The document summarizes the rise and fall of Educomp Solutions, once India's largest education services firm. It achieved rapid growth between 2006-2012 by providing digital classroom technologies to schools, but ran into financial difficulties as many schools struggled to make payments. As Educomp's financial position deteriorated in recent years, several high-level executives resigned and its stock price declined sharply. The company's founder remains optimistic about its growth and impact, but critics argue its business model carried too much business, execution and financing risk.
This presentation is based on the Semco case study in which Ricardo Semler has shown radical leadership with wisdom and have a democratic and shared work culture in Semco where every employees are respected and are welcomed to provide innovative ideas for a successful business.
This presentation is based on the Semco case study in which Ricardo Semler has shown radical leadership with wisdom and have a democratic and shared work culture in Semco where every employees are respected and are welcomed to provide innovative ideas for a successful business.
The file explains a brief overview on the Indian Cement Industry in the year 2013-14. The file explains the global scenario of the Indian Cement Industry, Major organisations and the Major players in the Indian Market and their market s
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The file explains a brief overview on the Indian Cement Industry in the year 2013-14. The file explains the global scenario of the Indian Cement Industry, Major organisations and the Major players in the Indian Market and their market s
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Business in Education is a monthly report by Indalytics Advisors, which is focused on the supply side of education sector in India. The report is aimed at helping education services providers with the latest activities in the sector.
The report covers the trends, as well as the opportunities in the Indian education sector, which were highlighted in media. It is designed for the individuals and organizations, which are in the education business, or are planning to enter it. It is also helpful for various products and services providers to the sector.
Best ERP for Schools | Schoollog Yearbook 2019 PoojaBhardwaj64
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In 2019, we toiled harder than ever before and came a little closer toward fulfilling the promise we made of empowering schools and students through our services.
It has been a great year for us in terms of growth and productivity and here we are unfolding our first-ever SCHOOLLOG YEARBOOK.
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A placement brochure design work I did in 2009, for IIM Kozhikode. The work spanned across directing for the photography, conceptualising the flow, assisting with the content, information visualisations and information graphics.
Fifty-six percent Indians born in
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But does one’s alma mater play such a significant role in career development? Are alumni of prestigious schools in our country a privileged lot? Do they have it any easier than their counterparts? Or are there other factors of merit besides the brand value of one’s education at play in corporate society?
These are some of the answers we will address in this paper.
Business in Education is a monthly report, which is focused on the supply side of education sector in India.
The report is aimed at helping education services providers with the latest activities in the sector.
The report covers the trends, as well as the opportunities in the Indian education sector, which were highlighted in media. It is designed for the individuals and organizations, which are in the education business, or are planning to enter it. It is also helpful for various products and services providers to the sector.
2019’s Most Recommended EdTech Companies To Watch, have come across a few significant organizations that have leveraged every opportunity in this domain.
The What, Why & How of 3D and AR in Digital CommercePushON Ltd
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Applications of 3D and AR in Digital Commerce,
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A.I. (artificial intelligence) platforms are popping up all the time, and many of them can and should be used to help grow your brand, increase your sales and decrease your marketing costs.In this presentation:We will review some of the best AI platforms that are available for you to use.We will interact with some of the platforms in real-time, so attendees can see how they work.We will also look at some current brands that are using AI to help them create marketing messages, saving them time and money in the process. Lastly, we will discuss the pros and cons of using AI in marketing & branding and have a lively conversation that includes comments from the audience.
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Attendees will learn about LLM platforms, like ChatGPT, and how they work, with preset examples and real time interactions with the platform. Attendees will learn about other AI platforms that are creating graphic design elements at the push of a button...pre-set examples and real-time interactions.Attendees will discuss the pros & cons of AI in marketing + branding and share their perspectives with one another. Attendees will learn about the cost savings and the time savings associated with using AI, should they choose to.
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The session includes a brief history of the evolution of search before diving into the roles technology, content, and links play in developing a powerful SEO strategy in a world of Generative AI and social search. Discover how to optimize for TikTok searches, Google's Gemini, and Search Generative Experience while developing a powerful arsenal of tools and templates to help maximize the effectiveness of your SEO initiatives.
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Confidently measure SEO performance
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Digital Commerce Lecture for Advanced Digital & Social Media Strategy at UCLA...Valters Lauzums
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Amid these operational challenges, customer data has emerged as an important strategy. By focusing on personalization and enhancing customer experience from historical behavior, businesses can deliver improved website and brand experienced, better product recommendations, optimal promotions, and content to meet individual preferences. Better data analytics can also help in effectively creating marketing campaigns, improving customer retention, and driving product development and inventory management.
