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Friday, June 20, 2014

Birla Shloka Edutech Ltd: A Turnaround Story
CMP: Rs.5.08
Introduction: Birla Shloka Edutech Ltd is one of the leading company in the field of educational services and has created its own niche through reliable, budget friendly and ethical approaches. Birla Shloka Edutech Limited was incorporated on 25th May, 1992 (Registration Number 066910) with Registrar of Mumbai as Rathi Mercantile Industries Limited. It was acquired in the year 1998 by the prestigious Yash Birla Group. The Company got its name as Birla Shloka Edutech Limited in December 2008. Today the company stands tall with the trust and confidence of its millions of delighted customers who form the backbone of the company’s new product innovations and researched. Company is engaged in providing IT Services & sale of IT products and has a curriculam based educational software programe viz., “XL@School “ as per the syllabus prescribed by different educational board that is  designed to impart academic knowledge through electronic media
The Company has three subsidiaries: 
  • Birla Edutech Limited.
  • Wholly-owned foreign subsidiary, viz. Birla Shloka Edutech ltd.FZE.
  • Ojus Healthcare private Limited.
The Shares in the later Subsidiary (51.10%) was acquired by the Company during FY13. The main object of the subsidiary is to establish hospitals, conducting research and development activities in the areas of medical science, to carry the business of providing the healthcare and health information. In addition to the main object it can also pursue e - Governance Project.

The company derives its revenue from either supply or on installation of educational content and services, content licensing, sale of content and technology products. 

Shareholding Pattern: The promoters have increased their stakes to 17.03% in Q4FY14 from 9.23% in the December, 2013 quarter. The general public holds 82.97% of the shares of the company. Among the general public Birla Bombay Pvt Ltd, holds 2.68% of the shares of the company. Also, 4% shares of the company are locked in for trade. Moreover, corporate bodies  hold 12.42% of the shares of the company. 

Financials: For Q4FY14, the total income of the company came out to be Rs.33.69 Cr as against Rs.54.3 Cr in the same period previous year. The net profit of the company jumped to Rs.3.53 Cr as against Rs.2.77 Cr in the same period previous year. The EPS of the company for Q4FY14, came out to be Rs.1.68 as against Rs.1.32 in the same period previous year. On a consolidated basis, the total income of the company for FY14 came out to be Rs.101.09 Cr as against Rs.279.4 Cr in the same period previous year. The net loss of the company came out to be Rs.9.45 lakhs as against a net profit of Rs.30.8 Cr in the same period previous year. The reserves of the company as of 31st March, 2014 stood out to be Rs.93.99 Cr as against Rs.87.81 Cr in the same period previous year. 

