Diversified business conglomerate Aditya Birla Group and Dubai-based billionaire of Indian origin Sunny Varkey, who runs an education empire under Gems Education, are among the companies in race to acquire school business of debt-ridden education services company Educomp Solutions Limited, separate media reports said citing sources.
Apart from Aditya Birla and Gems Education, the world's biggest privately held schools operator owned by Varkey, Zee Learn Ltd – promoted by Subhash Chandra-led Essel Group – is also said to be holding discussions for the potential acquisition of the company's school business.
Educomp has roped in Macquarie Capital as its adviser for the transaction, a report by The Economic Times said citing sources. The talks with the buyers, however, are in preliminary stage.
The deal, if concludes, is expected to fetch a valuation of $250 million for the company's network of more than 50 schools, a separate report by The Times of India showed.
Educomp operates a nationwide chain of 47 K-12 (kindergarten through 12th grade) schools under three brands through its subsidiary Educomp Infrastructure & School Management Ltd (EISML). Some schools are owned by the company, while some are operated through franchisee agreements and joint ventures.
Currently, Educomp owns 83.38 per cent stake in EISML, while Educomp's chairman and managing director Shantanu Prakash owns the rest in his personal capacity. As of March 31, 2014, 51 per cent of the company's stake in EISML was pledged with FCCB, ECB lenders and rest was earmarked to CDR lenders of EISML.
Educomp Solutions is currently undergoing a corporate debt restructuring programme to deleverage its balance sheet. The company had moved the CDR cell in June last year for restructuring its debts.
In January this year, the company said that its K12 arm Educomp Infrastructure & School Management Ltd received approval from the CDR Empowered Group for restructuring its debt of Rs 715.63 crore.
The restructuring package agreed with CDR lenders (led by Axis Bank) envisages extended repayment tenure of 153.5 months, including a 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 the year ended March 31, 2014, EISML had revenues of Rs 83.7 crore and net loss of Rs 130 crore.
As per the terms of Master Restructuring Agreement (MRA) dated December
28, 2013 entered into pursuant to approved Corporate Debt Restructuring
Scheme to restructure debt of EISML, certain tangible
fixed assets of EISML's subsidiaries amounting to Rs 142.4 crore (at cost) have been identified for sale in a time-bound manner.
Earlier this July, it decided to divest its entire 55.41 per cent equity stake in the engineering exam training arm Gateforum Educational Services Private Limited to private equity firm ASK Pravi Private Equity Opportunities Fund for an undisclosed amount.
Last year, Educomp made two exits in what it calls non-core segments. It sold off its entire 50 per cent stake in pre-school chain EuroKids International to joint venture partner Pearson. Also, it completed the sale of 50 per cent stake in vocational training business IndiaCan.
(Edited by Joby Puthuparampil Johnson)