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1. The Rise and Fall of Educomp
His company Educomp set out to prove that there was money in school education. But in
the last five years, he's burnt his fingers badly
Ankur Rudra, a stock analyst at Ambit Capital, knows how to call it like it is. In January
2011, the then 29-year-old stuck his neck out by putting a ‘sell’ rating on Infosys, a
company that had been the blue-eyed baby of the Indian stock market for nearly two
decades.
It would take nearly a year-and-a-half for the rest of the analyst and investor community
to come round to Rudra’s point of view, that Infosys was being valued too highly in the
context of its growth potential. Of course, by then its stock had shed nearly a third of its
value, so everyone had the benefit of hindsight as well.
In February last year, Rudra stopped tracking Educomp Solutions, the largest education
services firm in the country. “I’d been pessimistic about the company since 2009, but by
2012 there just wasn’t enough trading in the stock for it to be of commercial interest to
any stock broking firm,” says Rudra.
Sangeeta Gulati too had been bearish on the stock. Of the 35 transactions she undertook
in Educomp between 2007 and 2012, nearly two-thirds were sales, and in almost all cases
undertaken within a fortnight of acquiring the shares.
But Gulati wasn’t a star fund manager. She was the chief financial officer (CFO) of
Educomp. Most of the stock she sold was allotted to her through Educomp’s ESOP
(employee stock ownership plan). In April 2012, Gulati resigned, a week after making
her two final share sales.
Today, Gulati’s pessimism on Educomp’s stock makes perfect sense. For a company that
almost single-handedly created the hype around money-making opportunities in school
education, its stock is down 67 percent over the previous year; 84 percent over two years;
91 percent over three years. Its market capitalisation has fallen from Rs 7,000 crore in
November 2009 when Forbes India did a profile on the company to just Rs 771 crore as
of March 23.
Things have been bleak internally as well during the last two years, with even employee
salaries being held up at both Educomp and IndiaCan, its joint venture with Pearson Plc.
Of the $150 million in new funding it raised in July 2012 from three foreign investors,
two-thirds would go to pay back a five-year-old foreign currency loan it couldn’t repay
on its own, given the debt and liabilities on its stressed balance sheet.
2. Surely there are some lessons that Educomp and its founder Shantanu Prakash have learnt
during the rollercoaster ride of the last five years?
“It is not right to say that anything went wrong with Educomp,” Prakash avers. “From
2006 when we went public to 2012, our revenue has grown from Rs 51 crore to Rs 1,500
crore; profits from around Rs 6 crore to Rs 180 crore; school customers from 75 to
15,000. Plus we have 250 preschools, 47 schools with 22,000 students and 350 vocational
training centres. This is ‘Wow!’ This is fantastic growth! How companies fare in the
capital markets doesn’t tell the full story of how they’re doing in terms of their social
impact.”
What Prakash doesn’t talk about is that Educomp’s net profit margin has fallen 61
percent during the last four years; the net cash generated by its operations has been
falling significantly for the last three years; the time taken to collect its money from
customers almost doubled in the last four years; and most importantly, its overall
liabilities in 2012 were over twice its revenues.
Prakash is also cool about some high-profile exits from his company.
Four months after CFO Gulati’s resignation in 2012, Mohit Maheshwari, Educomp’s
company secretary and the person who led its compliance and corporate governance
functions, resigned too.
Meanwhile, that very year, four consecutive company secretaries would resign in
Edusmart, a three-year-old company whose sole purpose was to convert nearly two-thirds
of Educomp’s annuity revenue from schools into large chunks of discounted loans from
3. banks.
An uninformed, lay investor would think there was a pattern. “There is no pattern and no
inference from these resignations. They are 500 percent irrelevant. Edusmart is a really
small company and Educomp has had several management changes over the years,”
Prakash says.
A good place to see how the Educomp story developed chinks would be at the Sanskaar
School in Hubli, Karnataka.
EDUCATION’S SUB-PRIME CRISIS
Flanked by acres of red earth-topped bare fields and demarcated plots on all four sides,
the six-year-old Sanskaar English Medium School sits a few hundred metres off the
Gulbarga-Bijapur highway in Hubli.
The 19 classrooms from Montessori to Class 10 brim with the chatter of nearly 800
students. Each of the classrooms is fitted with an interactive digital ‘board’ that teachers
use to mix multimedia content with their regular teaching.
In early 2011, Educomp inked a deal with Sanskaar to equip all its classrooms with its
Smart Class range of digital classroom aids that allowed teachers to use interactive
multimedia content to supplement the standard textbook-and-blackboard approach.
Instead of paying roughly Rs 37 lakh to Educomp for the hardware and content, the
school would pay it a monthly fee per class over a contract period of five years. In turn,
the school would pass on the cost as a monthly fee increase of Rs 150 to Rs 200 per
student.
