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Transcript of educomp
Investor Presentation
May 2011
2
Educomp is the largest Education company in India and the only company spread across the entire Education Ecosystem
Educomp currently works with ~25,000 schools and serves over 15.5 million learners and educators across the world
Educomp owns India’s largest K12 content library with over 16,000 modules of rich 3D multimedia educational content reaching out to 3.9 million students across ~5,500 private school and 5.8 million students across ~10,550 government schools
Educomp runs ~800 pre-schools, 50 brick & mortar K12 schools, 7 higher-ed colleges, over 275 vocational training centers and has 2.5 million users of its various online businesses
All businesses have a high component of intellectual property and high branding
The company has been growing Revenues & Profits at a 5yr CAGR of over 100% with EBITDA margins close to 50%
Mission: Be among the top five Education Companies Worldwide by 2012
About Educomp
3
2 – 5 years 5 – 18 years 18 – 21 years 21 – 25 years
Education Life-Cycle
Presence across entire Educational Life Cycle
Pre-Schools
Digital Content Solutions
Higher Education Vocational Education
Professional Development
High Schools
Admissions Advisory Services
Tutoring Services Test Preparation
E-learning Platforms
Assessments & Counseling
Online & Supplemental Education
Pre-
Scho
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Initi
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Hig
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In
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ives
Hig
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Vo
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Initi
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Sup
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4
Smart Class: Teacher-led educational content solution that dramatically improves learning outcomes in Private Schools. Market leader with presence in 5534 schools
EduReach (formerly ICT): Turnkey solutions for computer aided learning in government schools; Only company to have content in 10 regional languages. Market leader with presence in 10550 schools across 13 states
School Learning Solutions Higher Learning Solutions
K12 Schools Online, Supplemental & Global Initiatives
Pre-Schools (~799 franchisee sign-ups) Roots to Wings: Educomp’s own pre-school brand; currently 220 pre-
schools franchisee sign-ups EuroKids: 50% stake in Eurokids, the largest pre-school chain in India
with 579 pre-schools franchisee sign-upsVendor to Schools owned & run by independent trusts (currently 50
schools operational, visibility of 81 schools) Millennium Schools: K12 schools in Tier I and Tier II cities Takshila Schools: K12 schools in Tier III and Tier IV cities Universal Academy Schools: Budget schools brand targeted at
semi-urban towns with a tuition fee of Rs.800 per month Le Mont High Schools: International Curriculum schools
Professional Development: Teacher Training in technology integration, pedagogy and best classroom practices. Trained 1.6million teachers till date
JV with Raffles Education: Professional development programs in Fashion Design, Management, B.Com etc. across 7 colleges
JV with Pearson: Vocational Training programs in English Language training, Accounting, IT, Retail etc. across 279 centers
LearningHour: Premium tutoring centers Mathguru: India’s first & largest online math tutor & content portal WizIQ: Internet Learning Platform to connect students and teachers Learnhub: Social Learning Network Studyplaces: Education portal for admission advisory services EducompOnline: Online Learning & Testing platform Vidya Mandir Classes: India’s premier IITJEE Test Prep organization Gateforum: India’s premier GATE Test Prep organization Learning.com: Leading web based K12 Company in US Ask-N-Learn: Singapore's largest K12 company
The only Education Ecosystem Company In India
5*CLSA Report March 2008
$ 1.4 billion
Books/ CD Roms/ Stationery/
Multimedia in School
$ 7 billion$ 20 billion
Higher Education
K12 Schools $ 40bn
FY’09
$ 4 billion
Vocational Training
$ 7 billion
Test Prep./ Tutoring
FY’14
$ 80bn
$ 39 billion
$ 7 billion
$ 15 billion
$ 4 billion$ 15 billion
India Education Overall Market estimated at $40bn growing at CAGR 16%
The Education opportunity in India is estimated at $40 billion
6
Educomp benefits from huge cross-selling opportunities by monetizing students across the education life cycle from age 2 to age 25 years
Flawless execution demonstrated across years
Demonstrated innovation in products: SmartClass, Millennium Learning System, One-on-One Learning, ETEN, VSAT technology, Online learning, Technology integrated Supplemental education etc.
