Shares of companies that focused on education tumbled following the arrest of Everonn Education Ltd's Managing Director, Mr P. Kishore, on Wednesday, on an alleged bribery attempt.

While the Everonn stock itself tumbled the maximum possible limit of 20 per cent (which means no buyers and only sellers), others such as Educomp Solutions, EdServ Softsystems, Career Point, Tree House Education & Accessories, Greycells Education, NIIT and Aptech took a beating as sentiment turned weak for them too.

According to analysts, lack of transparency in the sector is affecting the investors' sentiment. “Earlier, the sector was one of hot favourites, but fell out their interest,” an analyst with domestic brokerage said, on condition of anonymity.

“Lack of credibility is affecting the sector. There is always a nagging doubt in the minds of people that this is a money laundering business. And the recent incident of Everonn MD's arrest has inflicted further damage to the reputation of the sector in the minds of investors,” Mr Arun Kejriwal of KRIS Securities said.

According to data from Venture Intelligence, private equity and venture capital investors have invested about $93 million across 10 Education companies so far in 2011. A survey conducted by it revealed that investors preferred vocational education and test preparation companies followed closely by educational technology and tutorial firms.

Equity Issue deferred

Meanwhile, Educomp Solutions informed the stock exchanges that it is deferring its proposed equity offering ‘in view of the present capital market conditions.' The stock closed 3.41 per cent lower at Rs 197.05.

“Management estimates that it will be comfortably able to meet future obligations falling due in July 2012 from a combination of internal accruals/ external commercial borrowings (ECB)/ debt-linked structures,” the company statement to the exchange added.

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