AUGUST 2017 FORBES ASIA | 29S
hantanu Prakash was flying
high in 2009. The founder and
chairman of education tech firm
Educomp Solutions debuted on
the India rich list that year with a
net worth of $920 million.
Eight years later, he’s barely worth
$10 million and the company is in a
shambles. Prakash, 52, is looking to revive
Educomp, which is saddled with $320 mil-
lion in debt. The company says it is seeking
to restructure under the country’s Insol-
vency & Bankruptcy Code.
The Gurgaon company, founded in 1994
by the Indian Institute of Management grad,
made it to Forbes Asia’s Best Under A Billion
list in 2008 and 2011, buoyed by its flagship
product SmartClass. It rolled out digital
multimedia lessons to thousands of schools
across the country. Educomp says it still reaches
4 million students and 75,000 classrooms.
A 2008 Forbes Asia story on the
then $1.4 billion (market cap) company
mentioned the enormous “execution risk”
that Educomp faced because of the high
valuations. (The share price was 48 times
expected earnings for that year.) The com-
pany got into trouble when it ventured into
asset-heavy segments like providing com-
puters to government schools and setting up
brick-and-mortar K–12 schools.
Educomp began procuring computers
for schools under a build-own-operate-and-
transfer model. The company paid for thehardware up front by taking on debt and
planned to collect the money over five years.
But from 2010 to 2014 it was slammed with
large-scale delinquencies, mostly in tier 2
and tier 3 cities.
“The education business is cyclical—
but a publicly traded company is typically
expected to grow its top line quarter after
quarter,” says Aurobindo Saxena, vice
president heading the education practice at
Gurgaon consultancy Technopak Advisors.
(He’s a former Educomp employee and
has also offered consulting services to the
company.) “This led to aggressive sales, and
in certain cases the creditworthiness of the
buyers may have been overlooked.”
Prakash was not available for comment.
Other education companies that made
it to BUB in the 2008–12 time frame—like
Chennai’s Everonn and Edserv Softsystems
and Mumbai’s Core
Education & Tech-
nologies—also tanked
due to unsustainable
business models and
mounting debts. Trad-
ing has been suspend-
ed on all these stocks.
“Education as a
sector was and is very at-
tractive,” explains K. Ganesh, a serial entre-
preneur who cofounded online education
company TutorVista, which he then sold
to global education major Pearson. “WhenLessons Learned
Asset-heavy Indian schooling firms sink after good early marks.
BY ANURADHA RAGHUNATHANthese companies debuted on the stock mar-
ket, there were no listed education players.
The scarcity made the demand, valuation
and market cap unrealistic. Both the eupho-
ria that caused them to rise to stratospheric
levels and the subsequent gloom and doom
are not justified.”
For instance, Everonn’s 2007 IPO was
oversubscribed 145 times. It focused on of-
fering satellite-based education. But in 2011,
its founder, Kishore Padmanabhan, was
arrested in an alleged-bribery case. (Padma-
nabhan says he has pleaded not guilty to the
charge. The case is still in court.) Subse-
quently, Dubai-based entrepreneur Sunny
Varkey stepped in and invested in Everonn,
but the company is now under liquidation.
While these BUB companies failed to tap
the potential of the growing education mar-
ket, a new wave of digital-education com-
panies are now leading
the charge. Bangalore’s
Byju’s, which has
an investment from
Mark Zuckerberg
and Priscilla Chan,
serves thousands of
students with its apps
and online courses.
Simplilearn—out of
Bangalore and San Francisco—offers certi-
fication for professionals. The key difference
is that these privately held companies haveRAVI S SAHANI/THE INDIA TODAY GROUP/GETTY IMAGES no costly assets dragging then down.
Debt-heavy business models slammed
a variety of education companies.FBEST UNDER A BILLION — EDUCOMP SOLUTIONS
FORBES ASIA