Given India’s population, paucity of good schools and love for all things technology-
enabled, the potential market for such a service was seen as a few hundred thousand
schools. Smart Class itself grew like weed, from less than 100 schools in 2006 to over
6,550 schools by 2011.
By May 2011, Educomp had delivered all the hardware to Sanskaar, ready to be installed
and configured.
And there it would lie, for nearly two years. Under lock-and-key. In a storeroom.
A senior representative from the school says it cancelled the order back in May itself
because Educomp missed contractual deadlines for installation and commissioning.
Instead, it chose to place a new order with one of Educomp’s smaller competitors.
Meaning, Educomp received no further payments from the school and lots of letters
asking for the equipment to be taken away. Yet it was only when the school threatened to
auction the ageing hardware that Educomp decided to finally take it back just a few
weeks ago.
4. Divya Lal, the head of Educomp’s academic services, says Sanskaar acted with malafide
intent and such cases represent less than 1 percent of Educomp’s 15,000-plus base of
school customers.
The reason Educomp did not pick up the hardware in spite of the school terminating the
contract was, according to Lal, to avoid creating a perverse incentive for other schools
too. She also adds that Educomp recognised no revenue from Sanskaar, and wrote off the
value of the contract in its books.
While Educomp may claim that such cases are too miniscule to matter, what was too big
to ignore was the fact that many schools across the country weren’t paying it in time.
“The risk is that this technology sales model becomes akin to the sub-prime mortgage
scenario that caused the credit crisis in the US. Like in the US where loans were given to
people who did not have the repayment capacity, there is some danger that ambitious
schools looking for a magic bullet are buying hardware and software they ultimately
can’t afford,” says Karan Khemka, a partner with Parthenon, a strategic advisory firm
with a special focus on education.
“It is the job of a financing institution, not an educational services vendor, to finance a
school. Otherwise you end up bearing business risk, execution risk and financing risk.
That’s too much to bear,” says TV Mohandas Pai, the chairman of Manipal Global
Education (a group that competes with Educomp in various spaces) and erstwhile Infosys
board member.
FROM BOOM TO BUST
This risk troika wasn’t apparent to many investors who bought the stock in 2009.
Educomp then was supposed to be this ‘asset-light’ education software company that
would scale with lightning speed.
Kenneth Andrade, the head of investments at IDFC Asset Management, says, “We
bought the Educomp stock during its IPO and continued to hold a significant percentage
of it over the years. But in 2010, we exited the stock completely because I felt they were
straying from their original promise of being an ‘asset-light’ education services player
into being a balance-sheet player.”
Why did Prakash move to this business model which would take in more capital and
where the money would not come in quickly?
The short answer: The lure of a high valuation. In January 2008, it’s price-earnings
multiple was 27.8 (today it is just a fraction of that at 6.71).
Buoyed by Educomp’s rosy growth numbers, between 2008 and 2009 investment banks
and broking firms started putting out fat reports on the massive pot of gold at the end of
the education rainbow.
The potential market was estimated at $30-35 billion across various education segments
like multimedia-in-classrooms, privately run K-12 schools, vocational training,
5. preschools, coaching classes and higher education.
Under Prakash, who apart from being Educomp’s founder and CEO also owned over 50
percent of its stock, the company set out to plant its flag in every conceivable sector in
education using every conceivable strategic tool.
There were joint ventures—IndiaCan with Pearson Plc in the vocational training space;
Raffles Millenium colleges with Raffles Education; Topper TV with Network 18 (the
parent company of Forbes India) in the TV space. There were investments and
acquisitions—PurpleLeap in vocational training; Vidya Mandir and Gateforum in test
preparation; Eurokids in preschools. And of course there were numerous new subsidiaries
of which its own brand of K-12 schools was the most significant one.
Educomp’s annual report for 2009-10 listed 15 directly held subsidiaries, 28 indirectly
held ones, five joint ventures and 14 associate companies spread across India, Singapore,
Canada, USA and the British Virgin Islands.
One particularly innovative technique Educomp adopted even ended up making its debt
disappear for a while.
That magic bullet was Edusmart, an ‘unrelated’ company headed by one of Educomp’s
senior executives. The new company took over all of Educomp’s newer five-year school
contracts, pledged the receivables with banks in return for roughly 75 percent of the
amount as a lump sum, most of which it meekly handed over to Educomp.
Why would banks lend to a new and unknown company? Because Educomp stood
guarantee on those loans, even though Edusmart was neither a subsidiary nor a related
party on its books.
