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Educomp lays off 3,500 in three months

Slaps recovery notices on 750 defaulting schools

BS Reporter  |  Mumbai 

Shantanu Prakash

Educomp Solutions on Friday said it had laid off 3,500 people in three months to ensure employee strength rationalisation.

After the exit of these personnel, the education services company would have an employee strength of 14,670.

In a press statement, the company said it had announced a slew of measures aimed at putting it back on a growth trajectory, at a time when market sentiment was adversely impacting bottom lines across industries and pushed the education sector into a negative-growth territory. “Today, when the economic environment poses a challenge to the education sector as a whole, I am proud that Edu-comp has embarked on a bold strategy to return the company to robust growth,” said Shantanu Prakash, chairman and managing director, Educomp Solutions. “Although this transition will not be painless, we have to do what we have to do to get growth back on track.”

Educomp posted a loss of Rs 23.96 crore for the quarter ended June 30 (consolidated), against net profit of Rs 4.88 crore for the corresponding year-ago quarter.

Collections are being prioritised and a zero-tolerance regime for recoveries has been initiated. Educomp said around 750 schools that delayed payments had been sent notices. Divya Lal, COO, Educomp Smartclass, said 750 non-compliant schools, representing less than five per cent of the installed base, had been asked to explain their repeated payment delays. “While we have continually been accommodative of such schools, we cannot sustain this level of outstanding and have had to take a strict view of the issue,” she added.

In July 2012, there were reports of Educomp letting go of five per cent, or 750, of its 15,000 workforce. However, the management denied having dismissed anybody. Prakash had then said that if someone had resigned that’s a different story, but they had not fired people.

He had added that, in fact, they had hired in that quarter.

The company said it has embarked on a plan to rationalise costs across the board. “Redundancies are being calibrated in a progressive manner and employee strength is being rationalised. Contracts of unproductive staff are being terminated, while enhancing responsibilities among existing staff to control costs without impacting performance. Over the last three months, the company has let go of over 3,500 employees. This alone has the potential of significant savings for the company,” it said.

Educomp said its transformational plan is a composite template of critical modifications in structure, systems and sales strategies to return the company to profitability in the current and next financial years. Within this transformational plan, a series of tactical steps have been identified to fast-track the correction. This include an “horizontal-extraction” strategy to offer more products to customers, to increase spending from schools and improve income per capita customer contact point.

Educomp has also divested itself of most non-core businesses and monetised non-core assets to improve liquidity and reduce capital needs. The move, the company said, is expected to help it focus on its competencies and execute migration from being just a product company to a solutions company. The education services provided recently made two exits in, what it calls, non-core segments. Last week, the company sold its 50 per cent stake in vocational training firm IndiaCan to joint venture partner Pearson. Prakash had then said this was in line with the company’s strategy to focus on digital content and intellectual property offerings and asset-backed offerings like schools and colleges.

In 2013, Educomp announced a primary capital investment from Kaizen PE and Bertelsmann in its internet education platform business, Authorgen. Under this agreement, Educomp sought growth capital investment of Rs 22 crore in Authorgen from Kaizen PE and Bertelsmann. In March, it completed the sale of 50 per cent stake in Eurokids International Limited to a group of investors led by GPE India.

Educomp recently outsourced its service and maintenance logistics to HCL Infosystems to exploit efficiencies of scale and provide specialist services. The company is targeting a reduction in operational costs of close to 20 per cent over the last financial year due to these measures.

In July 2012, there were reports of Educomp Solutions letting go of five%, or 750, of its total 15,000 workforce. However, the management denied having sacked anybody. Educomp Solutions Managing Director and CEO Shantanu Prakash had then said that if someone has resigned and gone, that’s a different story, but they had not fired people. He had added that, in fact, they had hired in that quarter.

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First Published: Sat, August 17 2013. 00:57 IST