High investment in R&D: 400 people in content development, over 100 people in non-digital learning materials
Best in class partnerships & Joint Ventures: Raffles Education Corp. for Higher Education and Pearson plc for Vocational Education
Highly entrepreneurial & experienced management team
Best positioned to benefit from the growing middle class aspirations, growing consumption of quality Educational products as well as growing numbers (because of economic growth, urbanization as well as high birth rates)
Investment case for Educomp
7
High growth:
FY10 consolidated revenues ~$230 million growing at a 5yr CAGR of 108%
FY10 consolidated EBITDA ~$107 million growing at a 5yr CAGR of 106%
FY10 consolidated PAT ~$60 million growing at a 5yr CAGR of 110%
High profit margins:
EBITDA margins approx. 46% over the last 5 years
PAT margins approx. 25% over the last 5 years
Business models with annuity type revenue streams (3yr to 12yr annuity streams)
Low levels of penetration even in our most scaled businesses
Multiple engines of growth & value creation – many of them in early stage
Multimedia in schools
K12 schools
Higher Education
Vocational Education
Supplemental Education
Internet/ Online Learning
Investment case for Educomp (cont’d)
8
Multiples engines of growth & value creation
Current Mkt Size Educomp Presence Current Penetration Market Position Value Creation
Multimedia Content
$160m SmartClass <1.5% No. 1 player High
ICT $90m EduReach <2% No. 1 player Medium
Pre Schools $1bn Roots to Wings, Eurokids <3% No. 1 player High
K12 Schools $20bn Millennium, Takshila, Universal Academy, Le Mont HighShortage of 200,000
schoolsNo. 1 corporate
playerHigh
Professional Development
$15m Teacher Training NM No. 1 player Low
Higher Education
$7bn Raffles JVShortage of 1500
universitiesGrowing presence High
Vocational Education
$1.4bn Pearson JV NMAmong Top 5
playersHigh
Online & Supplemental
$7bnMathguru, WizIQ, VMC, Gateforum, Learnhub, Learning
Hour, EduIgnite, EducompOnline, StudyplacesNM
Largest e-learning footprint
High
Global N/A Learning.com, Ask-n-Learn NM NM High
Educomp – Business Description
10
What is SmartClass
• Solution designed to assist teachers & enhance students’ academic performance
• Also enables teachers to instantly assess and evaluate the learning achieved
How does it work
• India’s largest Digital Content library of over 16,000 modules of curriculum-mapped, multimedia rich, 3D content
• Classrooms are equipped with Plasma screens, Interactive digi-boards and overhead projectors
No of Schools Signed
Covering 5534 schools and ~3.9 million students
90 331 9331737
30773921
45855534
0100020003000400050006000
FY06
FY07
FY08
FY09
FY10
Q1FY
11
Q2FY
11
Q3FY
11
CAGR 142%
SmartClass: Empowering Teaching, Inspiring Learning
11
Overview of ICT Solution
• Educomp participates in government initiatives in a ‘Public Private Partnership’ model to IT enable ~1,000,000 government schools in India
• Educomp sets up Computer Labs in Govt. Schools and provides: Multimedia Content in regional languages
Testing and certification in computer education
Full time assistants as well as teacher training
Monitoring and Supervision
No of Schools Signed
Covering 10,550 schools and ~5.8 million students
600
2808
6004
12012
15426
0
4000
8000
12000
16000
FY06 FY07 FY08 FY09 FY10
CAGR 125%
EduReach: Partnering with Govt. to Bridge the Digital Divide
12
First structured and process driven IP in the fragmented space for early childhood education (2 to 4 years)
220 pre-schools franchisee sign-ups till date catering to over 8300 kids
Created pioneering IP of over 100,000 pages
Roots-to-Wings has been awarded 'Emerging Franchisor of the Year 2008' for excellence in Franchising and Business Development, by Franchise India Holdings Ltd.
