Educomp Solutions Ltd Management Discussions.


1. SmartClass

a. Launch of new products - The Company launched the most advanced version of Smart class called the Smartclass Pro; the tablet version of the revolutionary Smartclass. The tablet provides exceptional mobility which allows better classroom management by the teacher through real time connectivity. The information is just a click away with Smartclass Pro which comes with a 3G SIM, connecting to a wealth of learning, making classroom atmosphere more exciting with increased participation. The product enables content upgradation through online connectivity from cloud.

b. Operational efficiencies - The Company has been aggressively working on reducing response time and generating consumer delight. There have been continuous efforts made to reduce the turnaround time to resolve customer complaints.

c. Generation of new business - The Company continues to expand its footprint across the country by expansion of sales force in different geographies.

d. Focus on Collections - During the financial year under review, the Company aggressively focused on recoveries from delinquent customers. Towards this end, the arbitration department was expanded and results in terms of awards and their executions should soon follow.

e. Leaner organization - The Company continues to streamline its operations, integrating technology into the supply chain and servicing components to replace and optimize the existing cost structure. During the year, the company took specific measures strengthen its servicing operations for Smartclass. In its K-12 business, the Company has also streamlined the cost structure in line with the business requirements. Within SmartClass business, KRA realignment exercise and sales force reorganization into Customer Acquisition group and Relationship Management Group was undertaken to positively impact sales and collections.

f. Rising Leadership - As a last and very important priority the Company is a mix of experienced and new leadership. We thus have the advantage of youth & experience at the same time.

2. K-12

a. 5-25 Flexible restructuring scheme: - The proposal to restructure EISMLs borrowings under the 5/25 Flexible restructuring Scheme has been accepted by the lenders thus enabling the improvement in the overall liquidity position of the company.

b. Improving Brand value - The Company took aggressive steps for marketing which led to improvement in brand value and even attrition was brought under control.

3. Edureach

There were huge delays in recoveries of outstanding dues from the state agencies, which put a significant stress on the operating cash flows of the Company. Therefore, during 2015-16, the Company did not bid for any fresh Government projects but focused on executing the projects on hand.

In addition, the Company took advantage of new opportunities that have arisen in the skills development business. The Government of India is actively pushing the Skill India mission. During the year, the Company has initiated its participation in various capital light skill development projects and has been successful in securing and executing the contracts for many of them.


1. SmartClass

a. Sales penetration - The Company envisages deepening the penetration of digitized content in the education system. The launch of Smartclass Pro is one such initiative in that direction. Smartclass Pro is not only less expensive but also a technically superior version of the Smartclass classic model. The Company hopes that its cost effectiveness should drive higher sales and greater digitization in schools in the coming years. The Company will be driving its future growth by focusing on increasing sales of Smartclass Pro.

b. School Solutions Group - In order to optimize the utilization of human resources, the Company has restructured its sales and support roles into the Schools Solutions Group (SSG). The new structure will be led by National Sales Support team which will drive the sales targets from an assigned territory through fresh sales, up selling and cross selling. NSS team will be ably supported by a battery of State Business Heads, Divisional Manager, Regional Managers and Area Managers.

c. Service oriented organization - The Company has strengthened the customer complaints addressal mechanism, thus ensuring reduction in the turnaround time. We shall continue to strive towards improvement in this area.

d. Focus on training - The Company has formed a full- fledged training department to ensure that every employee is thoroughly skilled in order to deliver the targets assigned. Additionally this department will provide training to existing clients, interact with teachers individually to discuss their subject /class modules and support them in using technology in day to day teaching.

e. Debt restructuring - The Company is negotiating with its lenders to restructure its loan facilities, in order to align them with the collections of long term receivables and new business growth. Provided that the lenders back the Companys reasonable requests and the company remains on its improved trajectory, the near term outlook in FY17 will remain positive.

2. Edureach

a) The outlook for Edureach will be bidding for very selective contracts in association with a financial Partner. Selectivity in Government ICT business is a must as huge delays in recovering outstanding dues puts a significant stress on the Companys liquidity position.