Analysts and investors were aghast: The model’s sole purpose seemed to allow Educomp
to book three-fourths of a school’s five-year annuity revenue right upfront, thus inflating
revenue and profits.
Prakash says the decision to do this was “merely technical” and “not relevant in 2013”.
Raman Bajaj, vice president, business transformation and corporate affairs at Educomp,
is candid enough to admit the real reason: “We did it to keep the securitised debt off our
books as contingent liability, otherwise our higher leverage ratio would have meant banks
wouldn’t lend money to us for our K-12 schools business.”
This is why Educomp’s total debt as of March 2012 is just Rs 337 crore, while its total
liabilities were Rs 2,148 crore.
“That was the beginning of the downfall of their stock. When Educomp saw growth
slowing down because they’d penetrated most premium ICSE and CBSE schools, a better
way would have been to educate the market and make itself more sustainable instead of
6. changing their accounting model by using a private company to book revenue upfront,”
says Rudra.
For some this was a clear example of a promoter who was pursuing an unsustainable
path. “It was the duty of the company’s board to counterbalance the dominant
shareholder and CEO who thinks he’s a superstar. On that count I think the Educomp
board has clearly failed,” says Pai.
One would think that having burnt its fingers so badly by turning its primary business
into a capital-intensive operation, Educomp would be smarter in the K-12 schools
business. Yet it curiously chose to make that into an even more capital-intensive setup by
deciding to buy the land on which to put up its schools instead of long-term leases like
most competitors.
“Schools are valued on the basis of their cash flows, not land banks. Because whatever
the land’s real value, on the school’s books it can only be notional because it can’t ever
be de-linked and sold,” says K Ganesh, the erstwhile CEO and founder of TutorVista, a
company now fully owned by Pearson.
Today, the 47 schools run by Educomp have nearly 50,000 seats between them, filled
with only 22,000 students.
BACK TO BASICS
“In India any educational services company should be a private and not public listed
business,” says Pai. “While listing might bring capital, it will inevitably also force
businesses to take unsustainable steps to drive higher growth and valuation. In
Educomp’s case I think it was a combination of poor execution, lack of adequate
planning and oversight, and overreach as its businesses grew at a faster pace than its
management capability.”
De-listing may not be an immediate option for Educomp (though Prakash doesn’t rule it
out either), it does appear that the company is belatedly trying to refocus itself towards a
more sustainable business model.
The starting point for that transformation was July 2012 when three knights in shining
armour—the World Bank-owned International Finance Corporation, French development
finance institution Proparco and distressed assets fund Mount Kellett—put up $155
million.
“Educomp was lucky to get IFC funding, because the fund is usually savvy, conservative
and concerned with issues around corporate governance and reputation. I was amazed
and felt it was a coup of sorts,” says one of Educomp’s competitors.
IFC did not respond to a Forbes India email questionnaire sent to Ved Prakash, one of its
directors in India, by the time this story went to press. Mount Kellett too did not respond.
Though IFC may have disregarded some of Educomp’s past at the time of investment due
7. to building deployment pressure, it seems intent on being the new change driver. Sources
say that the fund was behind the decision to drop one of Educomp’s two auditors,
Anupam Bansal & Co (the other one being Haribhakti & Co).
Over the years, many analysts and investors have wondered why the company never
appointed one of the ‘big four’ accounting firms to audit its books, when even young VC-
funded startups are doing so.
In 2009, after a cloud of rumours and suspicion about its finances, Educomp announced
that it had appointed Grant Thornton as its internal auditor.
Educomp’s new investors are also behind a transformation plan that seeks to focus the
company’s attention on two primary businesses: The content-based Smart Class and the
asset-backed K-12 schools. Most other businesses will be sold off progressively.
Since July last year Educomp has sold off its stake in Eurokids, a pre-school chain and
raised Rs 22 crore for its online learning subsidiary authorGen in a funding round led by
private equity firm Kaizen. Pearson is likely to acquire its entire stake in the loss making
IndiaCan venture imminently. Also up for sale are Educomp’s majority stake in coaching
firm Vidyamandir Classes and test preparation company Gateforum.
Prakash insists the decisions to hive off these stakes isn’t a function of Educomp’s
financial situation. “These were only investments, which we are now divesting while
making great returns and unlocking value for our shareholders. On that count I think
we’ve outperformed even private equity funds like Tiger Management, Matrix and
Sequoia,” he says.
But is that enough?
An executive with a large fund that was a significant investor in Educomp for many years
before exiting it, puts it best: “The question ‘Can Educomp regain its past glory?’ has two
answers to it: A business [strategy] and a financial one. Thing is, even if they manage to
pull out all stops on the business front, they still have a mountain of debt to cross. And
then there’s investor trust, which may very well take many years to get back.”