Eurokids: India’s leading chain of Pre-Schools
579 pre-schools franchisee sign-ups in the
country catering to over 39,800 kids enrolled from age 2-4
11 Euroschools (K12 schools), operational on Franchise Basis
Recipient of ‘Best Franchisor Award, 2008’ at “Franchise India 2008”
Pre-Schools – India’s largest Pre-School company with ~800 Pre-Schools
13
Shortage of 200,000 schools in the country
Over 100million school-age children not attending school
High birth rates in the region, leading to increase in enrollment numbers
Market Scenario Educomp’s Goal
Portfolio of Brands Strong R&D Capability
K12 schools in Tier I & Tier II cities
Co-branded schools with Shriram Schools
Co-branded schools with PSBB group of Schools
K12 schools in Tier III and IV cities
Budget schools with a tuition fee of Rs.800 per month
International Curriculum schools
Educomp aspires to set up 150 schools in the country
Currently 50 schools under operation with 25,000+ students
Over 750 textbooks and workbooks
Over 19,000 Lesson Plans
Over 26,000 worksheets
Over 11,000 Activities and 3,000 projects
Over 500 Teaching manuals
Visibility of 81 schools
India’s middle class has a high willingness to pay for good education Edu-Schools
Creating core K12 Schools capacity
14
Important characteristics of K12 Schools business
Assured annuity type revenues till perpetuity and lock-in of customers for 14 years (2 years in Pre-School and 12 years in High School)
High margins in steady state
High return on capital employed in the range of 30-35%
Recession proof business with no volatility
Negative Working Capital business
High demand supply gap ensures high capacity utilization in all schools
High willingness in Indian middle class to pay for good education: Spending on Education is the highest non-food expense category in the consumption basket and is mostly non-negotiable spend
With high growth rates in the country and rising disposable income of middle class parents, there is a high propensity to pay for quality education
Characteristics of K12 Schools business
15Feb 2011 15
The Millennium School, Lucknow PSBB Learning Leadership Academy, Bangalore
The Millennium School, Mohali
Chiranjiv Bharti, Sushant Lok, Gurgaon The Millennium School, PanipatThe Millennium School, Noida
The Millennium School, Amritsar The Millennium School, PatialaThe Millennium School, Kurukshetra
Creating core K12 Schools capacity
16Feb 2011 16
Takshila School, Hoshiarpur Mussoorie International SchoolPSBB Millennium School, Coimbatore
The Millennium School, Meerut Le Mont High, LavasaThe Millennium School, Nagpur
Chiranjiv Bharti School, Palam Vihar, Gurgaon PSBB Millennium School, Chennai PorurPSBB Millennium School, Chennai OMR
Creating core K12 Schools capacity
17Feb 2011 17
Takshila School, Ahmednagar Millennium School, BhatindaChiranjiv Bharti School, Sushant Lok, Gurgaon
The Millennium School, Indore PSBB Millennium School, GST Road, ChennaiUniversal Academy, Dehradun
Shriram Millennium School, Noida Millennium School, Agra
Creating core K12 Schools capacity
Millennium School, Karnal
18
Current Location of Schools (Visibility* of 81 Schools, 50 currently Operational)
* Visibility of Schools covers all Schools (including Dry Management, land sites and under-construction sites
Rapidly expanding Pan India Presence
Chennai
Bangalore
Musoorie
Mohali
Pune
Ludhiana
Noida
GurgaonPanipat
Lucknow
Amritsar