FY17 should be a big year for the Skilling Business. Companys focus shall be on delivering on the Pradhan Mantri Kaushal Vikas Yojna (PMKVY) using an asset light model. The opportunity is enormous as the Government has targeted training 10 million students in next 3 years as part of PMKVY Scheme.

b) Bidding for New ICT Business - The company proposes to bid for new contracts under the ICT business for installation, set-up and operating computer labs /IT facilities at government schools. Under this proposal, the company plans to partner with overseas IT Company for partnership in the ICT Business. The partner will supply the hardware and provide the necessary financing for the hardware. It will also contribute the working capital required for the business. The proposed partnership arrangement envisages 50% of revenue and cost sharing with the partner.

3. School Business

a) The focus in K12 will be on driving enrolments and efficient utilization of existing resources.

b) Asset Monetization - The Company has planned monetization of various assets including closed schools, land parcels, schools identified for sale and other subsidiary assets. These will lead to additional realizations in the future years.

c) Capacity utilization and enhancement - The Company plans to increase the capacity utilization in existing schools. Additionally, a regular planned capital expenditure for capacity enhancement shall be incurred for sustained revenue growth in the future.


a) Market Overview - Education plays an important part in the building of a nation. This has even more relevance in case of India given its young population which has a significant portion of school going children. India, today, is considered as a talent pool of the world, having qualified and educated human resources in abundance. India has the worlds largest population under 25 years of age, approximately 550 million. Education is the key to unlocking and building lasting value in a robust economy. In order to meet this existing and emergent demand, there is huge need of investments in the Indian education sector. There have been encouraging signals already received from various government announcements done pertaining to education. A lot more enabling environment is expected to get developed that should take care of various growth inhibitors that continue to exist for certain segments.

In the Union Budget 2016, about 69,074 crore was allocated for education in 2015-16, as against 70,505 crore in the revised estimate in 2014-15.

b) Demand Supply Gap - While there has been some private investment in setting up educational institutions, there remains a glaring mismatch in demand and supply, particularly in high quality institutions. To reduce the demand supply gap in school education, it has been proposed in the 12th Five Year Plan (2012-2017) to set up 6,000 schools at block level as model schools to benchmark excellence. Of these 2500 will be set up under Public Private Partnership. The government has been investing in the promotion of literacy and education, although its efforts remain largely focused on elementary schooling.


a) Smart class market - Education has taken a quantum leap with the Internet, breaking classroom barriers and introducing students to a whole range of courses for upgrading themselves, which are also more affordable and accessible. Smartclass is rapidly transforming the way teachers teach and students learn in the schools with innovative and meaningful use of technology. Powered by the worlds largest repository of digital content mapped to Indian school curriculum, Smartclass brings in technology right next to the blackboard for teachers in the classrooms. Total number of schools in India stood at 1.53 million in 2015 (as per EY-FICCI report). Only around 10 per cent of the private schools have tapped the potential of multimedia classroom teaching, whereas in government schools, it has barely made any inroads. The current market size for digitized school products in private schools is around US$500 million. This is expected to grow at a Compound Annual Growth Rate (CAGR) of 20 per cent to breach the US $2 billion mark by 2020. In an IT savvy country like India, virtual classrooms assume a whole new value. India needs to take the virtual classrooms to each and every sphere of education to take India to the next level as far as learning, knowledge and skills are concerned.

This makes India a very promising market for introducing newer technology in classrooms. A recent trend is that schools in tier two and tier three cities are increasingly adopting the latest technology. Moreover, state governments are also giving a boost to the adoption of technology in schools.

b) K-12 Market - The current K-12 school system in India is one of the largest in the world with more than 1.53 million schools in 2015 with 250+ million students enrolled, reveals EY-FICCI report on the education sector in India. 54% of all 1.46 million K-12 schools in India, are managed by the Central Government/ state governments and 21% are managed by local bodies/ municipal corporations. Private schools account for 25% of the total number of K-12 schools in India. The share of private K-12 institutions is projected to rise to 30% in 2017-18. Policies for K-12 are framed by The National Council of Education Research and training (NCERT). Popular boards under which K-12 is accredited are CBSE, ICSE, IB as well as state boards. The K-12 segment is regulated by the respective state government through local bodies and state level education departments.