Triggers:
  • The Company has a curriculum based educational software program viz., ‘XL@school’ as per the syllabus prescribed by different Educational Boards that is designed to impart academic knowledge through electronic media. To cope up with the increased business opportunities, the Company has made considerable investment in research and development areas, ongoing quality enhancement program and infrastructure facilities, etc. 
  • The Company has expanded its business in Information and Communication Technology (ICT) solution for various government schools segment. In March, 2014, Birla Shloka Edutech Ltd informed the BSE that it had received an order from School Education Department, Government of Tamil Nadu for implementation of Information and Communication Technology Scheme in 1820 Government High & Higher Secondary Schools in Tamil Nadu State with a Total Project Value of Rs.359 Cr. Few more such orders could flow into the company's kitty this Fiscal. 
  • The government of India is keen to explore the Public Private Partnership (PPP) model for setting up of Schools which the private partner will design, build, finance and manage. The company sees enormous potential in this space for future growth as more and more states are likely to devise and implement similar schemes for Senior Secondary Education and probably in primary education too.
  • The Company is aggressively participating in tenders of various state government projects and vigorously pursuing such initiatives across the country.
  • The need for ICT solution in government school is growing and opportunities are available in this space. Retails opportunities are available by way of sale of software contents to the end customer directly.
  • The Education sector is one of the most promising sector creating tremendous opportunities. Being a country having 50% of its population less than 25 yrs old, the Company sees bright prospects in this fiscal. The Company sees tremendous growth opportunities in the following areas:
    (i) ICT projects availed from School Educational Department, Government of Maharashtra: The School Education Department, Maharashtra along with DES & HS had invited various reputed and experienced organizations/ Institutes for the supply of Computer and connected accessories, Education software's, Online M.I.S., teaching faculty and provision of IT Education Services in 5000 Government Secondary and Higher Secondary schools in 10 groups (i.e. 10 regions) from the districts of the State of Maharashtra as specified in DTN for a period of five years through e-tender. The proposed project is about setting up of computer laboratories in Secondary and Higher Secondary schools all across the state of Maharashtra. It has been decided that a region wise implementation is to be done for the same and a representative number of schools have been chosen from the regions created. The Company has been awarded with the project for providing Computer and connected accessories, Education software's, Online M.I.S., teaching faculty and provision of IT Education Services to 850 Government Secondary and Higher Secondary schools for a period of five years. The Total Value of the Project is Rs.152 Cr. The ICT Solutions provided by the Company under this project will be on BOOT (Build Own Operate Transfer) model and will be transferred to the respective school(s) at the end of the tenure of Contract at an agreed price of Re. 1.
    (ii) Interactive multimedia learning and education system: The company has a well developed library of syllabus based interactive multimedia learning content for CBSE & Maharashtra State Board. The company has initiated the process of enhancing the features of the existing content and also develop the syllabus based interactive multimedia content for other state and central boards to expand the footprints in the segment of Multimedia Content for learning across the country.
    (iii) Development of Teaching Solutions and Learning Aids for Early Year Schooling: The company intends to set up development centre to create learning solutions for the young learners about the space, environment & relationships around them. The program will aid children to explore & nurture relationships they share within the spectrum of this space/ environment, empowering them to take ownership of the environment and relationships around them while contributing positively towards it. This unique solution together with the learning aids and collaterals developed by the company intends to provide unique teaching methodology and aids for Pre Schools. The company intends to have strategic tie ups with leading providers of collaterals like storybooks, music CDs, Story CDs, games and manipulative games, theme kits, toys, interactive games etc., to augment the solutions developed by the company.
    (iv) Supply of ICT solution to government and private schools: The company sees numerous opportunities under the ever increasing scope of Information and Communication Technology (ICT) of Government of India. The ICT is being presently used from School Education to University Education. The government is increasingly focusing at the Public Private Partnership (PPP) model to set up more number of Centers of Excellence and Skill Based Vocational Training Centers which will enhance the employability potential of students. The government of India, with the aim of improving Computer Literacy in Public Schools is increasingly opting for Public Private Partnerships to source IT Infrastructure and training under Sarva Shiksha Abhiyaan (SSA) Programme. Institutions have varying requirements and the private sector may be able to offer innovative solutions that will provide quality services and value for money.
    (v) Setting up and managing Teacher Training Institutes: In the coming years India is expected to face a huge demand for schools and teachers to educate its rapidly increasing school population. The curriculum in most of the existing Teacher Training Institutes does not equip teachers with the requisite skills to prepare students for tomorrow. The company is committed to setting up state of the art Teacher Training Institutes across the country that will attract the country's leading talent and prepare a cadre of highly skilled teachers who can ensure that each child learns in our classrooms.
    (vi) Supply of software as per customer specifications and requirements: The company is engaged in the business of providing customized software based on the specifications and requirements of its customers. The company sees more prospects and growth in this segment and therefore, is enhancing its capabilities and offer more products and services in this segment.
  • The company came up with 100% Book Built FPO in Jan 11, 2010 - Jan 13, 2010 at an Issue Price: Rs.45 - Rs.50 per Equity Share to meet:
    (i) Capital expenditure for Turnkey Projects executed by the company under the BOOT model
    (ii) Capital expenditure on up-gradation of infrastructure and content development for XL@School
    (iii) Funding the proposed M&A activities and
    (iv) The Working Capital requirements
    This price is around 9-10 times the CMP of the shares of the company. 
  • Recently there were some media reports that, the NDA govt will focus on e-governance for transparency, efficiency and accountability. President Pranab Mukherjee, who addressed the joint session of Parliament for the first time after the 16th Lok Sabha was constituted, said the government would embrace digitization of records and leverage technology. Pointing out that e-governance brings empowerment, equity and efficiency, Mukherjee said the newly-elected government will use the tool to improve service delivery and programme implementation. President Pranab Mukherjee said ICT will play a crucial role in the ways of working of the new government as it will be used to drive re-engineering of government processes to improve service delivery and program implementation. All these are positive for the companies like Birla Shloka Edutech Ltd. 
Conclusion: The Book Value of the shares of the company is Rs.50.36 and at Rs.5.08 it has a market cap of only Rs.10.47 Cr, against reserves of Rs.93.99 Cr as, of 31st March, 2014. In March, 2014 quarter it showed a turnaround. On the daily candle stick chart too, it seems a temporary bottom has been formed, as it bounced back from the oversold positions. Risk taking traders can buy at least 10, 000 shares of the company and keep holding. It is a screaming buy at the current market price.
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