OperationalLand Acquired
Takshila Schools
Hoshiarpur
Ahmednagar
Gaya
Faridabad
Coimbatore
Gwalior
Meerut
HanumangarhGhaziabad
Sangli
Barnala
Jalna
Tirupur
Jodhpur
Hyderabad
Davangere
Guwahati
Bazpur
Kashipur
Gadarpur
Universal Academy/ Vidya Prabhat
Dehradun
Bhatinda
Jalandhar
Kurukshetra AgraKarnal
Patiala
Ambala
Kanpur
Nagpur
Salem
Madurai
Erode
Tirunelveli
Kundli
Reddipalayam
Trichy
Nuh
Indore
Firozpur
EuroSchool
Airoli
Sricity
Ahmedabad
Nadiad
Tura
HassanTumkur
Sirka
Patns
Bhuvneshawar
Begusarai
Porur
Alwar
Mysore
Le Mont High
Nagina
Taoru-Mewat
Le Mont High
19
7 ‘Raffles Millennium International’ colleges operational in Delhi, Bangalore, Chandigarh, Kolkata, Hyderabad, Ahmedabad and Chennai
RMI offers courses in Fashion Design, Interior Design, Fashion Marketing, Graphic Design, Product Design, Jewellery Design, Commerce and Interactive Multimedia Design
International faculty from US, UK, Italy, Spain and Singapore
Got AICTE approval to launch Engineering & PGDM programs in July/August 2011 in Greater Noida
Chennai Campus
Delhi Campus
An Educomp Raffles Joint Venture
JV with Raffles for opportunities in Higher Education
Ahmedabad Campus Greater Noida Campus
20
Network of 115 centers in place with a target to reach 150 centers
Over 37,400 students enrolled
ETEN ACE (Civil Services and Bank PO) pilots underway
Piloting ETEN Academy of Competitive Exams (over 100 enrolments)
Delivery channels in 110 colleges and runs 10 Robotics labs
Over 4,000 students enrolled
Programs for Engineering and MBA in place
Rolled out CCNA & Embedded Systems courses; plans to roll out Telecom course
Vocational Network of 55 centers signed up with over 11,000 enrollments
Sales program launched in 5 centers; Retail program to be launched in December 2010
Launched Media course with NDTV
Launched Oracle and Accounting courses
Various government projects worth Rs20 crores in hand
JV with Pearson for opportunities in Vocational Education
An Educomp Pearson Joint Venture
21
Supplemental
Educomp Supplemental - A unique Supplemental Education platform
Admissions Advisory Services
Tutoring Services
Test Preparation
E-learning Platforms
Assessments & Counseling
22
:
Premier provider of Web-delivered K12 curriculum and assessments
Digital Learning Environment products
Reach across 7,700 schools, 1550 school
districts and 3.2 million students and 125,000 teachers across the US
Unparalleled distribution access and strong footprint in the US
US is the largest education market in the world
Leading K12 education company in Singapore
Catering to over 230 educational
institutions across Singapore, China,
Thailand, Philippines, Vietnam, Japan and
Brunei
Started groundwork to launch SmartClass in China through CDEL
(China Distance Education Holdings)
Content Leadership in North America & South East Asia
23
26%46% 45% 44% 46% 46%
21%25%26%25%
0%10%20%30%40%50%
FY06 FY07 FY08 FY09 FY10EBITDA Margin PAT Margin
Revenue Growth EBITDA Growth
Rs 1 Cr = Rs 10 Million
56110
286
634
1,041
0
200
400
600
800
1,000
1,200
FY06 FY07 FY08 FY09 FY10
CAGR 108%
PAT Growth
1429
71
133
272
0
50
100
150
200
250
300
FY06 FY07 FY08 FY09 FY10
CAGR 110%
Rs.Cr
Rs.Cr
EBITDA & PAT Margins
Financials Snapshot (Consolidated basis)
2650
125
290
480
0
100
200
300
400
500
FY06 FY07 FY08 FY09 FY10
CAGR 108%
Rs.Cr
26%
46% 45% 44% 46% 46%
21%25%26%25%
0%
10%
20%
30%
40%
50%
FY06 FY07 FY08 FY09 FY10
24
Amount in Rs cr