Key issues currently faced by the segment include:

a) Quality of education is questionable: Although the government is investing in the promotion of literacy and education, its efforts remain largely focused on elementary schooling but secondary and higher education has not been accorded priority as it is necessary to first create adequate infrastructure and provide incentives to universalize elementary education.

b) Lack of adequate infrastructure: Many state funded schools especially in rural areas lack even basic infrastructure facilities.

c) Lack of qualified teachers: Given rising enrollments in the K-12 segment, the availability of teachers is going to be a perpetual concern.

d) Low enrolment across senior classes remains a key challenge in the K-12 education system.

e) Right to Education Act provides a subsidy on education to weaker sections of Society. However, this increases cost of education for the non-subsidised segment and negatively impacts the profitability of the sector as a whole.


1. Government impetus on skill development;

2. Existing shortage of K-12 schools in country;

3. Growing aspirations of a huge middle class in India;

4. Large untapped opportunities in the digital classroom space;

5. Opportunity to drive economic growth on the back of its rising-working age population;

6. Train growing work force and create quality employment;

7. Opportunity for innovation by taking advantage of technological advancements;

8. Reduction in hardware prices which is increasing propensity to digitize and adoption by schools.


Competition in all segments (however, Educomp has unmatched scale across segments, providing it the competitive advantage).


1. High interest rates.

2. Saturation in Tier I and Tier II cities (but hardware prices are falling and may expand the market further).


1. The interest in digital content has evolved over the years and the consumer expectations and compliance requirement have increased. There might be some patent issues in using the interactive content, as some of the content in the offering remains licensed content.

2. Prohibitive costs in tier-I & II cities in setting up new schools.


In FY 2015-16, key Human Resource (HR) policies and processes were redesigned and realigned to the business vision. The same were effectively institutionalized in order to improve the efficiency and accuracy of business output. The On-boarding process was deepened further with the implementation of a one week rigorous induction program. As part of this process, the Buddy Program was launched which is essentially mentorship by high performers. FAQs for key HR policies were uploaded onto the system to ensure easy understanding.

Further, as on March 31, 2016, 5065 number of employees have been employed by the company. Festivals, birthdays and various other events are celebrated regularly to build employee camaraderie.


The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Company has appointed M/s Rajnish & Associates, Chartered Accountants, and M/s Mazars, jointly as the Internal Auditors of the Company to maintain its objectivity and independence, the Internal Auditor reports to the Audit Committee.

The Internal Audit Department monitors and evaluates the efficacy and adequacy of the internal control system in the Company, it compliance with operating systems, accounting procedures and policies of the Company and its subsidiaries. Based on the report of internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee.

FINANCIAL PERFORMANCE Overview - Executive Summary

The financial performance of Educomp Solutions Limited (Educomp) as per Indian GAAP is discussed in two parts:

i. Educomp (Standalone), which excludes the performance of subsidiaries of Educomp.

ii. Educomp (Consolidated), which includes performance of subsidiaries of Educomp. The Consolidated Financial Statements bring out comprehensively the performance of the Educomp group and are more relevant for understanding the overall performance of the group.

Overview of the Financial performance summary (Standalone)

The total revenues of Educomp aggregated 2,231 million in FY16 as compared to 2,322 million in FY15.

In fiscal 2016, the Companys profit/(loss) before prior period items, exceptional items and taxes aggregated (3,360) million as against (2,981) million in fiscal 2015.

In fiscal 2016, the Companys profit/(loss) after taxes, prior period and exceptional items aggregated (3,433) million as against (11,654) million in fiscal 2015.

In fiscal 2016, the Companys earnings/(loss) per share (basic) is (28.04) as against (95.17) in fiscal 2015.

