Thursday, November 17, 2011

Everonn close to raising $100 Million from PE?

As reported by BS, Everonn may be close to raising $100 million from private equity players including Carlyle and New York Life capital partners. If true then this would be among the largest PE investments in education sector. At current market price of Rs 298, it has a market cap of about $115 million dollars. However, I would be surprised if Everonn is able to pull it off due to the following reasons

1. Carlyle has burnt its fingers in the past in another Indian education company, which it self has fallen out of favor due to fears on corporate governance. With Everonn's recent problems, including arrest of the former CEO and also deferring of the open offer and poor Q2 results, PE players won't get any where near the company

2. The open offer was to be at Rs 528, almost double the current price. The sharp decline in price would prevent any preferential allotment due to SEBI restrictions on pricing (higher of average of last six months or last two weeks)

Also, NIIT, which is a venerable Indian education training company, is three times the size of Everonn and is available at less than $100 million after adjusting for its 25% stake in NIIT Technologies. And, Educomp, despite concerns on debt is also available at a lower PE of 6.5.

The deferring of the open offer is really worrisome and could see the stock really tanking to lows seen in 2009. 

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