* Other income includes foreign exchange gain/ loss
Key Ratios (as a % of Net Income from Operations) Q4 FY'09 Q4 FY'10 FY'09 FY'10EBIDTA Margin after minority interest & pre-acquisition profits 40.0% 47.6% 45.8% 46.7%PAT Margin after minority interest & pre-acquisition profits 24.5% 18.1% 20.9% 26.1%Total Expenditure 59.5% 52.3% 53.0% 53.3%Consumption of Raw material 25.9% 14.0% 17.8% 15.6%Staff Cost 16.5% 16.0% 18.7% 17.2%Selling, Distribution & Administration expenses 17.1% 22.2% 16.4% 20.3%
Particulars Q4 FY'09 Q4 FY'10 % Chg YoY FY'09 FY'10 % Chg YoYNet Income from Operations 226.5 333.1 47.1% 634.2 1,040.5 64.1%Total Expenditure 134.7 174.178 29.3% 336.4 554.7 64.9%
Cost of Goods Sold 58.6 46.6 -20.6% 113.2 162.1 43.2%Staff Cost 37.3 53.2 42.4% 118.8 179.3 50.9%Selling, Distribution & Administration expenses 38.8 73.9 90.7% 104.2 211.6 103.1%Prior Period Items & Miscellaneous Items 0.0 0.5 NA 0.2 1.8 702.9%
EBIDTA (before minority interest and share of profits of associates) 91.7 158.9 73.2% 297.8 485.8 63.1%Share of profit in associates - 0.01 NA 0.8 0.0 NAMinority interest / Pre-acquisition profit 1.2 0.4 -63.3% 6.7 6.0 -9.8%EBIDTA (after minority interest and share of profits of associates) 90.5 158.4 75.0% 290.4 479.8 65.2%Depreciation & Amortization 28.4 20.1 -29.3% 80.4 113.8 41.6%Finance Charges 8.0 12.8 60.3% 18.4 48.9 166.1%OPBT 55.3 125.9 127.7% 199.0 323.1 62.3%Other Income 38.7 10.4 -73.1% 21.9 116.7 433.9%PBT 94.0 136.4 45.1% 220.9 439.9 99.1%Tax (including deferred) 37.3 75.5 102.8% 80.7 162.5 101.3%PAT before minority interest & pre-acquisition profits 56.8 60.8 7.2% 140.2 277.3 97.8%PAT after minority interest & pre-acquisition profits 55.6 60.4 8.7% 132.7 271.3 104.4%Basic EPS (Rs.) 6.4 6.4 -0.6% 15.4 29.3 90.7%Diluted EPS (Rs.) 6.3 5.8 -6.7% 15.0 27.3 82.0%
Note: FY09 figures are un-audited as disclosed to Stock Exchange in Q4 FY09
FY10 Financial Statements (Consolidated basis)
Income Statement
Key Ratios
25
Revenues Q4 FY'09 Q4 FY'10 % Chg YoY FY'09 FY'10 % Chg YoYSchool Learning Solutions 166.5 269.0 61.5% 430.3 806.5 87.4%Higher Learning Solutions 8.7 7.8 -10.9% 30.6 28.5 -6.9%K-12 Schools 23.7 30.2 27.1% 62.3 98.3 57.8%Online, Supplementary & Global 27.5 26.2 -4.7% 110.9 107.2 -3.4%Total Net Sales/ Income from Operations 226.5 333.1 47.1% 634.2 1,040.5 64.1%
PBIT Q4 FY'09 Q4 FY'10 % Chg YoY FY'09 FY'10 % Chg YoYSchool Learning Solutions 72.3 162.6 124.8% 210.1 448.3 113.4%Higher Learning Solutions 1.3 (3.9) NA 9.5 (10.7) NAK-12 Schools 9.8 8.8 -9.5% 30.6 33.1 8.1%Online, Supplementary & Global 0.7 (4.0) NA 17.9 (16.7) NA
84.0 163.6 94.6% 268.1 454.0 69.4%Less: Interest (Net) 8.0 12.8 60.3% 18.4 48.9 166.1%Other un-allocable expenses (net of un- allocable income and prior period items)
(17.8) 14.3 NA 28.8 (34.7) NA
Total Profit before Tax 93.8 136.4 45.4% 220.9 439.9 99.1%
PBIT Margins Q4 FY'09 Q4 FY'10 FY'09 FY'10School Learning Solutions 43.4% 60.5% 48.8% 55.6%Higher Learning Solutions 14.6% NA 30.9% NAK-12 Schools 41.2% 29.3% 49.1% 33.6%Online, Supplementary & Global 2.4% NA 16.2% NA
Revenue Break up Q4 FY'09 Q4 FY'10 FY'09 FY'10School Learning Solutions 73.5% 80.8% 67.9% 77.5%Higher Learning Solutions 3.9% 2.3% 4.8% 2.7%K-12 Schools 10.5% 9.1% 9.8% 9.4%Online, Supplementary & Global 12.1% 7.9% 17.5% 10.3%
Amount in Rs cr
Note: FY09 figures are un-audited as disclosed to Stock Exchange in Q4 FY09
