Everonn shares dip, chairman quits after MD's arrest

The crisis in Chennai-based education services provider Everonn Education deepened on Friday, with its non-executive chairman Jamshed J Irani resigning following Tuesday’s arrest of managing director P Kishore in a bribery case.

The Everonn stock plunged 20 per cent to hit a new 52-week low and was the top loser on the Bombay Stock Exchange. It hit a lower circuit to close at Rs 351.45, down Rs 87.85.

An Everonn statement said Kishore was in jail under judicial custody and the company had appointed Susha John, whole-time director, as the chief executive officer to exercise the powers delegated to the managing director.

The board also appointed a business council consisting of two independent board members to advise the CEO.

The Central Bureau of Investigation had issued a press statement late on Tuesday about the arrest of Kishore for allegedly bribing Rs 50 lakh to a tax official to reduce income-tax liability.

The arrest of Kishore, also Everonn’s founder, is likely to increase concerns over corporate governance practices in several Indian companies. “Market is worried with companies where there are corporate governance issues,” said S P Tulsian, an independent investment analyst.

Last month, the Income Tax Department had conducted raids on the premises of Educomp, which the education services company has termed as “routine exercise”.

Several companies in the telecom sector are also under the scanner for what is known as the 2G spectrum scandal.

Everonn, however, said it would extend cooperation to all concerned as necessary to clearly demonstrate its commitment and adherence to principled corporate governance. Everonn also said its business would continue as usual despite the managing director’s arrest.

During the June quarter, all major shareholders in Everonn had reduced their stake. According to data available from BSE, both the promoters and foreign institutional investors reduced their holdings marginally, by 38 basis points and 87 basis points, respectively. Domestic institutional investors cut their stake by around four per cent.

As per a 2010 Kaizen Education report, Multimedia and ICT in education is a $200 million segment expected to grow at 65 per cent CAGR over the next four years. Growth of the sector is led by government spending through public-private partnership and Sarva Sikshiya Abhiyan. An underpenetrated market provides tremendous growth opportunity to players like Everonn.