Overview of the financial performance summary (Consolidated)

In fiscal 2016, the total consolidated revenues of Educomp group aggregated 5,874 million as compared to 5,942 million in fiscal 2015.

The consolidated profit/(loss) before taxes aggregated (3,901) million in fiscal 2016 as against (4,347) million In fiscal 2015.

In fiscal 2016, the Companys consolidated profit after taxes, prior period and minority interest aggregated (4,473) million as against (16,422) million in fiscal 2015.

In fiscal 2016, the Companys consolidated earnings/(loss) per share (basic) is (36.52) as against (134.10) in fiscal 2015.

Detailed financial review under standalone version is provided in the following sections of this report.

Financial Review (Standalone)

Result of operations

Total revenues from operations of the Company aggregated to at 2,010 million as against 1,982 million in fiscal 2015.

EBIDTA stands at (489) million in FY16 vs. (207) million in FY15. EBIT stands at (889) million in FY16 vs. (685) million in FY15. Profit/(loss) after tax stands at (3,433) million in FY16 vs. (11,654) million in FY15.

Particulars FY16 FY15
Net Sales 2,010 1,982
Other income 221 340
Total Income 2,231 2,322
Expenditure 2,719 2,529
Interest 2,471 2,295
Depreciation 401 478
Loss/Profit before taxes, prior period and exceptional items -3,360 -2,981
Provision for Tax including Current tax, Deferred tax -191 -
Prior Period, Exceptional Items 264 8,673
Profit after taxation and prior period items -3,433 -11,654
Basic Earnings per share -28.04 -95.17
Key Ratios FY16 FY15
EBIDTA/Net Sales -24.30% -10.44%
Profit after Tax and prior period items/ Net Sales -170.8% -588.0%
Total Expenditure/ Net Sales 135.3% 127.6%
Consumption of Raw material/ Net Sales 19.29% 11.79%
Staff Cost/Net Sales 57.22% 65.01%
Selling, Distribution & Administration expenses (including Miscellaneous Expenses)/ Net Sales 58.79% 50.82%

Segment results

Revenues FY16 FY15
School Learning Solutions 1966 1906
Higher Learning Solutions 20 58
K-12 Schools - -
Online, Supplementary & Global 24 18
Total Net Sales 2010 1982
( in million)
School Learning Solutions -498 -9008
Higher Learning Solutions 11 48
K-12 Schools - -
Online, Supplementary & Global -17 -1
-504 -8961
Less: Interest (Net) 2471 2295
Other un-allocable expenses (net of un- allocable income) 649 398
Total Profit before Tax -3624 -11654

Other Income

The Company generated other income of 221 million in FY 2016, a decrease of 35% over other income of 340 million generated in FY 2015.

Expense Analysis:

Cost of goods sold (COGS):

COGS totaled 388 million during FY16, a increase of 66% from 234 million in FY15.

Particulars March 31, 2016 March 31, 2015
Cost of Goods Sold 388 234
% of Net Sales 19% 12%

Personnel Expenses:

Personnel expenses consist of compensation to all employees. It includes salaries, contribution to provident fund, bonus & retirement benefits, staff welfare and ESOP amortization. It also includes expenses incurred on staff welfare. The total personnel cost decreased by 10.7% to 1,150 million from 1,289 million during the year, with total staff strength going down due to ICT and Smartclass manpower reduction and rationalizations across business.

Particulars March 31, 2016 March 31, 2015
Personnel Expenses 1,150 1,289
% of Net Sales 57% 65%


Depreciation has decreased by 16.2% to 401 million during FY16, compared to 478 million in FY15. The increase in depreciation was primarily due to changes in product mix in Smartclass, which resulted in lower capital expenditures during the year.

Particulars March 31, 2016 March 31, 2015
Depreciation 401 478
% of Net Sales 20% 24%

Other expenses:

Other expenses were 1,182 million during FY16, a increase of 17% compared to 1,007 million during FY15. Administration & other expenses (as a percentage of Net Sales was 59%, up from 51% in FY15.

