Educomp Solutions' lenders might go for haircut

Educomp Solutions' insolvency may see lenders taking deep haircuts, just like in Synergies Dooray Automotive. A company that offers technology solutions to schools, Educomp walked the insolvency route to pay up lenders.

Sources handling the insolvency case stated that lenders might have to take more than 50 per cent haircut as dues amounting to almost Rs 3,000 crore contrasted annual revenue of Rs 150-200 crore seen over the past few years. For instance, in 2015-16, the company clocked Rs 223 crore of revenue that resulted in a net loss of Rs 343.34 crore. As such, serviceability of the debt remained a challenge.

Although an option, liquidation will be far worse for the lenders, fetching them just 5 per cent to 10 per cent of their dues, said the sources, explaining that the asset base remains low, most of it comprising intellectual properties.

However, three to four investors have shown interest in investing in the company, the sources added.

The company's resolution professional had invited expressions of interest for the company from parties, much in line with the insolvency and bankruptcy regulations.

Those close to the resolution process state that revival remains difficult as no new technology has been introduced, nor any new contract signed by the company. As a part of its debt-restructuring plan with one of its lenders, ICICI Bank, the company sold its stake in Vidyamandir for Rs 90.56 crore. In 2013 and 2014, the company sold its stake in a few related ventures like EuroKids. Over 30 million learners use Educomp's solutions.

Sources say that some creditors like Axis Bank and ICICI Bank had even approached the resolution professional for EduSmart Services to recover their dues, the entity standing as guarantor for Educomp. E-mails to the banks went unanswered; to the resolution professional, again no answer; SMS to Educomp's promoter Shantanu Prakash not answered.

The new resolution professional took charge of the company from the previous one, three months after the case was admitted in the National Company Law Tribunal (NCLT). Educomp Solutions' case was admitted by NCLT on May 30.

The company, on its part, plans to request an extension for submitting a resolution plan, say sources involved in the process.

At present, the company is funding its day-to-day functioning with internal accruals. One of the sources quoted above said that the working capital may dry up soon as the company has not signed any recent contract or even upgraded its tech solutions.

Educomp Solutions turned to the insolvency route after a failed corporate debt restructuring (CDR) attempt in 2013. A second CDR in 2015 also failed. Twelve of fifteen banks that had lent capital to the company exited CDR, impelling it towards insolvency for revival.

According to the company's portal, there are 26 financial creditors and eight operational creditors.

Educomp Solutions' share was up 3.90 per cent at Rs 6.13 over the previous close on BSE.