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Education services and technology company Educomp Solutions would exit all its non-core businesses, said the firm’s chairman and managing director Shantanu Prakash. According to him, Educomp’s presence would be limited to schools and digital business and it would hive off all other businesses including overseas acquisitions.
“We’re bringing a whole sea-change in the business and want to be an intellectual and knowledge company. In FY16, we will focus on internet, social (peer-to-peer learning and sharing) and cloud. In due course, we may exit other businesses,” he said.
Prakash added that in the next one month, the Educomp content will be available on Flipkart, Amazon and Snapdeal; in three months’ time, it would be available in electronics retailers such as Croma as well. The content has already been put on the cloud platform from where students can access it - after making payment - using their smartphones or laptop it. According to him, the products offerings have also expanded and is not just restricted to Smartclass, but includes newer products such as English Mentor and E-Dac Learning System. A low-priced version of smartclass called UniClass is also available.
“We haven't stopped investments in R&D (research and development). However, we’re trying to bring all the delinquent schools back on track. Collections have improved from contracts and we have collected Rs 500 crore,” he noted.
The firm’s focus is to re-position the brand as a pure knowledge company. According to Prakash, the corporate overheads and salary costs have come down by 35 per cent. Educomp had 17 warehouses earlier; it has now come down to two.
Educomp had changed the business model of its flagship Smartclass programme with effect from April 1, 2013, where the revenue recognition of the contract would be over the entire contract period.
He expects it to be Ebitda (earnings before interest, taxes depreciation and amortisation) positive from this financial year onwards. Earlier, Educomp was selling smart class on an outright basis and recognised revenue (75 per cent of contract value) over two years. This had resulted in a drop of revenue and profits.
Educomp also made two exits from what it calls non-core segments. The company sold its entire 50 per cent stake in the vocational training firm IndiaCan to its joint venture partner Pearson. Further, Educomp also announced a primary capital investment from Kaizen PE and Bertelsmann in its internet education platform business, Authorgen. Later, it completed the sale of 50 per cent stake in Eurokids International to a group of investors led by GPE India. The company had said it made a profit of Rs 70 crore on this investment, and that the proceeds would be used for its core businesses.
Its corporate debt restructuring scheme was already approved earlier comprising working capital debt of Rs 399.04 crore and long term debt of Rs 83.05 crore.
Prakash said from the first quarter of this financial year itself, the company would see better business growth and more recovery from government contracts.
In January 2015, the Educomp Solutions board had approved issuance of equity shares to the lenders on conversion of Funded Interest Term Loan. It had also initiated the process for merging Edu Smart Services with itself.
“Our efforts to refocus on our core business are an ongoing process. The investment intent in education is coming back and we may raise Rs 450-500 crore from private equity investors,” he said. Prakash also said the competitive intensity was coming down in the Smartclass category.
The company posted losses of Rs 591.6 crore for the quarter ended December 31, 2014 compared to a loss of Rs 87.61 crore in the same quarter in the previous year. Sales also came down by almost 20 per cent in that period. The higher losses were due to higher provisions for doubtful trade receivables including dues from government companies/agencies.
Further rationalisation might also happen with respect to jobs in the company, though Prakash said that the company is hiring people for the call-centre and R&D positions. In 2013 itself, Educomp Solutions had said that it slashed 3,500 jobs in three months, truncating its workforce by almost 20%.