Particulars March 31, 2016 March 31, 2015
Other expenses 1,182 1,007
% of Net Sales 59% 51%

Finance Charges:

Interest expenses increased from 2,471 million from 2,295 million during FY15.

Particulars March 31, 2016 March 31, 2015
Finance charges 2,471 2,295
% of Net Sales 123% 116%

Income Tax Expense:

The Companys current tax expense in FY15 is (191) million.

Particulars March 31, 2016 March 31, 2015
Current tax - -
Deferred Tax - -
Tax earlier years -191 -
Total -191


Profit after Tax:

Net (loss)/profit after tax was (3,433) million during FY16, an decrease of 71% from (11,654) million in FY15. Net profit as a percentage of revenues in FY16 has decreased to (171%) as compared to (588%) in FY 15. This decrease was due to impairment charges on long term receivables of our legacy Smartclass business.

Particulars March 31, 2016 March 31, 2015
Profit after tax -3,433 -11,654
% of net sales -171% -588%

Financial Position (Standalone):

Equity and Liabilities Shareholders Fund Share Capital:

The total paid up Equity Share Capital stood at 244.93 million as on March 31,2016, as compared to 244.93 million as on March 31,2015.

A statement of movement in the equity share capital is given below:

March 31, 2016

March 31, 2015

No. of Equity shares in million No. of Equity shares in million
Balance at the beginning of the year 12,24,67,168 244.93 12,24,41,068 244.88
Shares issued during the year - - 26,100 0.05
Balance at the closing of the year 12,24,67,168 244.93 12,24,67,168 244.93

Reserve & Surplus:

Securities premium:

The addition to the share premium account of Nil million during the year and a reduction of redemption premium of 51 million for FCCB redemption.

March 31, 2016 March 31, 2015
Securities premium- opening balance 10129 10235
Add: On issue of shares (including shares under ESOP) - 5
Less: Issue expense/redemption premium 51 111
Balance at the end of the year 10078 10129

General Reserve:

During the year 76 million has been transferred to the general reserve due to ESOP cost reversal on forfeiture.

Profit and Loss Account:

The balance retained in the profit and loss account as of March 31,2016 is (9,616) million.

March 31, 2016 March 31, 2015
Profit & Loss Account-Opening balance -6,183 5518
Add: Deletion/Addition during the year -3,433 -11,701
Less: Proposed dividend - -
Less: Corporate Dividend Tax - -
Less: Transferred to General Reserve - -
Balance at the end of the year -9,616 -6,183


Long term borrowing stands at 18,847 million as on 31st March, 2016 as against 21,533 million as on 31st March, 2015. Short term borrowing stands at 982 million as on 31st March, 2016 as against 2,107 million as on 31st March, 2015.

Particulars March 31, 2016 March 31, 2015
Long-term borrowings
Foreign Currency Convertible Bonds 663 626
Non convertible debentures 450 450
Term Loans-Secured/Unsecured & Finance Lease Obligations 17,734 20,457
Total (Long-term borrowings) 18,847 21,533
Short-term borrowings
Loans repayable on demand/Commercial papers 982 2,107
Total (Short-term borrowings) 982 2,107

Capital Expenditure:

The Company has incurred an amount of 188 million (319 million in FY15) as capital expenditure, comprising additions to gross block of assets. Addition to fixed assets is mainly on account of addition to knowledge based content repository and addition to office equipment.

Particulars March 31, 2016 March 31, 2015
Addition to Fixed assets 188 319
Increase in capital Work-in-progress - -
Deletions in Fixed assets 1,065 3


The Company has made strategic investments in subsidiaries/ associates/ Mutual funds/various companies, amounting to 17,132 million as at March 31,2016.

March 31, 2016 March 31, 2016 March 31, 2015 March 31, 2015
Non current Current Non current Current
Investment in subsidiaries/associates 16682 - 16063 -
Investment in other companies 450 - 875 -
Investment in Mutual fund/ subsidiaries - - - -
Net Investment 17132 - 16938 -


The Company had inventories of 120 million as on March 31,2016 as against 254 million as on March 31,2015.

