 "Education companies still face pressure from lenders")
Educomp Solutions saw a reduction in net loss for the fourth quarter ended March 31, 2016 to Rs 150.89 crore as compared to Rs 152.99 crore net loss posted in same quarter last fiscal. Total income from operations (net) stood at Rs 112.59 crore for Q4 of FY16 as compared to Rs 119.41 crore in same quarter previous fiscal.
However, lenders are looking at another restructuring package for this company. A senior public sector bank executive said the company has fixed assets and lenders are inclined to give it another chance, though viability may not be that great. The exposure is about Rs 2,800 crore.
Educomp management, in response to a query by Business Standard, said that the combined effect of a weak economy and several delinquencies from schools, particularly in the years starting from 2011 till 2013 resulted in a large financial impact for Educomp. This was corrected to a large extent when the company worked on a new business plan and a new business model and underwent a Corporate Debt Restructuring (CDR) Scheme in 2013. As a result of this, the company changed its business model to focusing on outright sales and content licensing from a predominantly EMI sales model. It also ushered in a large number of business process efficiencies as well as staff rationalisation.
The company management further said that Educomp has successfully hived off and divested a number of other parts of the education business and has emerged as a strong and stable company post corporate debt restructuring. The restructuring has helped the company re-focus on its core strengths, revitalise its product portfolio, leverage its deep R&D and IP and expand sales across the customer profile.
Core Education & Technologies is another company that has been facing lender troubles. Bank executives said while the restructuring package has been filed, its promoters could not bring in their share of contribution for the recast package. Bankers further said that they could also not sell non-core assets to generate resources. The exposure of creditors (CDR and non-CDR lenders) is about Rs 1,400-1,500 crore. A mail sent to Core Education did not elicit any response.
While the company is yet to declare results for the fourth quarter of last fiscal, its net loss widened to Rs 37.03 crore in quarter ended December 31, 2015 as compared to Rs 29.34 crore loss in quarter ended December 31, 2014.
While declaring Q3 results, the company in its filing to the stock exchanges in February 2016 had said that in view of the withdrawal of the CDR programme, it is exploring other possibilities for its financial revival. These include (but are not limited to) disposal of non-core assets of the company,paring down the debt through bilateral negotiation with various lenders and accelerating the collection of long overdues from some government clients. It said that in view of these efforts,the company has drawn up the accounts on a "going concern" basis.
Government contracts have been a point of concern for these players as they have said that there are several dues yet to be paid in these contracts. Some companies are even moving away from bidding for these contracts in the future.
The companies are also constantly engaging with lenders to find a way forward. Educomp said its re-modelling is in consonance with lenders and that their confidence in the restructuring process is a testament to the corrective steps they have taken to consolidate the business, sharpen focus and streamline operations.
It also said that the new business model, as well as the focus on broadening the sales pitch to sell its large basket of products rather than simply SmartClass has started to bring in results. In FY 2017, they are looking to further consolidate their growth and leadership in the market.
There has been a direct impact on the stock prices as well, which have plummeted to below Rs 15 a share in the last five years. Educomp said that they generally have no comments to make on the stock price, because that is the result of several external factors beyond the control of the management. However, it added that their shareholders have seen the value of our leadership position in the market over a period of time and are fully aware of the potential upside of the stock in the long term.
In Core Education & Technologies, trading has been suspended due to penal action.