFY17.
Virtual Global Solutions has been the worst performing among small-cap educational stocks, with a 84.8% decline in value during FY18.

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