Educomp plans to raise Rs 450 crore from PEs, diluting stakes in subsidiaries

Last year, the company had raised Rs 120 cr from sale of its subsidiaries

New Delhi-based education solutions provider, Educomp Solutions is planning to raise around Rs 450 crore over a period of three years.

The company said it is looking at raising money through private equity and by selling some of its non-core assets.

Last year, the  company had raised around Rs 120 crore from sale of its subsidiaries.

"We have invested in multiple high growth and marquee businesses in the education sector. In the current scenario, we are prepared to divest partially or even completely in some of those businesses. This will reduce our debt substantially and will further strengthen our balance sheet," Educomp's Chairman and Managing Director Shantanu Prakash said.

He said the last two years were very challenging for almost all education companies including Educomp.

"We believe the worst is already behind us. We are now focused on implementing corrective measures and driving our future growth. Some of these efforts are already showing results. For example, we have changed our business model and started consolidation of our existing businesses by maintaining a base of around 1 lakh classrooms for the Smartclass product. Besides, we are only doing very selective bidding for ICT contracts," said Prakash.

The company is also monetising its investments and improving efficiencies of the Smartclass business by optimising costs.

It expects to reach out to more schools in the country. The addressable market for Smartclass is more than 2 lakh private schools in India, Prakash added. 

"We are confident that the coming years will see an increased demand for digital learning innovations such as Smartclass and similar other products. In fact, we can confidently say that Educomp Solutions will be among the best turnaround stories to look out for," said Prakash.

He refused to comment on the subsidiaries in which the company is likely to dilute in future.

The company's annual report shows that it has invested in Educomp Professional Education Ltd, Vidyamandir Classes Ltd, Educomp Childcare Pvt Ltd, India Education Fund and Greycells18 Media Ltd.

After Boston Consulting Group's recommendation, the company decided to focus its energies on a few large core businesses and decided to divest others. The company also went through a corporate debt restructuring programme (CDR), which was approved in March 2014.

Following this, it has raised Rs 120 crore from sale of subsidiaries last year, including Gate Forum (test preparation business). The company divested Eurokids, one of the largest pre-school chain, sold 50% stake in Indiacan back to Pearson and sold Gateforum, India's no 1 GATE coaching company to a group of private equity investors.