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Santosh Nair
Moneycontrol Bureau

There are only buyers for Aptech shares on the BSE at Rs 92.30(+5%) today. The Economic Times has reported that Core Education Technologies , India’s largest listed educational services firm, was most likely to buy out Aptech promoter and billionaire investor Rakesh Jhunjhunwala. Promoters hold 35.79% in Aptech, of which Rakesh Jhunjhunwala, his wife Rekha, and their partnership firm Rare Equity together hold a little over 32%. The Economic Times report says that Jhunjhunwala is expecting a price that values the company as a whole for Rs 700 crore. At Tuesday’s closing price, that would translate into a price of Rs 143 per share.

If the acquirer (Core or any other firm for that matter) agrees to pay Rs 143 per share, an open offer would automatically follow. That could explain the sudden demand for Aptech shares today. Even if Jhunjhunwala does eventually get the price (Rs 143) that he is asking for, Aptech would not count among his most memorable investments given his reputation for spotting multi-bagger stocks.

And that is not just because of the price at which he bought the stake, but also the time and energy he has invested in the company.Unlike his other investments, Aptech was not a passive investment for Jhunjhunwala; he was involved in the decision making and according to his close circles, he had big plans for the company. Jhunjhunwala picked up a 10% stake in Aptech in July 2005 through his holding company, paying Rs 56 per share. The holding company then picked up an additional 8% stake through a preferential allotment at Rs 61 per share.

In October 2006, Rakesh and Rekha Jhunjhunwala were together allotted 27 lakh warrants at a conversion price of Rs 113 per share, which they did convert later. Between late October and early November 2008, the promoters bought another 10 lakh shares when the shares traded between a low of Rs 51 and a high of Rs 88. The Aptech stock did have its green patch too, touching a high of Rs 436 in December 2007. But that would have been cold comfort to Jhunjhunwala unless he had made some trading gains in the stock. Operationally too, the company has not made any giant strides over the last six years. In financial year 2006 (ending December), the company’s sales turnover was Rs 174. For the year ended March 2011, it was Rs 191 crore, and for the half year ended September 2011, it was around Rs 93 crore. Standalone revenues were Rs 81 crore in 2006 and Rs 94 crore in March 2011.

Jhunjhunwala’s decision to exit Aptech was reported in the media in June 2011 when the stock was trading around Rs 90. It rose to Rs 148 over the next one month as investors bet that Jhunjhunwala would be able to get a handsome premium for his holding. After struggling in a range between 140 and 125 between July and early November, the stock has been going downhill ever since. A bearish market is partly responsible for that, but it could also indicate that the potential buyers are trying to drive a hard bargain.

A valuation of Rs 700 crore would mean over three times annual revenues, which looks a bit stiff given that the topline growth in the last few years has been anything but spectacular. But Aptech also owns 22% in China-based BJB Career Education, which netted it around Rs 82 crore as dividend in two tranches in 2011. The value of that stake is not known as BJP is privately held. For a while, BJB’s likely initial public offering was billed as a major valuation re-rating trigger for Aptech. But there is no clarity on when, if at all, BJB Career will go public.

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