These are the days of boom in education space and everyone is eying that sector with an intention to foray and make a big impact. It is basically the IT companies which are making an entry especially after the slump in IT sales last year. It is rather easy for an IT company to change its line of business and especially the transition from Software to Education is easy, if one concentrates on the implementation of ICT across schools or develops software pertaining to education space.
Now, coming back to the company Usha Martin Infotech ltd., the subject matter of this post. Actually the new name of the company is Usha Martin Education and Solutions ltd. The management changed the name in order to reflect the new line of business of the company. If we look at from the where the company has emerged then one cannot doubt the credentials of the management. The Company was a part of the Usha Martin Group, which was formed in India in the early 1960s with the establishment of Usha Martin Industries Limited (UMIL), engaged in the manufacture of steel wires, wire ropes and other related products. The group was promoted by Mr. B. K. Jhawar, who is the Chairman of the Company.
Usha Martin's IT division, was demerged into a new company named as Usha Martin Infotech Limited (UMITL). In accordance with the Scheme, UMITL issued and allotted one equity share of Rs. 5/- each to all the shareholders of the company in the ratio of one equity share of Rs. 10/- each held by them in the Company.
The new initiative - Learning Business
During the year, the learning business division of the company completed its first full year of operation. As part of portfolio of educational offerings, the company has started conducting classes/trainings for formal degree courses (MBA, MCA, BBA and BCA), affiliated to Punjab Technical University.
As per the management, till Mar'09 the learning division was operational at three centres (two at Kolkata and one at Ranchi), however they had mentioned that another centre at Patna is scheduled for commencement in June'09 with similar course offerings for which necessary infrastructure arrangements have been done. So, by now the company should be having 4 learning divisions operational.
Per the recent developments, Usha Martin Education & Solutions has forayed into providing standardized end-to-end solutions and school management services to enable the creation of a national network of high quality English medium K-12 schools with a focus on non-metro towns and cities of India. The company has partnered with Pearson Education India for instructional support, including curriculum and content, assessment, teacher training and support, and enterprise and learning management systems.
During the year FY2008-09, the revenue of the company increased by 390% (to Rs. 282.83 lakhs) as compared to last year. If we break up the revenues, then out of 2.8 cr, 2.3 cr came from learning division, while the rest of it was from other divisions. The profitability of Learning Division is good with margins in the range of 10-11%. During the year, the Company incurred capital expenditure of Rs 143 lakhs and the entire amount was provided by internal generation.
For the half year ending Sep'09, the company has recorded revenues of Rs 3.3 cr, more than what it did in FY2008-09. The net profit for the mentioned period stands at Rs 33 lakhs, whereas it was just 16 lakhs for half year ending Sep'08. Thus the company has been showing significant growth in numbers. Its results for different quarters can be highly fluctuating. It might even show a loss in some quarter of the year. This is because of the company's revenue recognition policy. They record revenues in their income statement, only when the classes commence, while the expenditure is recognized as and when it is incurred.
Now, the developments so far have definitely been positive, especially the association with Pearson Education India. However, considering the size of operations, the revenue, the profitability and also the fact that the company is a new entrant into this space, the valuations are on a far higher side, and one should avoid taking long term stand at current market price.
Now, coming back to the company Usha Martin Infotech ltd., the subject matter of this post. Actually the new name of the company is Usha Martin Education and Solutions ltd. The management changed the name in order to reflect the new line of business of the company. If we look at from the where the company has emerged then one cannot doubt the credentials of the management. The Company was a part of the Usha Martin Group, which was formed in India in the early 1960s with the establishment of Usha Martin Industries Limited (UMIL), engaged in the manufacture of steel wires, wire ropes and other related products. The group was promoted by Mr. B. K. Jhawar, who is the Chairman of the Company.
Usha Martin's IT division, was demerged into a new company named as Usha Martin Infotech Limited (UMITL). In accordance with the Scheme, UMITL issued and allotted one equity share of Rs. 5/- each to all the shareholders of the company in the ratio of one equity share of Rs. 10/- each held by them in the Company.
The new initiative - Learning Business
During the year, the learning business division of the company completed its first full year of operation. As part of portfolio of educational offerings, the company has started conducting classes/trainings for formal degree courses (MBA, MCA, BBA and BCA), affiliated to Punjab Technical University.
As per the management, till Mar'09 the learning division was operational at three centres (two at Kolkata and one at Ranchi), however they had mentioned that another centre at Patna is scheduled for commencement in June'09 with similar course offerings for which necessary infrastructure arrangements have been done. So, by now the company should be having 4 learning divisions operational.
Per the recent developments, Usha Martin Education & Solutions has forayed into providing standardized end-to-end solutions and school management services to enable the creation of a national network of high quality English medium K-12 schools with a focus on non-metro towns and cities of India. The company has partnered with Pearson Education India for instructional support, including curriculum and content, assessment, teacher training and support, and enterprise and learning management systems.
During the year FY2008-09, the revenue of the company increased by 390% (to Rs. 282.83 lakhs) as compared to last year. If we break up the revenues, then out of 2.8 cr, 2.3 cr came from learning division, while the rest of it was from other divisions. The profitability of Learning Division is good with margins in the range of 10-11%. During the year, the Company incurred capital expenditure of Rs 143 lakhs and the entire amount was provided by internal generation.
For the half year ending Sep'09, the company has recorded revenues of Rs 3.3 cr, more than what it did in FY2008-09. The net profit for the mentioned period stands at Rs 33 lakhs, whereas it was just 16 lakhs for half year ending Sep'08. Thus the company has been showing significant growth in numbers. Its results for different quarters can be highly fluctuating. It might even show a loss in some quarter of the year. This is because of the company's revenue recognition policy. They record revenues in their income statement, only when the classes commence, while the expenditure is recognized as and when it is incurred.
Now, the developments so far have definitely been positive, especially the association with Pearson Education India. However, considering the size of operations, the revenue, the profitability and also the fact that the company is a new entrant into this space, the valuations are on a far higher side, and one should avoid taking long term stand at current market price.
Note: The stocks discussed at MPS thru blog postings are neither a part of “Business Insights” issue nor a “Penny Stocks” which we reco/publish for paid subscribers. These are just stock specific views by MPS team; one MUST do the due diligence before doing any investment based on our reco.
To contact the Lead Associate on this story: Ekansh Mittal in Noida (New Delhi) at Ekansh@hbjcapital.com
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