Wednesday, February 8, 2012

Core Education & Technologies Sees Sell by the FII, Blackstone/Aberdeen

By Staff Reporter

Core Education & Technologies Ltd (BSE: 512199, NSE: COREEDUTEC) counter yesterday witnessed significant sells of 13.52 lakh shares by the FII, Blackstone Asia Advisers LLC, amounting to 1.21% of the total shares in the company.  The sell was through the FII sub-account The India Fund Inc, which represents the New York Stock Exchange listed The India Fund, Inc. (NYSE:IFN), which Blackstone had sold to Aberdeen Asset Management Inc., around four months back. 

Sells by Blackstone/Aberdeen occurred both in NSE & BSE, with 7.59 lakh shares sold in NSE, and 5.93 lakh shares offloaded in BSE. Interestingly, there were no identifiable or major counterparties to the sale, like institutional investors or promoters, which means that the massive sell was picked by the wider market in both the exchanges. 

Core Education & Technologies Ltd (formerly known as Core Projects & Technologies Ltd) is a leading Indian education company that has presence across India, USA, UK, Africa, and the Caribbeans. Core's technology enabled solutions include products for K-12, higher education, vocational education etc, and its customers are generally government bodies, schools and students.

The India Fund Inc (IFN) is a close-ended mutual fund that is publicly listed in USA. Originally managed by Oppenheimer Funds Inc, it was later acquired by Blackstone, and in September 2011 by Aberdeen. IFN  has assets worth $1.22 billion, and has been a good performer for its investors with annual returns of over 20% in the last decade, and nearly 15% since 1997. IFN currently trades at $23.40, at a discount of 8.70% from its NAV.

The Blackstone Group LP (NYSE: BX) is a leading US based private equity firm, that also has significant interests in commercial real estate, leveraged buyouts etc. Blackstone was one of the first major private equity firms to list shares in its management company on a public exchange.

Aberdeen Asset Management Plc (LSE: ADN) is a UK based publicly listed international investment management group, managing assets for both institutions and private investors. Aberdeen Asset Management is a member of the FTSE 250 Index, and is headquartered in Aberdeen, Scotland. 

Core Education & Technologies which had a good fundamental performance over the past four fiscals, has continued the performance in this fiscal too, maintaining a healthy consolidated Net Profit Margin (NPM) of over 20%, despite QoQ consolidated net profits seesawing during the past 3 to 4 quarters.

Based on this fundamental performance, the scrip was saved from the kind of massive market correction in calendar year 2011, and Core Education had fallen by only 30% unlike many stocks of similar market caps. Core Education & Technologies had fallen from its 52-Week High of Rs. 350.60 in BSE on April 8th 2011, to a 52-Week Low of Rs. 245.20 on 29th December.

But it should be disturbing that IFN didn’t even wait for a relief rally in Core Education & Technologies to sell massively. This might be due to many reasons like they already being in profit, and the scrip’s failure to participate meaningfully in the recent market rally. It is also disturbing that no other FIIs or DIIs came forward to buy the IFN sell, even at these relatively low levels.

The Core promoters already hold a healthy stake, of over 46% in the company.

As per the Q3 SHP, IFN held 16.83 lakh shares or 1.50%, of which 13.52 lakh shares or 1.21% was sold off yesterday, which hints at a total exit strategy, which may have happened already.

It is also noteworthy that IFN didn’t wait for the Q3 results of Core Education & Technologies which is due out tomorrow. 

Most probably, this Blackstone/Aberdeen fund has taken its cue from media reports that Core Education & Technologies is eyeing the stake of celebrity investor Rakesh Jhunjhunwala in listed computer education firm Aptech. Though retail investors in Core was bullish by the news, institutional investors in Core are likely to be disturbed as the deal is expected to be at a high premium of over 60% to Aptech’s current market price. There is also the issue of the deal triggering an open offer, which Core will have to accommodate with additional funds, apart from the Rs. 700 crore it will need to buy Jhunjhunwala’s stake.

It remains to be seen how other large institutional investors in Core Education & Technologies react to the significant sell by Blackstone/Aberdeen. These decisions will decide the future of the Core scrip, as the stock has significant institutional participation of over 25%, dominated by FIIs. 

Despite the sell by IFN, Core Education & Technologies had closed yesterday’s trade in green, up by 1.28% in BSE, and today Core has opened in green, up by 0.43%.