FY10 Financial Statements – Segmental Analysis (Consolidated)
26
Q3FY11 Consolidated Income Statement
Q3 FY11 Q3 FY10 YoY Q2 FY11 QoQRs Cr Rs Cr % Rs Cr %
IncomeSales & Service income 357.5 260.1 276.8Other income 8.7 15.8 8.4Total Income 366.2 275.9 33% 285.2 28%
ExpenditureCost of goods sold 69.8 24.8 59.5Personnel expenses 65.1 46.8 63.2Administration and other expenses 57.6 55.0 48.2Finance charges 27.9 13.9 21.2Depreciation 20.1 33.8 20.8Total Expenditure 240.5 174.1 38% 212.9 13%
Profit before tax 125.7 101.6 24% 72.3 74%PBT Margin 34% 37% 25%
Provision for tax 25.3 37.5 14.1
Pre-acquisition profits 0.2 -0.1 -1.6Share of profit in associates 0.5 0.0 0.6Minority interest 3.0 3.0 1.4Profit after tax,minority interest & pre-acquisition profits 96.7 61.2 58% 57.8 67%PAT Margin 26% 22% 20%
EBITDA 162.4 136.6 19% 103.4 57%EBITDA Margin 44% 49% 36%
EBIT 142.3 102.8 38% 82.6 72%EBIT Margin 39% 37% 29%
EPS (Rs)Basic 10.13 6.48 56% 6.06 67%Diluted 9.23 6.08 52% 5.47 69%
Consolidated Financials
27
Q3FY11 – Segmental Analysis (Consolidated)
Q3 FY11 Q3 FY10 YoY Q2 FY11 QoQRs Cr Rs Cr % Rs Cr %
School Learning Solutions 279.4 198.7 41% 192.3 45%K12 Schools 30.4 25.1 21% 32.1 -5%Higher Learning Solutions 14.6 7.8 87% 13.7 7%Online, Supplemental & Global 33.1 28.5 16% 38.7 -14%Total 357.5 260.1 37% 276.8 29%
Q3 FY11 Q3 FY10 YoY Q2 FY11 QoQRs Cr Rs Cr % Rs Cr %
School Learning Solutions 170.9 121.6 41% 88.8 92%K12 Schools 10.7 10.3 3% 12.9 -17%Higher Learning Solutions -6.0 -4.1 NM -6.5 NMOnline, Supplemental & Global -4.4 -4.7 NM 3.1 NMTotal 171.1 123.1 39% 98.3 74%
Q3 FY11School Learning Solutions: Smart Class 87 ICT 52K12 Schools 22Higher Learning Solutions 4Online, Supplemental & Global 3Total 168
Debtor Days*
Revenue by Segments
EBIT by Segments
28
Consolidated Balance Sheet
As at 31st Dec 2010 As at 30th Sep 2010Sources of funds Rs Cr Rs CrShareholders' fundsShare capital 19.1 19.1Reserves and surplus 1,974.2 1,720.3ESOP outstanding account 14.7 12.4Minority interest 235.7 205.1Loan funds 1,461.3 1,400.2Deferred tax liability (Net) 9.7 3.1Total Sources of Funds 3,714.7 3,360.2
Application of fundsGoodwill 819.8 634.4Total Fixed Assets 1,589.1 1,399.8Foreign currency monetary long term translation account -1.9 -3.0Investments 141.3 78.2
Current assets, loans and advancesInventories 35.3 23.8Sundry debtors 551.2 748.2Cash and bank balances 504.5 472.9Loans and advances 440.5 327.6Other current assets 17.3 21.0Less : Current liabilities and provisionsLiabilities 343.7 323.6Provisions 38.6 19.0Net current assets 1,166.4 1,250.8
Miscellaneous Expenditure[to the extent not written off or adjusted] 0.0 0.0Total Application of Funds 3,714.7 3,360.2
Consolidated Balance Sheet
29
60.08%
4.17%
Equity Shares Outstanding-95,539,396
Company has sub-divided each of the existing Equity Shares of the face value of Rs.10/- each fully paid-up into five Equity Shares of the face value of Rs.2/- each fully paid-up.
Shareholding Pattern – As on Dec 31, 2010
Promoters, 49.8%
FIs/ Banks/ MFs, 1.7%
Foreign Institutional Investors/ Foreign Financial
Institutions, 37.1%
Body Corporate, 3.3%
Public, 6.7% Others, 1.4%
30
For any Investor Relations queries please contact:
Ms. Sangeeta Gulati, CFO Educomp Solutions LimitedEducomp Towers,514, Udyog Vihar Phase III Gurgaon – 122 001, HaryanaEmail: [email protected]: 0124 - 4529000
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