A little over a decade after acquiring IT education firm Aptech, reclusive investor Kalpathi Suresh is now joining the race to buy debt laden Educomp Solutions Ltd's K-12 schools business, sources privy to the development told VCCircle.
The business housed under a subsidiary Educomp Infrastructure & School Management (EISM) also counts home-grown private equity firm Gaja Capital besides Educomp founder and CEO Shantanu Prakash as shareholders.
Suresh is preparing to bid around Rs 1,100 crore ($176 million) for the business, one of the sources cited above said.
While Educomp Solutions did not respond to an email query, Suresh could not be reached for comments despite repeated calls to his office.
EISM runs schools under its own brands and through co-branded establishments.
Its chains of schools are operated under the brands of The Millennium Schools, Takshila Schools and Universal Academy Schools across top tier cities, middle tier cities and semi-urban areas, respectively. It has co-branded schools with Shriram Schools, PSBB Group of Schools, Vasant Valley Schools and Sri Kanchi Kamakoti Peetam.
The firm closed FY14 with total income of Rs 97 crore with net loss of Rs 130 crore. It had long-term borrowings of Rs 900 crore as of March 31, 2014.
Last year, it received approval from the CDR Empowered Group for restructuring its debt. The restructuring package agreed with CDR lenders (led by Axis Bank) envisaged extended repayment tenure of 153.5 months, including moratorium period of 33.5 months, from cut-off date and funding of interest for two years from cut-off date. The package also provides for additional loans of Rs 73 crore to fund critical capital expenditure.
For Educomp, this would mark the biggest asset sale, which had sold some other ventures in the past.
In 2013, it sold its 50 per cent stake in pre-school chain EuroKids International to a consortium of financial investors led by Gaja Capital Partners. In the same year, Pearson Plc, the world’s-largest education service provider and one of the leading media groups, acquired Educomp’s 50 per cent stake in IndiaCan, a vocational training company formed as a joint venture between the two firms in 2009.
Last year, it divested its entire 55.41 per cent equity stake in the engineering exam training arm Gateforum Educational Services Pvt Ltd to private equity firm ASK Pravi Private Equity Opportunities Fund.
Educomp Solutions, once India’s largest education companies, registered a net loss of Rs 360.7 crore with consolidated net revenues of Rs 634.8 crore in FY14.
Started by first generation entrepreneur Shantanu Prakash as a digital learning venture, Educomp expanded in various allied services in education space with a business model hinged on hardware installations and then selling content to schools. It ran up a pile of debt which got the company tangled up as returns were not commensurate with the aggressive growth plan.
The firm raised private funding from Mount Kellet Capital, Proparco and World Bank's private investment arm IFC to boost financial resources.
As part of the debt restructuring plan it has looking to change the business model focusing more on delivering content and going asset light.
For Suresh, an IIT Madras grad who built his name with IT education and services firm SSI Ltd before venturing into real estate and movies, the move marks taking on other prospective bidders for EISM. According to a previous The Times of India report, AV Birla and Sunny Varkey-owned GEMS Group are also eyeing a deal to buy the firm.
The newspaper, which reported the development early in the day, said Suresh may join hands with a PE firm for the deal. It pegged the deal value at Rs 1,200 crore.
(Edited by Joby Puthuparampil Johnson)