Liquidity crisis? Educomp staff not paid salaries for last three months

Education solutions provider Educomp is reported to have not been paying salaries to 6,000 employees for the past three months, while several others have not reported to work for a while now.

According to CNBC-TV18, thecompany, which filed for a corporate debt restructuring (CDR) plan in July 2013, is battling a liquidity crisis.

Educomp works with government schools to provide computer education. The schools are expected to pay for the hardware, content and services provided by Educomp’s resource coordinators or Smartclass coordinators.

Not only has the company’s president for Smartclass Anand Ekambaramresigned but several employees havebeen seeking termination of contract too.

Sources told CNBC-TV18 that schools have stopped making payments, which has largely hit the liquidity of the company.

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A senior official at Educomp told CNBC-TV18 “In some instances, delayed payments to Educomp on part of schools using Smartclass led to delays in the payment to their resource coordinators (provided by Educomp to Schools to ensure effective usage of Smartclass). We hope to resolve this situation very soon as we are currently in midst of a comprehensive drive to boost collections from such schools and where necessary, we will discontinue services to non-paying schools.”

[caption id=“attachment_1013189” align=“alignleft” width=“380”]  Not only has the company’s president for Smartclass Anand Ekambaram resigned but several employees have been seeking termination of contract too.[/caption]

Last month, Educomp Solutions initiated discussions with its lenders and has approached corporate debt restructuring (CDR) forum to restructure its rupee debt to correct the asset liability mismatch on its balance sheet.

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The company also approached the CDR forum for restructuring of debt in its K-12 business (second major business, operated through its subsidiary - Educomp Infrastructure and School Management).

The debt-restructuring exercise was to help the company comprehensively address the liquidity issues by matching the maturity profile of debt with the relatively long-term nature of its investments.

However, according to this Business Line report, the company’s cost concerns have already led to unemployment for many.It not only sacked more than 750 people last year but also shut down one of the two admin offices in Gurgaon.