March 31, 2016 March 31, 2015
Educational Products - -
Technology Equipment 120 254
Total 120 254

Trade Receivable:

Trade Receivable amounts to 11,662 million as of March 31,2016 as compared to 13,569 million. The decrease is due to provisioning for bad debts on receivables acquired from ESSPL in previous fiscal year.

March 31, 2016 March 31, 2015
Trade Receivable 18,819 21,312
Less: Provision for doubtful debts 7,157 7,740
Net Trade Receivable 11,662 13,569

Cash & Bank balances:

As on March 31,2016, the Company had cash & bank balances of 344 million (570 million as on March 31,2015) including Margin money deposit given against borrowings, letter of credit and bank guarantees including to revenue authorities.

March 31, 2016 March 31, 2015
Cash & Bank balances 316 541
Other bank balances (restricted) 28 29
Total 344 570

Loans and Advances:

Loans and advances as on March 31,2016 were 821 million (1,746 million as on March 31,2015). Loans and advances include loans and advances given to related and unrelated parties, EMD (refundable and non-refundable) to various State Governments, security deposits to various parties and advances to trade creditors.

March 31, 2016 March 31, 2016 March 31, 2015 March 31, 2015
Long term Short term Long term Short term
Security deposits 6 357 7 363
Other loans & advances 248 107 247 408
Loans & advances to related parties 102 1 102 619
Total 356 465 356 1390

Other assets:

Other current assets cover mainly Non current bank balances, income accrued, but not due, i.e. unbilled revenue and interest accrued but not due.

March 31, 2016 March 31, 2016 March 31, 2015 March 31, 2015
Non current Current Non current Current
Non current bank balances 21 - 11 -
Interest accrued on deposits 4 - 3 -
Unbilled receivables - - - 8
Recoverable from Banks - - - 1
Recoverable against corporate guarantee - 224 - -
Total 25 224 14 9

Other liabilities:

Other liabilities as on March 31,2016 stood at 8,345 million (3,283 million as on March 31,2015). Increase in short term liabilities is mainly due to maturing principal due on the CDR debt.

March 31, 2016 March 31, 2016 March 31, 2015 March 31, 2015
Long Term Short term Long Term Short term
Advance from customers 73 588 73 450
Current Maturities of debt/Finance lease & Interest accrued


6,960 2,285
Premium on Foreign Currency Convertible Bond 162 - 111 -
Others - 562 - 364
Total 235 8110 184 3099

Trade Payable:

Trade payable amount to 851 million as of March 31,2016 as compared to 892 million as of March 31,2015.

March 31, 2016 March 31, 2016 March 31, 2015 March 31, 2015
Long Term Short term Long Term Short term
Trade Payable - 851 - 892


Provisions made towards taxes, employee retirement benefits, proposed dividend, and tax on dividend aggregated to 648 million as on March 31,2016 (1,268 million as on March 31,2015). Significant provisions include provision for warranties.

March 31, 2016 March 31, 2016 March 31, 2015 March 31, 2015
Long Term Short term Long Term Short term
Staff benefits 64 7 64 8
Income Tax (net of TDS/Adv. Tax) - - - -
Warranties 115 462 662 534
Proposed dividend - - - -
Tax on Proposed dividend - - - -
Total 179 469 726 542

Earnings per Share:

Basic and Diluted Earnings per share (EPS) as per computation based on AS 20 issued by The Institute of Chartered Accountants of India (ICAI) was (28.04) as on March 31,2016 against (95.17) for basic and diluted EPS respectively.

March 31, 2016 March 31, 2015
Basic and Diluted Earnings per share () -28.04 -95.17

Cash Flows:

The cash (used)/generated from operations stands at 1,416 million as on March 31,2016 as against (2,997) million as on March 31, 2015.

The cash generated/ (used in) on account of investing activities stands at by 140 million as on March 31,2016 as against 170 million as on March 31,2015.

The net proceeds from financing activity were (1,781) million as on March 31,2016 as against 3,201as on March 31,2015.